Couch Potato Investing

Investment Objective
Couch Potato Investing involves splitting the funds invested in 3 mutual funds which cover Canadian Equities, US equities and Canadian Bonds. The portfolio is rebalanced once a year to get back to original asset allocation.

How to Invest in Couch Potato Portfolio
The investor wants to invest $10,000 in the Couch Potato Portfolio. The investor buys the following three mutual funds which represent 1. Canadian Equity, 2. US equity and 3. Canadian Bonds:

  1. iShares Core S&P/TSX Capped Composite Index ETF [TSX:XIC] – Buy $3,300
  2. iShares Core S&P 500 Index ETF [TSX:XUS] – Buy $3,300
  3. iShare Core High Quality Canadian Bond Index ETF [TSX:XQB] – Buy $3,300

Once a year, the investor must buy and sell his ETFs (or add new money) to get portfolio back to its 30%-30%-30% split. The result is a low-cost portfolio that has 66% of money invested in a wide range of stocks in Canada and US and 33% invested in Canadian Bonds.

Couch Potato Portfolio Allocation
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Other Couch Potato Portfolios
Global Couch Potato Portfolio
This portfolio is more diversified than the Classic Couch Potato portfolio and hence involves less risk. The investor wants to invest $10,000 in the Global Couch Potato Portfolio. The investor buys the following four mutual funds which represent 1. Canadian Stocks, 2. US Stocks, 3. International Stocks and 4. Canadian Bonds:

  1. iShares Core S&P/TSX Capped Composite Index ETF [TSX:XIC] – $2,000
  2. iShares Core S&P 500 Index ETF [TSX:XUS] – $2,000
  3. iShares Core MSCI EAFE IMI Index ETF [TSX:XEF] – $2,000
  4. iShare Core High Quality Canadian Bond Index ETF [TSX:XQB] – $4,000

Once a year, the investor must buy and sell his ETFs (or add new money) to get portfolio back to its 20%-20%-20%-40% split. The result is a low-cost portfolio that has 60% of money invested in a wide range of Canada, US and International Stocks and 40% invested in Canadian Bonds.

High Growth Couch Potato Portfolio
This portfolio has higher exposure to stocks. It’s more volatile and hence more risky than other Couch Potato Portfolios but produces higher returns over time.
The investor wants to invest $10,000 in the High Growth Couch Potato Portfolio. The investor buys the following four mutual funds which represent 1. Canadian Stocks, 2. US Stocks, 3. International Stocks and 4. Canadian Bonds:

  1. iShares Core S&P/TSX Capped Composite Index ETF [TSX:XIC] – $2,500
  2. iShares Core S&P 500 Index ETF [TSX:XUS] – $2,500
  3. iShares Core MSCI EAFE IMI Index ETF [TSX:XEF] – $2,500
  4. iShare Core High Quality Canadian Bond Index ETF [TSX:XQB] – $2,500

Once a year, the investor must buy and sell his ETFs (or add new money) to get portfolio back to its 25%-25%-25%-25% split.