If you’re interested in becoming a Couch Potato, you must first decide whether you will be investing only once a year or through regular monthly contributions.

If you’re investing once a year, you should use exchange-traded funds or ETFs. These are index-fund-like investments that trade like stocks on major stock exchanges. Many ETFs charge ultra-low management fees (think 0.3% or less), but to buy or sell them you have to pay a brokerage fee just as if you were buying a stock. The fees aren’t huge in themselves — $30 is typical — and if you’re investing once a year, they are a minor annoyance when you consider the low management fees you’re paying.

On the other hand, if you want to contribute monthly, paying $30 a pop for each transaction can send your overall bill soaring. You’re better off to use index mutual funds. You’ll pay a bit more in management fees, but you won’t face brokerage fees on every contribution.

For purposes of illustration, we’ll assume you’re using our Global Couch Potato strategy (for other strategies, see Meet the potato family).

Once-a-year investors: Open a discount brokerage account. Deposit your money, then divide the total amount by five, and buy these ETFs:

The first pile

• (20% of your money) goes in the iShares Canadian Composite Index Fund [TSX: XIC]. (We’ve decided to replace the i60 Fund recommended in previous articles with this new, more diversified fund, but if you already have the i60, there’s no need to switch.)

The second pile

• (20%) goes in the iShares Canadian S&P 500 Index Fund [TSX: XSP].

A third pile

• (20%) goes to iShares Canadian MSCI EAFE Index Fund [TSX: XIN].

Both the fourth and fifth piles

• (A total of 40%) go in the iShares Canadian Bond Index Fund [TSX: XBB].

Once a year, buy and sell your ETFs (or add new money) to get your portfolio back to its 20%-20%-20%-40% split.

The net result of all this is a very low-cost portfolio that has 60% of its money invested in a wide range of stocks in Canada, the U.S. and around the world, and 40% invested in Canadian bonds.

Monthly contributors: For purposes of illustration, we’ll use TD eFunds, because they’re particularly cheap. As above, you start by transferring your money into the account and splitting it up into five piles:

One pile

• (20% of your money) goes in the TD Canadian Index Fund.

The second pile

• (20%) goes in the TD U.S. Index Fund.

The third pile

• (20%) goes in the TD International Index Fund.

Both the fourth and fifth piles

• (40%) go in the TD Canadian Bond Index Fund.

Once a year buy and sell your funds (or add new money) to get them back to their original split.

That’s it. Now sit back, put up your feet and enjoy life as a couch potato.

Past performance: Classic Couch Potato performance, Global Couch Potato performance.