Couch Potato Portfolio: How to set it up

We show you what ETFs and funds to buy

40

by

Online only.

40

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: Couch Potato performance

40 comments on “Couch Potato Portfolio: How to set it up

  1. Have been investing now for about 30 years and only NOW do I hear about the Couch approach! Considering
    I'm now 87, married to a fine gal of 79, still have six US mutual funds worth about 240K, should I even be
    considering such a change? One of my funds is also my US IRA with a current balance just above 30K which
    still is paying a decent " Xmas bonus" each year. I still get a kick from following the market via internet though
    I've long since given up Barron's and other printed services. So, again, is there any sense or possible value
    in becoming a (financial) potato?

    Reply

    • Not really. At your age, you need to make sure you protect your nest egg by keeping the majority of your money in fixed income and no more than 10-15% in equities. The couch potato strategy is for people with a longer investment time horizon.

      Reply

  2. The Couch Potato is great however it is only good if you are doing once a year investment.If you intend to do a monthly PACC you are left only with the option to invest in TD Efunds.
    So the basic contention and its wide acceptability falls flat as one is forced with TD Efunds.

    Reply

  3. Pingback: Jeff Magnusson » Better Personal Investing

  4. Hi! I think the Couch Potatoe Approach sounds interesting …. We are 37 years old and have close to $100,000 in RRSP/RESPs. We are using an Advisor but over the last few years, with the market not being great we don't seem to be going anywhere too quickly. I like how easy your approach is. Should we take out all of our existing RRSP/RESP funds and transfer all of them to the Couch Potatoe distribution suggested …. and instead of our current monthly contributions switch to a once a year contribution?? Thanks for the advice.

    Reply

  5. Just curious as to why advice always seems to be to combine piles 4 & 5 and invest 40% in Canadian Bonds? Is there no merit in any other bond market?

    Reply

  6. The content of the portfolio is a bit confusing when compared to info from say http://www.efficientmarket.ca.
    Your article seems to concentrate on Canadian content where as other sites suggest more US and Global content. With the changes in Bill C-43 allowing as much forign content wouldn't it be advisable to have more US content considering the lower MER fees in the states.

    Reply

  7. Pingback: What’s on your potato? | MoneySense

  8. I want to switch my investments into a couch potato portfolio. But I have been dragging my heels because I am daunted by the task of moving from my advisor to a self directed online site. How can I get some clear advice on which ETFs to buy and how to manage the transfer process? I want to be sure I don't pick the wrong holdings or screw up the transfer. I cant seem to find a fee for service advisor who will do this for me. I have read the articles on Money Sense but the recommendations for ETFs seems to be 4 years old.

    Help please.

    Reply

  9. good question Joe.
    I am in the same boat. My concern is investing 200k all at once in the CP plan when the market is seemingly high.

    Reply

  10. "XIN" does not seem to be symbol for " iShares Canadian MSCI EAFE Index Fund ". looks like its "EFA"

    Reply

    • Hi there, XIN is the Canadian version of the iShares MSCI EAFE fund while EFA is the American version. -Sarah

      Reply

  11. Nice article. last thirty days I uncovered this internet internet site and desired to permit you be conscious that i’ve been gratified, heading via your site’s posts. I should certainly be signing equally as much as the RSS feed and should certainly wait around for another post. best Regards, Mateus

    Reply

  12. Great post. I was checking continuously this blog and I’m impressed! Extremely helpful information particularly the last part :) I care for such info a lot. I was seeking this particular info for a long time. Thank you and best of luck.

    Reply

  13. Wonderful goods from you, man. I’ve understand your stuff previous to and you’re just too wonderful. I actually like what you’ve acquired here, certainly like what you’re saying and the way in which you say it. You make it enjoyable and you still take care of to keep it smart. I can not wait to read far more from you. This is really a tremendous site.

    Reply

  14. Pingback: global travel advisor

  15. Pingback: Night club poland

  16. Hello there, You’ve done a fantastic job. I’ll definitely digg it and personally suggest to my friends. I am confident they’ll be benefited from this site.

    Reply

  17. czas oczekiwania na zwrot podatku podatek anglia kalkulator rozliczenie podatku z norwegii zwrot podatku na konto druk zwrot podatku zagranicznego kalkulator zwrotu podatku p45 zwrot podatku rozliczenie podatku z holandii w polsce zwrot podatku na konto druk zwroty podatków odzyskanie podatku z anglii podatek w niemczech rozliczenie podatku holandia zwrot podatku w anglii kalkulator zwrot podatku z holandii kalkulator zwrotu podatku odzyskiwanie podatku z anglii rozliczenie podatku z danii zwrot podatku pl zwrot podatku z zagranicy forum

    Reply

  18. Its like you read my mind! You seem to know so much about this, like you wrote the book in it or something. I think that you can do with some pics to drive the message home a bit, but instead of that, this is wonderful blog. A fantastic read. I will certainly be back.gambling

    Reply

  19. A friend of mine advised this site. And yes. it has some useful pieces of information and I enjoyed scaning it. Therefore i could love to drop you a quick note to express my thank. Take care

    Reply

  20. I’ve to admit that i typically get bored learning the whole thing however i believe you’ll be able to add some value. Bravo !

    Reply

  21. Hi there can I bring into play some of the insight here in this inlet if I yield a affiliation destroy to your site?

    Reply

  22. I don’t know whether it’s just me or if everyone else encountering issues with your site. It looks like some of the written text within your posts are running off the screen. Can someone else please provide feedback and let me know if this is happening to them too? This may be a issue with my web browser because I’ve had this happen previously. Appreciate it

    Reply

  23. I guess it is. Very good stuff, will stop by later.

    Reply

  24. Pingback: proactol plus

  25. Pingback: Jtosme Movie

  26. Thanks for any other informative blog. The place else may just I get that kind of info written in such a perfect way? I’ve a venture that I am simply now running on, and I have been at the glance out for such information.

    Reply

  27. Any kind of scam in Google product is not at all acceptable. Because what google shows to a normal internet users have faith on those results.

    Reply

  28. Pingback: Nokia

  29. Ha, bald ist es soweit dann erscheint endlich der nächste (und letzte ?) Teil. Professor Xavier ist einfach der Hammer.

    Reply

  30. If you could mail me with a few suggestions on how you made your website look this good, I would be thankful.

    Reply

  31. Hello could I quote some of the material found in this entry if I provide a link back to your site?

    Reply

  32. Hello there, I found your website via Google while searching for a related topic, your site came up, it looks good. I have bookmarked it in my google bookmarks.

    Reply

  33. I am constantly browsing online for ideas that can facilitate me.

    Reply

  34. Pingback: lap band surgery costs

  35. Wonderful blog i am glad to read your article.
    Thanks for the useful share.

    Reply

Leave a comment

Your email address will not be published. Required fields are marked *