We know: it’s not the sexiest-sounding way to invest. But buying a diversified handful of index funds, then letting them do their thing, and checking in only once or twice a year to rebalance your holdings is a surprisingly effective (and low-cost!) way to manage your money. That’s why MoneySense has been showing Canadians how to build so-called “couch potato portfolios” for almost as long as it’s been possible—more than 20 years.
The key enabler for most of today’s couch potato investors was the popularization of index-tracking exchange-traded funds (ETFs). But you can also use mutual funds—and today, there are ETFs that will hold and rebalance whole portfolios in a single investment, allowing investors to be more sedentary than ever.
With this MoneySense guide to the couch potato portfolio, we aim to help prospective couch tycoons sort through the options and create the ideal cost- and labour-saving portfolio.
Are you a couch potato investor?
The couch potato style suits a particular type of investor. Some investors like getting into the weeds of selecting investments; others won’t feel comfortable without an advisor holding their hand. These (and other) types of investors will never feel comfortable on the couch.
To find out if couch potato investing might work for you, ask yourself whether any or all of these traits apply to you:
- You can’t be bothered to fuss over your investments or speak to an advisor month-in, month-out. That’s not to say investing bores or baffles you, but you have better things to do. By trying to simply match market returns, couch potato investing takes much of the strategy out of the process. You just hold funds that represent the broad market for publicly traded securities. As adherents like to say, you set up your portfolio and forget it for long stretches.
- You believe in passive investing. Passive investors don’t chase the latest trends (e.g., artificial intelligence). They trust that they will get acceptable returns buying the whole market with very little risk. They believe that markets on the whole operate efficiently—that money flows towards the investments with the best risk-adjusted returns (and away from those with the worst), leaving everything more or less priced at its worth, based on available information. There’s no need to take greater risks or pay portfolio managers to pick your holdings.
- You believe in minimizing the fees you pay. While future investment returns will forever be a mystery, you can foresee the fees you pay to invest—and reducing them will improve your returns. Some couch potato investors distrust advisors, whom they claim seldom earn the fees they charge. But as your portfolio gets larger, it may be worth hiring a fee-only financial advisor to offer a second opinion on your holdings. Still, this is unquestionably one of the lowest-cost—if not the lowest-cost—ways to invest.
How to build a couch potato portfolio
Sofa, so good? If this sounds like the way you’d like to start investing, or you’re considering transferring your assets from a guided portfolio with an advisor, robo-advisor, mutual fund company or DIY stock portfolio, read on for our story detailing how to set up a couch potato portfolio.
The tools and strategies used by couch-dwelling investors have evolved significantly over the years, giving self-directed investors more options than ever. It’s important to know what’s on offer and structure your portfolio in a way that will help you build wealth for many years to come.
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The post Updated for 2025: The ultimate couch potato portfolio guide appeared first on MoneySense.