# Couch Potato Anxiety



## doitnow! (May 28, 2011)

I am new to investing and hoping to hear the from investors who began with a buy and hold stock approach and are now primarily passive investors.

About a year ago I took the plunge, sold my mutual funds and purchased a number of stocks. Despite my limited investment know how for the most part I am happy with my returns but not with the work involved. I would rather be spending time on what I enjoy than tracking and rebalancing Canadian, US, 60/40 equities to bonds portfolio.

To that end I have been reading books and on the advantages of Couch Potato Investing and I find the methodology appealing and the evidence convincing. The difficulty I have in making the transition is that my stocks portfolio handily beat the passive portfolios as per the Couch Potato site. Same results when I compared past 3, 5, 10 year returns.

Much of what of what I have I read suggests that passive investing will win out in the long run and I know that it’s impossible to predict how my current portfolio will perform in the future. These concerns plus my wish to spend more time on the couch will likely tip the balance in favour of a Couch Potato approach. 

Have you similarly considered revising your investing strategy? If so, what has been your experience and results?


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## Young&Ambitious (Aug 11, 2010)

My experience was switching from mutual funds to DIY. Initally I was going to do a couch potato approach but after looking at the individual holdings I nixayed that plan and went DIY and began stock picking. I first opened a Questrade account 1.5 years ago and transferred everything in only .5 ago. I have been extremely satisfied with my performance thus far, but of course I don't have the long term perspective that others that may be helpful/insightful to you. GL


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## Jungle (Feb 17, 2010)

I started investing in 2007. Made some mistakes but learned a lot. I started tracking all of our portfolios, which include stocks and passive index investing. 

The stocks have out performed for a couple of years, but this year, couch potato is really close. 

With that said, I got lucky with some stock picks and good timing. This was easy to do with some of the market swings we've had over the last few years. I can't count on that going forward. If the market drops like 08-09, sure, I might buy blue chips on sale. But for every day core strategy, best to DCA potato. 

The market can be so twisted, up and down. USA is up, Cdn and INT are under performing, who knows where we'll go in the short term.

I believe the couch potato strategy gives you the best possible advantage-it removes market timing, emotional mistakes, bad stock picks and poor fund performance.


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## Cal (Jun 17, 2009)

I don't really rebalance. I just add the 'new' money into what I want to add to. Saves a little time in a way.

Having said that, I love the time I spend looking at dividends, month end net worth statements, and other projections that I do on my own.

I enjoy holding the equities directly. But do hold an international etf and an S&P for further expsure and diversity. I sleep well at night and have no intentions of altering my strategy.


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## leoc2 (Dec 28, 2010)

Spent many years stock picking and market timing. Did ok. Switched to couch potato last year and I am pleased with the results. I am even more pleased with the amount of free time I have.


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## GoldStone (Mar 6, 2011)

To OP:

It doesn't have to be all or nothing. Historically, Canadian large-cap dividend payers have done very well compared to TSX. On the other hand, US indexes are much harder to beat. 

So you might want to consider a hybrid approach:
- buy and hold Canadian blue chip dividend payers
- use ETFs to hold US and International equities


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## Oldroe (Sep 18, 2009)

Well it gets easier. You didn't say what kind of stocks you have purchased.

Like a lot of people here you are basically in a gravy train. You won't know if you like this stuff until you wake up 1 morning and 30-40 % of your holding just got wiped out from something you never heard about.

How you react from this point forward will determine your investment life.

My portfolio is ready for a crash always. I can pretty much run my invests by reading the front page of the newspapers as I drive thru getting coffee. Took about 25 years to get here.


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## kcowan (Jul 1, 2010)

I think the key is your own aptitude and interests. There is no question that individual stock picking takes time and energy. Hopefully that will be rewarded by avoiding the MER "tax" on an ETF. But you must stay on top of it. Buy and hold no longer works.

The other advantage to building your own portfolio is that you can manage your capital gains. This can be a big advantage if you have uneven earnings from one year to the next. I was on commission and could do profit taking in a year when my commissions were skewed into the next year.

One year, I sold all my AAPL stock just to lock in the profits and get the tax over with. Then I repurchased after its swoon. With an ETF, you get CG every year.


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## Young&Ambitious (Aug 11, 2010)

Oldroe said:


> My portfolio is ready for a crash always. I can pretty much run my invests by reading the front page of the newspapers as I drive thru getting coffee. Took about 25 years to get here.


Oldroe can you expand on "[your] portfolio is ready for a crash always"? Everyone has different ideas on how to crash-proof their portfolio, one CMF investor keeps 25% in solid gold and others use options. What is your approach?


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## Oldroe (Sep 18, 2009)

I have 5 banks power corp/financial fortis, Suncor about 20% cash and 5% in Front Street Mutual Funds.

So anything that will make me buy is front page news. If the markets get crushed these will also correct just less. And they will be the first to recover.


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## doitnow! (May 28, 2011)

Oldroe said:


> Well it gets easier. You didn't say what kind of stocks you have purchased.
> 
> Like a lot of people here you are basically in a gravy train. You won't know if you like this stuff until you wake up 1 morning and 30-40 % of your holding just got wiped out from something you never heard about.
> 
> ...


V, VOD, TD, VRX, CVX, ABT, APD....

Some of these are hard to give up. 

Would you my sharing what you mean by "my portfolio is ready for a crash"?


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## doitnow! (May 28, 2011)

*Canadian Vanguard ETF's*

Anyone buying the new Canadian Vanguard ETF's?


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## doitnow! (May 28, 2011)

*Decisions*

I've done the following:

Decided to keep a few of my top performing stocks but the rest sold and will purchase ETF's.

Canada: (25%)
XIC (may change to 50% XIU & 50% XMD, & 5% ZRE

http://canadiancouchpotato.com/2012/03/22/under-the-hood-ishares-sptsx-completion-xmd/

US: (25%)
VTI, & 5% VNQ

INT: (10%)
VEA

Bonds (40%)
XBB

I currently have 10% of the fixed asset portion of my portfolio in XBB and the rest in a money market fund at fund. It is a significant amount to be collecting only 1.5% but I am concerned about rising rates and the bonds going down in value?

Anyone wrestling with similar concerns?


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## GoldStone (Mar 6, 2011)

Canada:

ZCN tracks the same index as XIC, at a lower MER. The only knock against ZCN, it doesn't have as long a track record.
http://www.etfs.bmo.com/bmo-etfs/glance?fundId=72048

International:

I use VXUS. It includes emerging markets and small-caps, unlike VEA.
http://canadiancouchpotato.com/2011/02/07/under-the-hood-vanguard-total-international-stock-vxus/

Bonds:

I sold XBB months ago, because of similar concerns. XBB yields about 1.9% once you deduct the MER. Not worth the risk for me.


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## doitnow! (May 28, 2011)

GoldStone said:


> Canada:
> 
> ZCN tracks the same index as XIC, at a lower MER. The only knock against ZCN, it doesn't have as long a track record.
> http://www.etfs.bmo.com/bmo-etfs/glance?fundId=72048
> ...


Thank you, will check ZCN.

Where do you invest the fixed asset portion of your portfolio?


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## GoldStone (Mar 6, 2011)

doitnow! said:


> Where do you invest the fixed asset portion of your portfolio?


High interest savings accounts like TDB8150 and MIP510. Paying 1.25% at the moment. Not happy about it at all. What can you do when governments are bent on punishing the savers??? a.k.a. *financial repression*

I have some issues to sort out on the equity side of my portfolio, so fixed income is not the highest priority at the moment. Luckily, inflation is running quite low. So I'm not in a rush to do anything.


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## mrPPincer (Nov 21, 2011)

doitnow! said:


> Where do you invest the fixed asset portion of your portfolio?


I keep mine in a HISA earning 2% until bonds start to look attractive again.
Here's a list of the top paying ones in Canada, take your pick -> http://www.highinterestsavings.ca/chart/


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## GoldStone (Mar 6, 2011)

Only Manitoba credit unions pay 2%. They are not CDIC insured. Credit union insurance is not nearly as good. Also, you can't buy them in a brokerage account. Not for me.

GIC ladder is another option. You can get better than 2% rate, and they are available in the brokerage accounts.

http://www.bmoinvestorline.com/ILCl...GICRates.do?method=displayGICRates&language=E

https://contact.rbc.com/gicrates/index.php

*To OP:*

I forgot to mention that XBB is no longer the cheapest universal bond ETF. Take a look at Vanguard VAB and BMO ZAG.


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## Square Root (Jan 30, 2010)

Buy and hold working fine for me. 4% yield, 10% total return over most periods. Banks, pipes, telcos, mostly.


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## Guigz (Oct 28, 2010)

I keep hearing "market timing" this and "market timing" that, is anybody still interested in value investing anymore?

Perhaps value investing is included in what people call "market timing" (e.g., the market drops and stocks are on sale relative to the value of the assets), but otherwise, this is just speculation, not investing.

I have been reading about investing recently and I am about ready to do the jump (mostly with pocket change for starters) but some of the comments I read have me scratching my head....


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## Young&Ambitious (Aug 11, 2010)

Guigz said:


> I have been reading about investing recently and I am about ready to do the jump (mostly with pocket change for starters) but some of the comments I read have me scratching my head....


Which ones? Perhaps some people can clarify and shed light?


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## Dibs (May 26, 2011)

Guigz, always take what you read in perspective. People with certain investing styles are more likely to post on the forum. There are a fair amount of index investors here, but they hardly say anything because there's nothing to say. As for value investing, I would say that there are a few individual stock threads that have very good value investing insights. CCO and BBD come to mind.


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## Guigz (Oct 28, 2010)

I was not specifically referring to this thread, but most of the posts in the "Investing" sub-forum (i.e., "What are you buyin now" thread and so on) have a few examples. 

There was also a post in this thread, but it looks like it was deleted? I was not looking at pointing fingers.

@dibs thanks for the pointer, I will go check those out! :smilet-digitalpoint


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## doitnow! (May 28, 2011)

GoldStone said:


> Canada:
> 
> ZCN tracks the same index as XIC, at a lower MER. The only knock against ZCN, it doesn't have as long a track record.
> http://www.etfs.bmo.com/bmo-etfs/glance?fundId=72048
> ...


Golstone, thanks for the tip, will consider swapping XIC for ZCN, I like the .15 MER and maybe VEA for VXUS for emerging markets and small caps. What's the downside of a "short track record" when it tracks the same index? 

As for bonds, what will you buy and when? 

Anyone?


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## doitnow! (May 28, 2011)

Currently holding ZRE.

Like the fund but not the high MER, any suggestions on lower cost alternatives (other than buying the individual holdings)?


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## CanadianCapitalist (Mar 31, 2009)

doitnow! said:


> What's the downside of a "short track record" when it tracks the same index?


Goldstone can weigh in on this. The track record is important in taxable accounts because you don't want to be in a situation where the ETF folds triggering a taxable event outside your control. That said, I think ZCN will be around. It has decent volume and significant AUM.


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## doitnow! (May 28, 2011)

CanadianCapitalist said:


> Goldstone can weigh in on this. The track record is important in taxable accounts because you don't want to be in a situation where the ETF folds triggering a taxable event outside your control. That said, I think ZCN will be around. It has decent volume and significant AUM.


Thank you CC. 

Quite a large MER savings, ZCN over XIC.

What do you think of VRE (much lower fees) as a low cost alternative to ZRE?

www.vanguardcanada.ca/individual/etfs/etfs-detail-overview.htm?portId=9559[/url]


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## Square Root (Jan 30, 2010)

Guigz: As a new investor you have to be careful here. I think many posters, esp in the what are you buying/selling threads are short term holders and often talk of their investments as fans would talk of their favourite sports teams. If you are planning on long term investing with a goal of a secure retirement you should probably ignore most of this. It seems that virtually every obscure stock gets a plug here sooner or later.


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## doitnow! (May 28, 2011)

Guigz said:


> I keep hearing "market timing" this and "market timing" that, is anybody still interested in value investing anymore?
> 
> Perhaps value investing is included in what people call "market timing" (e.g., the market drops and stocks are on sale relative to the value of the assets), but otherwise, this is just speculation, not investing.
> 
> I have been reading about investing recently and I am about ready to do the jump (mostly with pocket change for starters) but some of the comments I read have me scratching my head....


Tell us why as I am not quite sure how market timing plays a role in this discussion?

My intention was to begin a thread for those of us transitioning from active to passive investing, where ALL, beginner and experienced like minded investors share concerns, challenges, knowledge and experience.


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## PF_Enthusiast (Jan 21, 2011)

We Couch Potatoes don't have much to say...we don't need to check the markets daily and we're in it for the long term. No swing trading, no day trading, no market timing and no looking at balance sheets and financials for the next big winner! 

Most new passive investors get impatient. If you need to see immediate results and big returns, passive investing isn't going to satisfy that. My time horizon is 30+ years so I could care less what happens in the next 5 years. If the markets tank, I'll just save a bigger percentage of income to buy more!!


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## doitnow! (May 28, 2011)

PF_Enthusiast said:


> We Couch Potatoes don't have much to say...we don't need to check the markets daily and we're in it for the long term. No swing trading, no day trading, no market timing and no looking at balance sheets and financials for the next big winner!
> 
> Most new passive investors get impatient. If you need to see immediate results and big returns, passive investing isn't going to satisfy that. My time horizon is 30+ years so I could care less what happens in the next 5 years. If the markets tank, I'll just save a bigger percentage of income to buy more!!


I agree with the first part but what about those of us with a 5 to 10 year time horizon. Do we have reason to be concerned about passive investing?

It is my understanding that research indicates that if the "markets tank in the next 5 years" (or however many years) our passive portfolios will better weather the storm than active portfolios.

Can anyone speak from personal experience on this?


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## Oldroe (Sep 18, 2009)

It's a fact you run a huge risk of being all in when the next crash happens. The more active your portfolio the harder you get hit.

My next correction of 25% and more will be #6. The banks will not be hit so hard and they will be the first to recover then all the rock solid div. stocks.

Weather you buy stock or etf build that rock solid base then take 10% to actively mange.


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## GoldStone (Mar 6, 2011)

doitnow! said:


> Golstone, thanks for the tip, will consider swapping XIC for ZCN, I like the .15 MER and maybe VEA for VXUS for emerging markets and small caps. What's the downside of a "short track record" when it tracks the same index?


CC explained one issue. Does the new ETF have the staying power? I agree with CC, ZCN is unlikely to disappear. They have near 1B in assets under management.

Tracking error is another issue. ZCN tracked a smaller index until very recently (Dow Jones Canadian Titans 60). They switched to S&P/TSX Composite at the end of September. TSX Composite isn't too difficult to track: only 200 companies in 1 country. I don't expect any big issues. Still, it would be nice to see the actual track record before you invest. If they can't track the index accurately, their MER advantage may become moot.

Regarding VEA vs. VXUS, consider another option as well. VEA + VWO (emerging markets) was slightly cheaper than VXUS the last time I looked.


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## Jungle (Feb 17, 2010)

I like the couch potato strategy with DCA. But I would not ignore the markets. 

If there is a drop 10-20%, it's a great time to add more, or buy some blue chip stocks on sale.


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## doitnow! (May 28, 2011)

GoldStone said:


> CC explained one issue. Does the new ETF have the staying power? I agree with CC, ZCN is unlikely to disappear. They have near 1B in assets under management.
> 
> Tracking error is another issue. ZCN tracked a smaller index until very recently (Dow Jones Canadian Titans 60). They switched to S&P/TSX Composite at the end of September. TSX Composite isn't too difficult to track: only 200 companies in 1 country. I don't expect any big issues. Still, it would be nice to see the actual track record before you invest. If they can't track the index accurately, their MER advantage may become moot.
> 
> Regarding VEA vs. VXUS, consider another option as well. VEA + VWO (emerging markets) was slightly cheaper than VXUS the last time I looked.


Thanks Goldstone, I think that's a good option as well, are there any advantages to holding both VEA & VWO given that one fund, VXUS, requires less work and less cost. 

I have no idea what the probaility coud be that ZCN would fail to track the index accurately. Is there any way finding out or, in your opinion, is the likelihood so remote that it's not worth worrying about?


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## GoldStone (Mar 6, 2011)

doitnow! said:


> are there any advantages to holding both VEA & VWO given that one fund, VXUS, requires less work and less cost.


It's not less cost. Here are the MERs:

VEA: 0.12%
VWO: 0.20%
VXUS: 0.18%

75% VEA + 25% VWO is 0.14%. A bit cheaper than VXUS, but we are really splitting hairs here. VEA & VWO will cost more to buy and rebalance.

About 8% of VXUS is invested in Canada. Not a big deal, but not ideal either. VEA & VWO are cleaner in that respect; no Canadian equities in the mix.

VEA & VWO are large-cap ETFs. VXUS gives you a slice of mid- and small- caps.

You decide what's more important to you.

If simplicity is your primary goal, forget VTI and all of the above. Put 100% in VT. That's the ultimate one-stop solution.



doitnow! said:


> I have no idea what the probaility coud be that ZCN would fail to track the index accurately. Is there any way finding out or, in your opinion, is the likelihood so remote that it's not worth worrying about?


I have no doubts that ZCN will track the index fairly accurately. That's not the issue. We are not talking about big misses here. ZCN has 0.1% cost advantage over XIC. If ZCN tracking error is 0.1% worse than XIC, cost advantage disappears. There is no way to find out beforehand. You need several years worth of results to compare the execution. I wouldn't worry about it too much.

By the way, have you compared the performance of your stock portfolio to the relevant indexes? If you are good at stock picking, why make the drastic change? Are you really sure that you won't regret the result?


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## Clacker (Mar 18, 2012)

I like the couch potato strategy for the simple reason that I don't know the markets well enough to make educated choices, nor do I have time to acquire the knowledge right now. The couch potato let's me save regularly and with a high degree of confidence that I will do OK with this strategy.


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## lonewolf (Jun 12, 2012)

Hi, doitnow

From experience we all have differnt knowledge & understanding as well as most likely some of the same. You have differnt knowledge & understanding then I do as I have differnt knowledge & understanding then you do. From my experience the most important thing is to understand that which Iam thinking when Iam trying to achieve any goal including investing.

Mans mind is so constituted that he can not keep all his knowledge & values in his vocal awareness.Yet in order to survive, he must have some means of triggering instantaneous apprasals from his subconscious in response to his perceptions of the situations he encounters. If for example while crossing a street a pedestrian precieves a truck traveling @ break neck speeds in his direction, rather then carrying out a lengthy conscious thought process, his subconscious instantaneously assesses the gravity of the situation & he responds automatically by lunging to safety. Providing the conscious mind with lightning quick like appraisals, while bypassing any undue, lengthy thought process is the funtion of emotions.

Fear: is an emotional (energy in motion) response to that which treatens ones values, & it prompts one to avoid that which arouses the fear.

Love: is an emotional response to that which ones values most highly: to prompts one to act to achieve contact or to gain possession of that value.

The mental content of ones mind will dictate their investment method. If the mental content is true or false & good or evil I think will dictate weather the investor is successfull or not.

Just like the pedestrian that lunges to safety to protect that which he values i.e., life. The investor will do the same to protect that which he values or comes in possesion of. There is no way that with so much differnt understanding & knowledge that each of us has compared to each other, that everyones emotions would let them follow the same method. That which you value & & mental content will dictate your course. 

The better one understands concepts ( 1+1=2 not 1.9 or 2.1) in regards to investing & thier exact meaning the more successfull the investor will be. I know I often make mistakes but to the best of my honest ability I try to remove that which is not true with in my thinking & replace it with that which is true)


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