# Couch Potato - buy now or wait?



## J Watts (Jul 19, 2012)

I have a bit of money to get back into couch potato investing after selling to buy a house. Is anyone suggesting right now that we wait for the market to fall farther before buying in? Or do we think the market (e.g. oil) has pretty much bottomed out?

For example, Canadian Index e-Series is down 2.28% in the last 6 months, but the US Index is up 14.75% for the same time period. The Bond Index is also still up 3.6% and the International Index is down 2.43%.

Thoughts?


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## Synergy (Mar 18, 2013)

J Watts said:


> I have a bit of money to get back into couch potato investing after selling to buy a house. Is anyone suggesting right now that we wait for the market to fall farther before buying in? Or do we think the market (e.g. oil) has pretty much bottomed out?


Good luck trying to time the market! If you're worried about the markets falling further, DCA your way through your extra cash.


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## Ag Driver (Dec 13, 2012)

The entire concept of the Couch Potatoe Model is NOT to time the market.


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## J Watts (Jul 19, 2012)

Ag Driver said:


> The entire concept of the Couch Potatoe Model is NOT to time the market.


Understood. *BUT* if we were expecting the market to fall another 5, 10, or 20%, now would be a bad time to buy-in, right?


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## Echo (Apr 1, 2011)

Ag Driver said:


> The entire concept of the Couch Potatoe Model is NOT to time the market.


+1

This article is as relevant today as it was in 2011 - http://canadiancouchpotato.com/2011/06/24/ask-the-spud-can-you-time-the-markets/


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## Echo (Apr 1, 2011)

J Watts said:


> Understood. *BUT* if we were expecting the market to fall another 5, 10, or 20%, now would be a bad time to buy-in, right?


The point is that nobody knows what the market is going to do in the future. And while dollar-cost-averaging your way in might make you feel better, studies show that lump sum contributions have performed better. http://canadiancouchpotato.com/2013/05/31/does-dollar-cost-averaging-work/

Obviously this is a popular question for Couch Potato investors - http://canadiancouchpotato.com/2013/05/28/ask-the-spud-should-i-buy-in-now/


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## My Own Advisor (Sep 24, 2012)

I'm with Robb. 

You ignore what the market does or doesn't do with indexing. Take the advice of this expert


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## Video_Frank (Aug 2, 2013)

J Watts said:


> Is anyone suggesting right now that we wait for the market to fall farther before buying in?
> Thoughts?


I subscribe to the Boglehead's philosophy:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

In my opinion, now is the time to invest as per #2 and #5 above.


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## Simon Says (Jan 5, 2013)

You could try and time the market and it could go down 20% 

You could try and time the market and it could go up 20% 

If anyone COULD time the market we would all be much richer - what we "expect" the market to do and what it actually does are two different things.

Wait if you want to wait - but trying to time the market is a waste of time, I've given up on that thought long ago based on the advice of many people with much more investment knowledge then myself.

Si


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## londoncalling (Sep 17, 2011)

Start buying your potato in chunks. Not because I think the market will go up down or sideways but because if you buy all in one shot and there is a 20% drop you will hate yourself and you will hate investing. I am in accumulation mode and most of my retirement will come from Defined Benefit plan. I also have 2 more chunks of money. 1 a RRSP pension that I have left with my employer and my own portfolio of stocks. With my portfolio I try to stock pick (dividend payers both large and small) when I think they are oversold. For the most part there have been ups and downs sometimes ahead of a potato plan sometimes behind. Time spent reading financial statements, forums, news items and punching a calculator. Like the professionals I can't predict or time the market. Sometimes I win sometimes I lose. I do it because I am interested and more importantly because I got sick of giving my money to someone else to do it for me. The purpose of the couch potato is because you believe you can't time the market have little desire to try and time the market and because its easy. If you want to try and guess keep a portion just for that purpose.

Cheers


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## gardner (Feb 13, 2014)

londoncalling said:


> in chunks


This is the approach I would use also. I would be looking to spread buys across 12 months in chunks. Size buys so that the brokerage fees are a vanishingly small proportion.


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## indexxx (Oct 31, 2011)

Bottom line- you have to start somewhere. Fear will paralyze you; sounds like the best plan for you is what others suggest- buy in over time. You'll drive yourself crazy if you don't buy and the market keeps going up- but you'll also drive yourself crazy if you buy and it keeps dropping. See the catch-22? Just start with what you're comfortable with and scale in, and don't worry about what the market does. If I were you, I'd set up an automatic investment plan so that twice every month, you're buying x amount of different TD e-series funds- say on the 5th and 20th of every month, $50 goes to four different index funds. That's $400 a month in increments over a year (I have no idea what your amount would be, just throwing a number in as an example). 

Set it and forget it.


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## Smylie (Jan 20, 2015)

I recently(Late Dec.) had all my holdings come out of CIBC portfolios $100,000 plus....... Got reinvested into some Mutual funds that I wanted and some ETF's that looked great as well.... Let me tell you that over the X-Mas holiday and the first week in January when the markets took that little dip I could feel my heart in my throat...... But as has been said above, get in and wait it out.... Both M/F's an ETF's are up almost 5% in the following 3 weeks...... :smilet-digitalpoint


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## snowbeavers (Mar 19, 2013)

I was in your position in Dec 2012 when we were on the brink of the "fiscal cliff" that was striking fear into all investors. I had a sizeable chunk of money (>100,000) and after reading everything decided to take the plunge anyway. January 2013 came and there was no cliff and in fact, the markets surged and the S&P went on a run of +30% that year. The point is, you just can't time the market. Studies show that the lump sum wins most of the time.


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## GreedIsGood (Dec 4, 2013)

I'm in this exact situation now!

I have $15000 sitting in a HISA and $21500 sitting in cash (earning nothing). I plan to do something with the $21.5k but when? Tbh, I could have and should have acted 2 years ago but it's too late now to think about the past. Looking at the S&P 500, it's been increasing for 7 years now; the longest it's been. So I'm unsure of what to do.

Reading this thread, the consensus seems to be invest early because no one knows what the market is going to do.

Now the important question: if I DCA, I put in $5,000 by the end of Q1 (ie. March), do I diversify by buying, let's say, 4 different indexes (ie. small-cap, large-cap, REIT, bonds) or do I put a lump sum in one index fund and in the next quarter put in a lump sum in another index fund (because I would reduce my commissions that way)?


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## Smylie (Jan 20, 2015)

If you want to DCA you could put in $1000 into each one (x4) and do it over 5 months..... Voila.... invested....


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## richard (Jun 20, 2013)

snowbeavers said:


> I was in your position in Dec 2012 when we were on the brink of the "fiscal cliff" that was striking fear into all investors. I had a sizeable chunk of money (>100,000) and after reading everything decided to take the plunge anyway. January 2013 came and there was no cliff and in fact, the markets surged and the S&P went on a run of +30% that year. The point is, you just can't time the market. Studies show that the lump sum wins most of the time.


This is the hidden danger of waiting. If you thought it was dangerous to invest at the start of 2013 (like everyone did) and you waited 2 years, you would be regretting that today. The market goes up most of the time so waiting is a gamble. A decline, correction, and crash could happen at any time regardless of how long you wait to invest so the best protection is to choose an asset allocation that allows you to go through that without worrying. If you don't have much experience and you're still concerned beyond that you could spread out your investments over 6 - 12 months. But remember that nothing says the market can't drop just after you invest the last dollar.


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## richard (Jun 20, 2013)

GreedIsGood said:


> I'm in this exact situation now!
> 
> I have $15000 sitting in a HISA and $21500 sitting in cash (earning nothing). I plan to do something with the $21.5k but when? Tbh, I could have and should have acted 2 years ago but it's too late now to think about the past. Looking at the S&P 500, it's been increasing for 7 years now; the longest it's been. So I'm unsure of what to do.
> 
> ...


For that amount I wouldn't split each $5,000 chunk into 4 funds. You're already getting some "diversification" by investing at different times. You might be up or down a few hundred dollars depending on what you buy when but that's basically impossible to predict. And you have a lot more to gain than you have to lose.


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## snowbeavers (Mar 19, 2013)

If you are a couch potato investor, then a short-term market drop is actually a good thing. I am really hoping for the markets to crash again as everything will be on sale. Since my investments are for long term (+18 years), it is actually advantageous for the market to drop now. If stock are up in price, I buy bonds. If the stocks are down, I buy stocks. Pretty simple.


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## My Own Advisor (Sep 24, 2012)

Sounds pretty good snowbeavers. Don't over think it


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## GreedIsGood (Dec 4, 2013)

richard said:


> For that amount I wouldn't split each $5,000 chunk into 4 funds. You're already getting some "diversification" by investing at different times. You might be up or down a few hundred dollars depending on what you buy when but that's basically impossible to predict. And you have a lot more to gain than you have to lose.


You mean just put the entire amount into one fund?


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## richard (Jun 20, 2013)

GreedIsGood said:


> You mean just put the entire amount into one fund?


I would just buy a different fund each time. You'll end up with a balanced portfolio pretty quickly.


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## Pluto (Sep 12, 2013)

I have nothing against a couch potato approach as it suits many people. Many people want to DIY invest, but they don't have the time or inclination to study and learn other strategies. For them a couch potato strategy is a way to go. 

Having said that, there seems to be some bias in the approach designed to convince people that it is impossible to time the market. When I look at the Bogleheads investment philosophy on market timing in wikipedia it says,

"There is a large amount of research showing that typical mutual fund investors actually perform far worse than the mutual funds they invest in because they tend to buy after a fund has done well and tend to sell what they own when it has done poorly. This behavior of buy high, sell low is guaranteed to produce poor results. Instead, Bogleheads create a good plan and then stick with it, which consistently produces good outcomes over the long term."

That quote tells you one way to time the market. It says research has shown that if you buy after a fund has done well, you will do poorly. I tend to agree. And currently many index etf's have done well over the last 5-6 yrs. The boglehead strategy then is actually telling you you will likely do poorly in buying a fund that has done well for some significant time. 

The Boglehead reference (in wikipedia) for that research points to Graham the acclaimed value investor. Interestingly, a value approach is not a market timing model, so what gives with the reference? Graham did not advise to buy into an overvalued market, but the couch potato approach does. So does the Boglehead strategy. Gee this is complicated, isn't it. 

Despite claims to the contrary, there are investors who have avoided every major bear market since the 1980's. And not only avoided them, but profited from them. 

To me, one of the attributes of a successful investor isn't predicting, its patience and having the gumption to take advantage of opportunities as they arise. The recent debacle in oil is an example. Mr. Market offered investors the opportunity to buy quality oil companies at exceptionally low prices, and the opportunity to buy energy etf's at low prices. For example XEG. I look at it this way: people who dollar cost average xeg for example, miss the low price opportunity because they are buying in small pieces during the good times and when the low prices finally arrive, they don't enough money to really take advantage of it. The window of opportunity is small, and they already spent most of their money at higher prices. So, although the dollar cost averager may do OK "in the long run", in the long run we are all dead. I believe one can reach their goals faster by having patience and then strike when the opportunity presents itself. As the Boglehead article states, after an etf or other fund has done very well, it's a poor time to buy. 

To me buying xeg right now is not a bad idea because it is a time of pessimism, fear, and low prices. But buying a S&P 500 etf, for example, is a bad idea right now. Better to wait until the fall. Obviously, I don't buy into the view that it is impossible to know what the market will do when we have over a hundred years of market history showing us that it goes in cycles, and that buying into it many years after its last drubbing is almost always a bad idea.


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## Squash500 (May 16, 2009)

Pluto said:


> I have nothing against a couch potato approach as it suits many people. Many people want to DIY invest, but they don't have the time or inclination to study and learn other strategies. For them a couch potato strategy is a way to go.
> 
> Having said that, there seems to be some bias in the approach designed to convince people that it is impossible to time the market. When I look at the Bogleheads investment philosophy on market timing in wikipedia it says,
> 
> ...


Excellent post.


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## Michel (Mar 7, 2014)

People have been predicting a decline of the S&P 500 at least since 2013. Hasn't happened yet. It does look objectively like a bad time to buy, but there's always the possibility that markets will just keep doing well for several years and you'll be left out. I'm fairly torn at the moment on when to buy more shares of my index funds. The value of my TFSA just went up 4.5% in January alone, it's getting really expensive to buy. I hate when markets go up like that.


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## GreedIsGood (Dec 4, 2013)

@Pluto. That's what I'm afraid. The market has been doing well since 2008. I know that investors have been expecting it for some time now but looking at the S&P 500 chart, it looks going to crash at any moment. Should I leave my TFSA in cash for now? A part of it is not in a TFSA so it's earning nothing.

I know you guys are invested in the markets right now but I honestly can't wait for it to crash...

EDIT: Unless some drastic emergency happens my time horizon is 10+ years but I would still like to buy low.


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## james4beach (Nov 15, 2012)

There are some people who wait (years) for low prices. The interesting thing is that investment professionals and advisors can't afford to wait like that... it produces career risk, as decribed by Grantham (PDF link). I highly recommend reading this article. It describes how investment professionals and pundits are heavily biased towards agreeing with mainstream opinion i.e. always being invested -- even if their better sense tells them not to. It's important to realize that the pros (media, etc) will say you should be invested in the market, even if they don't actually believe this is a good idea.

Grantham writes:

_To repeat an old story: in 1998 and 1999 I got about 1100 fulltime equity professionals to vote on two questions. Each and every one agreed that if the P/E on the S&P were to go back to 17 times earnings from its level then of 28 to 35 times, it would guarantee a major bear market. Much more remarkably, only 7 voted that it would not go back! Thus, more than 99% of the analysts and portfolio managers of the great, and the not so great, investment houses *believed that there would indeed be “a major bear market” even as their spokespeople, with a handful of honorable exceptions, reassured clients that there was no need to worry*._



> I know you guys are invested in the markets right now but


I'm not invested in the market. I'm waiting. I don't see any rush to buy the S&P 500 or TSX. I bought gold when it was hated, and I'll buy the stock indices when they're hated.


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## GreedIsGood (Dec 4, 2013)

^ So what is your money in right now? GIC? Do you think 2015 is the year that the bear market starts?


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## Pluto (Sep 12, 2013)

james4beach said:


> There are some people who wait (years) for low prices. The interesting thing is that investment professionals and advisors can't afford to wait like that... it produces career risk, as decribed by Grantham (PDF link). I highly recommend reading this article. It describes how investment professionals and pundits are heavily biased towards agreeing with mainstream opinion i.e. always being invested -- even if their better sense tells them not to. It's important to realize that the pros (media, etc) will say you should be invested in the market, even if they don't actually believe this is a good idea.
> 
> Grantham writes:
> 
> ...





james4beach said:


> There are some people who wait (years) for low prices. The interesting thing is that investment professionals and advisors can't afford to wait like that... it produces career risk, as decribed by Grantham (PDF link). I highly recommend reading this article. It describes how investment professionals and pundits are heavily biased towards agreeing with mainstream opinion i.e. always being invested -- even if their better sense tells them not to. It's important to realize that the pros (media, etc) will say you should be invested in the market, even if they don't actually believe this is a good idea.
> 
> Grantham writes:
> 
> ...


Good post. Your Grantham quote ratifies what I have long believed. DIY investors would be well advised to identify and listen to the "honorable exceptions". 

In 1987, I got creamed by believing the dominant narrative that said, don't worry, be happy. Essentially they said the economy is fine, therefore the stock market is fine. I realized the narrative of the majority was at key points, dead wrong. The task was then to try and identify the key point. 1. Stock markets top out when the economy is fine and unemployment has dropped to what is considered normal levels. The TSX topped out in Sept 2014. Google some articles about the Canadian economy prior to and up to that time. I sold my bank stock soon after that. Too, I have previously stated I do most of my aggressive value type buying when the index is below the 270 day moving average. I bought a couple of oil stocks in mid Dec, I think, around the time The TSX had plunged below That MA for the second time. (It remains to be seen if I was too early.) 
2. Markets top out when there is abundant optimism and at least some euphoria. That was evident last year when bullish advisors were at a very rare high in, if I remember right, August. (That's what stimulated me to sell my Can bank stock in the next rally. )
3. The third one is, what are the institutions doing? If they are not buying aggressively and driving prices up, we are sunk. The rallies in the S&P are weak and peter out. The euphoria, and extreme optimism is blunted. Markets are tentative. Talk about US multinationals having weak earnings, and talk about investors moving into non-multinationals where, they say, its safe. Anyone who thinks that's going to save us is more into hope, than substance. And yet more talk about the US fed When will they tighten? Its a game of chicken, and I don't play that game. I step aside and watch and wait. 

As far as the dollar cost averaging strategy goes, part of their dominant narrative is it is impossible to know when the markets top out, therefore buy anytime and all the time. It is true that one can not know with precision in advance. But one can know approximately and there is three ways to know in this post. So I am approximately out of the market, and I have no problem waiting in short term bond etf, and cash. 

People think they get hurt financially by waiting in cash. I don't buy it. I bought oil stocks in 2009. I sold later when oil was near 100. I bought a couple of oil stocks again. How the heck did I get hurt by selling and then waiting for the next fall?


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