# Couch potato and/or dividend investing



## GGO (Feb 15, 2015)

Although there are many other investment strategies, I am mainly interested in the mentioned two. For now I have started buying dividend stocks in Canada/US market with some cash accumulated in previous years in RRSP, e.g banks utilities telecom etc., similar to the approach suggested by Globe and Mail John Heinzl's dividend portfolio. 

There are also many people follow the couch potato way, i.e., passive investment through index and ETF. I have some regular RRSP contribution that goes to an index fund.

There are pros and cons for both, and I wonder what makes you choose one over the other, or do you do both? I would like to learn from your thoughts and experience.

Thanks


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## none (Jan 15, 2013)

management fees of ETFs are so low now I don't get the point of dividend investing. Couch potato investing I think offers many befits at a insignificant cost -- and it's super easy.


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## GGO (Feb 15, 2015)

Thanks, yes the biggest selling point of CP is that it's so easy to implement.


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## none (Jan 15, 2013)

People don't like simple - even when it's super effective. That's the main draw back about couch potato investing. It's REALLY REALLY boring - even though it's REALLY REALLY effective and is better than 99% of the investment methods out there. Good problem to have really.


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## uptoolate (Oct 9, 2011)

I'm a KISS principle person. Couch potato makes it very easy to be very well diversified across asset classes, markets and even currencies if one chooses. Happy to not be hitting home runs.


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## none (Jan 15, 2013)

uptoolate said:


> I'm a KISS principle person. Couch potato makes it very easy to be very well diversified across asset classes, markets and even currencies if one chooses. Happy to not be hitting home runs.


Which would also likely end up with more strike outs!

People sometimes find it hard to realize that hitting average every single year is fantastic!


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## Davis (Nov 11, 2014)

Depends on your stage oif life. I did index investing as a way out of paying high MERs and choosing managers who underperformed. Now with retirement coming up in 2016, I am glad that I have a portfolio of dividend stocks and REITs to generate a real flow of income until my pension starts in 2030.


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## GGO (Feb 15, 2015)

Davis said:


> Depends on your stage oif life. I did index investing as a way out of paying high MERs and choosing managers who underperformed. Now with retirement coming up in 2016, I am glad that I have a portfolio of dividend stocks and REITs to generate a real flow of income until my pension starts in 2030.


Interesting, so you convert index investment into dividend stocks gradually, as a source to generate income?


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## hboy43 (May 10, 2009)

Hi:

Direct stocks have some advantages. Better control of taxation issues, and can have lower MER.

However I'd say the biggest issue is to answer the following question: Do you see volatility as a good thing or a bad thing? If you see it as a good thing, then that argues for stocks, bad thing argues for index investing.

hboy43


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## Echo (Apr 1, 2011)

You could try a hybrid approach where you buy Canadian blue chip dividend payers and then use an ETF like Vanguard's VXC (All World, ex-Canada) to get your international exposure with one simple low-cost fund.

I started out with Canadian dividend stocks but recently sold them all in favour of a two-ETF solution. http://www.boomerandecho.com/my-2014-and-final-portfolio-rate-of-return/


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## GGO (Feb 15, 2015)

hboy43 said:


> Hi:
> 
> Direct stocks have some advantages. Better control of taxation issues, and can have lower MER.
> 
> ...


Thanks for comments. Buying a mix of blue chip dividend stocks should limit the down side, hopefully better than index at down turn?


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## GGO (Feb 15, 2015)

Echo said:


> You could try a hybrid approach where you buy Canadian blue chip dividend payers and then use an ETF like Vanguard's VXC (All World, ex-Canada) to get your international exposure with one simple low-cost fund.
> 
> I started out with Canadian dividend stocks but recently sold them all in favour of a two-ETF solution. http://www.boomerandecho.com/my-2014-and-final-portfolio-rate-of-return/


Thanks for that link. I read through the article and comments. Very interesting. From simplicity point of view, index is definitely much easier. I also agree that most dividend stock now seems quite expensive and one has to wait patiently for buying opportunities. For indexing, I would guess one also want to time the market a bit, e,g., I would not want to put a large chunk to buy VTI at the moment by looking at its chart, maybe wait for pull back a bit.

Also noticed you only have two fund, meaning 100% equity?


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## My Own Advisor (Sep 24, 2012)

I do a blend of each, dividend stocks and a couple ETFs. No bonds. I own 30+ stocks now and happy to do so and contrary to what some believe, it is a rather passive way to invest. After dividends are reinvested, the money leftover gets put into indexed products for international diversification. With dividend stocks, no MERs to worry about. There are only about 20-30 blue chip stocks in Canada to own anyhow.


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## gibor365 (Apr 1, 2011)

> I do a blend of each, dividend stocks and a couple ETFs


 Me 2  include bond ETFs: VSC, CBO, PCY, HYG



> it is a rather passive way to invest


 True! Especially if you are talking about FTS, EMA, BCE, REI.UN, Canadian banks or some of US dividend kings like JNJ or PG




> Direct stocks have some advantages. Better control of taxation issues, and can have lower MER.


 actually, owning direct stocks , you don't have MER at all. Advantage of ETFs -> some brokerages , sometimes, having no trading fees for ETFs...
Direct stocks give you more predictable dividend income stream that can be important when you have RRIF/LIF...
Also, if you have 15-20 stocks from XIU, the performance will be rather similar


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## GGO (Feb 15, 2015)

My Own Advisor said:


> I do a blend of each, dividend stocks and a couple ETFs. No bonds. I own 30+ stocks now and happy to do so and contrary to what some believe, it is a rather passive way to invest. After dividends are reinvested, the money leftover gets put into indexed products for international diversification. With dividend stocks, no MERs to worry about. There are only about 20-30 blue chip stocks in Canada to own anyhow.


Thanks for comments. I agree that dividend investing with buy and hold is kind of passive and some may say boring. In my case I have a large amount of cash in RRSP from previous years and slowly buying some dividend stocks, but I find there are not many opportunities at current market condition as most of these blue chips in US or canada are very expensive. It seems that it will take me a while to get fully invested, and get a bit impatient. Then in the same sense I probably won't drop a large amount on ETF either as they are high. Some may say this is market timing, but I just get uncomfortable looking at chart for past 5 years.

Diversification through ETF is a good idea as that is not covered with dividend stocks. Will look into that.


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## GGO (Feb 15, 2015)

gibor said:


> Me 2  include bond ETFs: VSC, CBO, PCY, HYG
> 
> True! Especially if you are talking about FTS, EMA, BCE, REI.UN, Canadian banks or some of US dividend kings like JNJ or PG
> 
> ...


Thank you for sharing. I own quite a few stocks mentioned, and are slowly buying more.

Good points on predictable dividend income with stocks, and for canadian market as mentioned by My Own Advisor, there are not many dividend stocks to choose anyway.


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## Echo (Apr 1, 2011)

GGO said:


> For indexing, I would guess one also want to time the market a bit, e,g., I would not want to put a large chunk to buy VTI at the moment by looking at its chart, maybe wait for pull back a bit.
> 
> Also noticed you only have two fund, meaning 100% equity?


Not necessarily. Although it can be unnerving to invest a large sum all at once, I thought of it this way: If I had $100,000 invested in these two ETFs right now, would I sell everything and wait for a better time to buy in, or just continue adding new money and rebalance periodically?

As for the two-fund solution, yes it's 100% equity. It's a variation of one of the Canadian Couch Potato model portfolios (http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf), minus the bonds. This is suitable for my situation but I realize that a 100% equity portfolio is not for everyone.


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## Canuck (Mar 13, 2012)

Dividend stocks all the way for me! I hold a lot of them though, so it's almost like picking the best picks from an ETf in each sector, but without the Mer's

I like the predictability of the dividends, the tax advantage, and most importantly the dividend increases.

I'd be so bored just holding 2 ETF's. I actually get all excited to get up in the morning and read all the news releases on my stocks


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## Echo (Apr 1, 2011)

Canuck said:


> I'd be so bored just holding 2 ETF's. I actually get all excited to get up in the morning and read all the news releases on my stocks


Hey, I used to feel the same way about dividend stocks but I'm at a point in my life where I don't have the time (or expertise) to keep up with everything so that's why indexing with a simple two-fund solution makes sense for me now. I absolutely think you can succeed with a dividend approach, but it takes time and discipline to execute it for the long term. I also believe more dividend investors need to track their returns and compare them against an ETF benchmark to determine if their effort is actually paying off.


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## Canuck (Mar 13, 2012)

Echo said:


> Hey, I used to feel the same way about dividend stocks but I'm at a point in my life where I don't have the time (or expertise) to keep up with everything so that's why indexing with a simple two-fund solution makes sense for me now. I absolutely think you can succeed with a dividend approach, but it takes time and discipline to execute it for the long term. *I also believe more dividend investors need to track their returns and compare them against an ETF benchmark to determine if their effort is actually paying off*.



The excitement is the pay off! for me anyway 

But I hear what you're saying, I actually have no idea if I would have done better by just holding a few ETF's. 

I also need a higher dividend, and the tax advantage of eligible dividends, than what an ETF can offer, as I'm living off my dividends now, so that plays a large part in why I chose to go with dividend paying companies.


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## gibor365 (Apr 1, 2011)

> I also believe more dividend investors need to track their returns and compare them against an ETF benchmark to determine if their effort is actually paying off.


 True....but ETF benchmarks can be different and everyone should select one of them.... I know that any comparing to XDV...but it's not really "fair" as if as dividend investor you have 20% or more in US dividend stocks , not a problem to outperform XDV...
Personally , I compare with benchmark 20% XIC, 20% VEA, 20% VTI, 40% VSC...


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## pastorash (Feb 3, 2014)

Lots of excellent points here. Agree with many of them. There is room for both and it depends on the individual.

Are you interested in the details of a company?
Do you have time to do the necessary reading and research on companies to buy and companies you already own?
Are you interested in doing that?
Do you want a higher stream of dividends than ETF's typically provide?
Do you want a more reliable/regular stream of dividends?
Do you enjoy the "game" of investing and is the potential loss of income worth the "thrill" of the buy?

I'm accumulating stocks at the present (6 Cdn. 2 US) and have part of the money saved for a ninth down the road. I want the higher dividend that comes with dividend investing for down the road but even I agree with the fact that the day may come where this is more bother than it is worth and I'm trusting the low cost alternative of index investing will be there for me.


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## My Own Advisor (Sep 24, 2012)

gibor said:


> True....but ETF benchmarks can be different and everyone should select one of them.... I know that any comparing to XDV...but it's not really "fair" as if as dividend investor you have 20% or more in US dividend stocks , not a problem to outperform XDV...
> Personally , I compare with benchmark 20% XIC, 20% VEA, 20% VTI, 40% VSC...


My benchmark for CDN stocks is XIU. 

So, if I (intend to) own 30-40 stocks in XIU, then I largely get the same returns as XIU; no MERs and I don't need as much capital (in stocks) to fund my lifestyle. Sure, I could sell capital (XIU) but I would have to "time the market". Why bother?

Investing in international stocks including the U.S. is different, too many stocks to "pick" from; so I prefer to hold a few and index everything else.

Until I can be convinced my pipeline, utility and bank raises over the last few months, in particular, are not a good thing I will continue with my hybrid approach. There is room for both approaches at the investing table, it's not a this way or that way mandate. At least it isn't for me.


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## gibor365 (Apr 1, 2011)

> I will continue with my hybrid approach.


 This is also what I'm doing.. started "hybrid" approach 4 years ago when I started investing, was thinking in future to stick up to one of them, but still cannot decide....  So now my ETFs about 18-20% of total portfolio that include 6 accounts



> Investing in international stocks including the U.S. is different, too many stocks to "pick" from; so I prefer to hold a few and index everything else


 same approach here...hold VTI, but also many individual stocks , mostly dividend champions and contenders + PM 



> > My benchmark for CDN stocks is XIU.


 but here is the question, what about US stocks?! For me it's too complicated extract performance data only for CAN stocks


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## My Own Advisor (Sep 24, 2012)

If I was holding blue-chippers and mostly dividend payers in the U.S., my benchmark would likely be VIG.
https://personal.vanguard.com/us/funds/snapshot?FundId=0920&FundIntExt=INT

5-year return for VIG is just north of 14%


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## Fraser19 (Aug 23, 2013)

I am like MOA, I have Canadian stocks but I index everything else. 
The market is too big for me to be able to sort out stocks from all over the world.


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## GGO (Feb 15, 2015)

Echo said:


> Not necessarily. Although it can be unnerving to invest a large sum all at once, I thought of it this way: If I had $100,000 invested in these two ETFs right now, would I sell everything and wait for a better time to buy in, or just continue adding new money and rebalance periodically?
> 
> As for the two-fund solution, yes it's 100% equity. It's a variation of one of the Canadian Couch Potato model portfolios (http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf), minus the bonds. This is suitable for my situation but I realize that a 100% equity portfolio is not for everyone.


Thanks. To the first question, I guess there is underlying question is that index investing probably don't care fair price or value, and just stay invested. I am struggling with that part a bit but long term results do seem to suggest that it works fine.
100% equity is bold but I think many investor are doing that.


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## GGO (Feb 15, 2015)

Canuck said:


> Dividend stocks all the way for me! I hold a lot of them though, so it's almost like picking the best picks from an ETf in each sector, but without the Mer's
> 
> I like the predictability of the dividends, the tax advantage, and most importantly the dividend increases.
> 
> I'd be so bored just holding 2 ETF's. I actually get all excited to get up in the morning and read all the news releases on my stocks


LoL, I like your attitude ! I think dividend investing will definitely work well for you. For myself sometimes so busy I don't have time to do all the research, although I don't mind doing that when there are some time, hence the back and forth.


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## GGO (Feb 15, 2015)

pastorash said:


> Lots of excellent points here. Agree with many of them. There is room for both and it depends on the individual.
> 
> Are you interested in the details of a company?
> Do you have time to do the necessary reading and research on companies to buy and companies you already own?
> ...


Good points. Although I am buying individual stocks now I often have the urge to just go couch potato way which seems so much easier.


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## GGO (Feb 15, 2015)

gibor said:


> This is also what I'm doing.. started "hybrid" approach 4 years ago when I started investing, was thinking in future to stick up to one of them, but still cannot decide....  So now my ETFs about 18-20% of total portfolio that include 6 accounts
> 
> same approach here...hold VTI, but also many individual stocks , mostly dividend champions and contenders + PM
> 
> but here is the question, what about US stocks?! For me it's too complicated extract performance data only for CAN stocks


 Good to know that I am not alone about the struggle which way to go.


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## GGO (Feb 15, 2015)

Fraser19 said:


> I am like MOA, I have Canadian stocks but I index everything else.
> The market is too big for me to be able to sort out stocks from all over the world.


Agree. For canada probably a lot easier to cover with individual stocks, as financial oil/gas and material is close to 70% of TSX.


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## Moneytoo (Mar 26, 2014)

Also have a mix of index ETFs and individual stocks, but don't limit myself to only dividend payers. I've been following globe&mail investor's Strategy Lab where growth and value portfolios keep outperforming dividend and index ones by far, and will be adding more growth stocks to my TFSA this summer.

_Based the latest Strategy Lab performance update, from inception on Sept. 13, 2012, through the end of February, 2015, the model dividend portfolio produced a total return – from dividends and capital appreciation – of 42 per cent. That trails Strategy Lab’s growth and value portfolios, but it’s ahead of the model index portfolio. It also beats the S&P/TSX composite index’s total return – also including dividends – of about 31 per cent over the same period._

http://www.theglobeandmail.com/glob...-a-trillion-reasons-to-smile/article23273275/


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