# Canadian Couch Potato



## CrazyMorgan426Hemi (Dec 27, 2020)

I'm in my late 20s and want to start my retirement fund. I've been saving for an extravagant around-the-world trip but 2020 happened  I've decided to put all this money into my TFSA and RRSP fund.

I have no experience with investments, and I want to spend as little time as possible managing my investments but get the best returns. I won't be withdrawing this money until I retire.

I came across the Canadian Couch Potato website and it looks like a very hands-off minimalistic investment strategy. Since I already bank with TD, I figured I would follow their TD e-Series model portfolio where I would be investing my money in four index funds.

This strategy seems too simple to be true. Can anyone point out any negative points against the Canadian Couch Potato TD e-Series Funds strategy?


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## robfordlives (Sep 18, 2014)

I believe they still call for 25% in Canadian equity funds overall? This has been disastrous for many and underperformed a simple S&P fund the last 12 years. Personally this has cost me hundreds of thousands but the advocates of this will say oh yea but what about the dividends and the dividend tax credit? Yea I'd rather have the Ferrari then many of the useless no to low growth companies that litter the Canadian index. Go for growth, for tech, go for the future.


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## james4beach (Nov 15, 2012)

CrazyMorgan426Hemi said:


> This strategy seems too simple to be true. Can anyone point out any negative points against the Canadian Couch Potato TD e-Series Funds strategy?


This is a very good idea, and the TD e-series are excellent. The Couch Potato method is totally solid.

You're right, it does seem too simple to be true, but this is legit. This tried-and-true investment method is called "asset allocation" and the Couch Potato portfolios are just implementations of this.

The negative points (or challenges you will encounter) are nearly entirely behavioural / psychological in nature. Here are some I can think of:

*Conflicting views/advice and peer pressure*: This is demonstrated by @robfordlives , so here's a real life example. No matter what strategy you start following, you will encounter people who don't like some part of it for whatever reason. You will have to gain enough confidence in your method (and the allocation weights) so that you aren't swayed by other people. That includes experts as well. Experts don't all agree on the same thing. You have to absolutely make sure that you aren't constantly changing your investment mix... this is going to be the hardest part. I promise you this is the hardest part.

*Disappointing periods:* No matter which couch potato mix you choose (which asset allocation), you will encounter some poor performance along the way. You need dedication and confidence to stick with your investment plan. For example when I started my own asset allocation mix, I had a zero return in the first year and it was immediately disappointing. The first two years were actually quite poor. Today however after 5 years, I've had over 7% annual return. You will only see the great results in the long term.

*Market drops and crashes:* Many people give up on their portfolios during market crashes and frightening economic news. Make sure you choose a conservative enough allocation that you aren't scared away during market crashes. The market can crash at any moment, always... the stock market is _always_ scary. Couch Potato can't protect you from this cold hard reality.

*Sticking with the plan:* This is the key. Couch Potato methods are long term investments, and it's very hard for most people (including me) to stick with such long term plans. You have to control your itchy trigger fingers and fight the temptation to sell a disappointing investment, and to deviate from the plan.

It's hard to stick with the plan. That's the challenge with Couch Potato. The actual method is rock solid. You already saw in this thread that it only took about 27 minutes after you posted to hear the first challenge to the plan. Now imagine that happening constantly over 30 years.

People will tell you to do dividend growth investment instead, they'll tell you to invest in bitcoin instead, or to give up on stocks and invest in real estate. You'll hear this stuff endlessly. Will it disrupt your plan?


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## like_to_retire (Oct 9, 2016)

CrazyMorgan426Hemi said:


> This strategy seems too simple to be true. Can anyone point out any negative points against the Canadian Couch Potato TD e-Series Funds strategy?


It's an excellent low cost strategy and the TD eSeries is a good way to employ it since you can make periodic small additions to these funds without trading costs.

I would follow the percentages as outlined for the Couch potato. 

Actually you'll find that over the long term the US and Canadian Indexes are about the same total return. You can see the total return chart below over 20 years of the S&P 500 versus the Canadian TSX composite. The TSX actually wins. Some years the US will win and others the TSX will win, but that's the nice part of diversifying with other countries. 










ltr


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## james4beach (Nov 15, 2012)

robfordlives said:


> I believe they still call for 25% in Canadian equity funds overall? This has been disastrous for many and underperformed a simple S&P fund the last 12 years. Personally this has cost me hundreds of thousands


No idea what you're talking about. The TSX index return over the last 12 years is roughly 9.2% (using XIU) which is a tremendously strong return. Absolutely nobody is losing in this game if they are getting 9.2% CAGR


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## james4beach (Nov 15, 2012)

Here's a slightly longer term view than what @like_to_retire posted, using XIU which is almost the same (TSX 60 index). This takes into account the currency conversion so now you're looking at CAD-vs-CAD.

Over the 21 years pictured here, Canada has been outperforming the US for the entire time except for the last year.

The reason Couch Potato includes both Canada and the US is that both have had very strong long term returns. Both should be included in the portfolio.


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## AltaRed (Jun 8, 2009)

Ditto to what James and LTR said regarding use of TD e-funds and allocations. The only thing I'd do if your risk tolerance is high, is to to be more growth oriented with a small bond component. Perhaps the 10% bond component version in the CCP Model Portfolios

A person in their 20s doesn't really need to have a bond component for anything other than to not panic sell in case of a market 'swan dive' like happened in 2008/2009 and March 2020. Another way to slice it is not quite even allocations for Cdn/US/Int'l equity. In the Vanguard ETF version on CCP, over on the right side for VGRO, you will see Cdn/US/Int'l at 24/32/24 with the remaining 20% in bonds. Vanguard has done a lot of work to come up with their 'ratios', including backtesting.

Ignore post #2 as so much rubbish for someone who wants their investments to work for them (with negligible attention) rather than having investing time control their lives.


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## CrazyMorgan426Hemi (Dec 27, 2020)

What should me asset allocation be for Canadian Couch Potato TD e-Series? I was reading an article that suggest my bond allocation be my age and the remainder in equities.


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## Karlhungus (Oct 4, 2013)

Ignore what robforlives said, listen to jamesforbeach. Td eseries are great. As for allocation, depends on what feels comfortable for you. If you understand what the stock market has done in the past, and you feel like you wouldnt flinch if the market tanks 30% (or actually get excited and add more) then I would just chop it up 3 ways. 33% CAN, 33% US 33% INT. Thats what I do.


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## Thal81 (Sep 5, 2017)

If you've never invested in the stock market before I'd go for a 60/40 mix of stocks/bonds. Let's call that your training wheels, and keep those wheels on until you first big correction. See how you feel afterwards, and adjust accordingly.

I've known several newbies who went with 0-20% bonds when they first started, but couldn't handle the fall 2018 downturn, or outright sold in March 2020.


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## AltaRed (Jun 8, 2009)

CrazyMorgan426Hemi said:


> What should me asset allocation be for Canadian Couch Potato TD e-Series? I was reading an article that suggest my bond allocation be my age and the remainder in equities.


As mentioned by others, this is a personal choice depending on your risk (volatility) tolerance. Much of what has been written in the past about 'bonds equal age' or '100 minus age = equity exposure' which is the same thing, is dated from a time when bonds actually had a decent return. The 30 year bond bull market is long gone and new variants showed up such as '110-age = equity' and even '120-age = equity'. a 'balanced' allocation of 60/40 (equity/bond) is a popular choice for many mutual funds, including the ever popular Mawer MAW104. On the other hand, the new Vanguard Asset Allocation ETFs have everything from VCIP (20/80) to VCNS (40/60) to VBAL (60/40) to VGRO (80/20) to VEQT (100/0). The two most popular are VBAL and VGRO.

For a young person starting out, I would normally suggest an 80/20 mix until maybe 40 years of age, the becoming more conservative to 60/40 thereafter. As suggested by Thal81 though, you might want to start out at 60/40.... as in 20/20/20/40 in TD e-series for a few years until you get comfortable and then edge up to 25/25/25/25 with new money as you gain confidence, and perhaps even 25/30/25/20. You will eventually get a feel for your comfort level. The key point: There is no 'right' asset allocation. Variances of 5 percentage points either way in the individual selections have little effect on a portfolio. I let my asset allocation vary by that much. 

Ultimately, there is only a 'right' allocation for you and don't get fussed by small variances.


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## bitconnect (Dec 30, 2020)

You can't go wrong with e-series, it's a solid choice.

Personally, I like the one-fund ETFs because it keeps things dead simple.

100% equities: VEQT / XEQT
80/20: VGRO / XGRO
60/40: VBAL / XBAL

I prefer the iShares offerings because they are a bit lighter on Canada, and I can trade them commission-free with iTrade.

I'm not sure if TD offers commission-free ETFs yet. If not, you might want to consider Questrade or WealthSimple. Otherwise the e-series might be your best bet with TD depending on your portfolio size and whether you're doing dollar-cost averaging. At some point the move to ETFs might make sense either way.


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## james4beach (Nov 15, 2012)

@bitconnect are you associated with the disgraced crypto coin fraud, Bitconnect?


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## bitconnect (Dec 30, 2020)

james4beach said:


> @bitconnect are you associated with the disgraced crypto coin fraud, Bitconnect?


No affiliation. I just suck at picking usernames and remember seeing some funny video making fun of bitconnect.


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## james4beach (Nov 15, 2012)

bitconnect said:


> No affiliation. I just suck at picking usernames and remember seeing some funny video making fun of bitconnect.


Ah cool. Sorry for going off topic but that video with hype man Carlos and Bitconnect is one of my all time favourite videos


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## AltaRed (Jun 8, 2009)

bitconnect said:


> 100% equities: VEQT / XEQT
> 80/20: VGRO / XGRO
> 60/40: VBAL / XBAL
> 
> I prefer the iShares offerings because they are a bit lighter on Canada, and I can trade them commission-free with iTrade.


I don't see the iShared AA ETF offerings on this list Commission-Free ETFs | Scotia iTRADE although that list likely pre-dates the AA ETFs. Reddit says they are commission free

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https://www.reddit.com/r/PersonalFinanceCanada/comments/ahijp9


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