Your exact mix of funds can vary (and we'll get to the details in just a second), but the key advantage
of the Couch Potato strategy is that it gives you wide diversification among hundreds of stocks and bonds at rock - bottom cost.
The most attractive feature
of the Couch Potato strategy has always been its low fees, especially when compared with actively managed mutual funds.
These two ideas are among the pillars
of the Couch Potato strategy.
The authors do an admirable job of explaining the benefits of diversifying across uncorrelated asset classes, which is a core principle
of the Couch Potato strategy.
Not exact matches
We usually recommend that
Couch Potato investors follow a classic balanced
strategy, which consists
of putting 60 %
of your money in stocks and 40 % in bonds, but you may want to adjust the stock component upward if you're young and willing to take on additional risk in pursuit
of larger returns.
Whether a dividend
strategy can be expected to deliver higher returns than the traditional
Couch Potato is debatable, but I recognize the intuitive appeal
of investing for income.
The first is whether the
Couch Potato strategy is effective with portfolios
of several hundred thousand dollars or more.
He thinks the efficient market hypothesis — one
of the fundamental ideas behind the
Couch Potato strategy — is bunk.
In his book, Swensen lays out a
Couch Potato - like
strategy of his own.
The
Couch Potato Portfolio is an investment
strategy that keeps costs low by building a diversified portfolio
of index funds.
At that time we positioned our $ 400,000 portfolio to follow the
Couch Potato strategy and gave our financial adviser very explicit instructions that none
of our investments were to be in funds that have a deferred sales charge (DSC).
If you've read about rebalancing in the pages
of MoneySense, it was likely to be part
of a discussion about
Couch Potato investing, since sticking to a long - term asset allocation is a pillar
of that
strategy.
When MoneySense introduced the Global
Couch Potato in 2004, the only ETFs available were broadly diversified, cheap, and passive — indeed, those three qualities were the basis
of the
strategy.
But if you're going to be a
Couch Potato investor, you need to understand the best investing
strategy is the one that gives you the highest probability
of long - term success.
While they are certainly not traditional
Couch Potato products, the ETFs make an attempt to execute a managed futures
strategy based on quantitative rules rather than the whims
of a fund manager.
The
Couch Potato strategy thrives on simplicity, but advanced index investors (geeks) should understand what goes on under the hood
of ETFs.
It contains a proven
strategy for achieving outstanding returns, and the advisor has agreed to share it with readers
of Canadian
Couch Potato: Recently, a small group
of investors has unlocked the secret to investing success.
By design, a
Couch Potato portfolio will always fall somewhere in the middle
of the pack over short periods, but over the long term it is likely to beat the vast majority
of active
strategies.
«So I'm just trying to decide the best way to implement a
couch potato strategy while minimizing the risk
of investing all our money at the wrong time.»
Our standard Global
Couch Potato strategy has fees
of just 0.37 %.
While we donâ $ ™ t think itâ $ ™ s the only
strategy that makes sense, we do believe that the
Couch Potato is the best
strategy for the 80 %
of us who donâ $ ™ t like analyzing financial statements and who donâ $ ™ t have a strong view about where the market is going next.
So long as an investing
strategy follows those two rules, we applaud it, even if it doesnâ $ ™ t follow one
of our
Couch Potato templates.
Indeed, if you're attracted to the
Couch Potato strategy it's probably because you don't want to spend a lot
of time managing your portfolio: You simply want to enjoy the benefits
of diversification and low fees.
Is there a reason I should follow the
Couch Potato as opposed to one
of these similar
strategies?
While the premise
of the
Couch Potato remains the same, a lot has changed since the magazine brought the
strategy to Canada 17 years ago.
I had an interesting conversation with Dan Bortolotti from Canadian
Couch Potato, a while ago and one
of the topics we discussed was different investment
strategies.
In their self - directed account — worth about $ 65,000 — they hold index funds and use the MoneySense
Couch Potato strategy, with 60 %
of their income in equity funds and 40 % in bonds.
Q: My husband and I have been very happy
Couch Potato investors, but I'm questioning the
strategy after reading the latest edition
of Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown, which says massive U.S. money - printing and debt will eventually cause rampant inflation and spiking interest rates.
But if you're a
Couch Potato with a taxable account, you may be able to reduce the Canada Revenue Agency's share
of your investment returns with a
strategy called tax - loss selling.
Investors fall into this same trap when they second - guess the
Couch Potato strategy during every period
of poor returns.
For those who have, and recognize the many benefits
of using these low - cost vehicles, check out Dan Bortolotti's
couch potato strategy here: The Ultimate Guide to the Couch Potato Portf
couch potato strategy here: The Ultimate Guide to the Couch Potato Port
potato strategy here: The Ultimate Guide to the
Couch Potato Portf
Couch Potato Port
Potato Portfolio.
If you're a regular reader
of this magazine, you're familiar with the
Couch Potato strategy.
For purposes
of illustration, we'll assume you're using our Global
Couch Potato strategy (for other strategies, see Meet the potato fa
Potato strategy (for other
strategies, see Meet the
potato fa
potato family).
This week I received an email from a reader
of MoneySense magazine, where I write regularly about the
Couch Potato strategy.
My column in the November issue
of MoneySense offers suggestions for parents who want to use the
Couch Potato strategy in a Registered Education Savings Plan (RESP).
«The
strategy can reduce a typical investor's costs by as much as 90 %, while at the same time beating the vast majority
of mutual funds and professionally managed accounts,» writes Dan Bortolotti in his exceptional blog, Canadian
Couch Potato.
Often I'm asked by people what they should they invest in and I always have the same answer; Purchasing index funds and following the Canadian
couch potato strategy (CCP) which was made famous by Dan B
of Canadiancouchpotato.com is the easiest way to grow your wealth with minimal involvement.