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The Couch Potato strategy can be adapted in many ways.
We've listed some examples below and demonstrated how you would allocate your assets for each strategy.
To figure out exactly which securities you should buy, see Building blocks for the names of specific ETFs and mutual funds.
Classic Couch Potato
The original and the simplest. You split your money into three equal parts and invest as outlined below. Once a year, you rebalance to get back to your original asset allocation:
1) Canadian equity (33.3%)
2) U.S. equity (33.3%)
3) Canadian bond (33.3%)
Global Couch Potato
This portfolio is more diversified than the Classic, and thus should have less risk. It spans the world by splitting your money into five equal piles. Two of those piles go into Canadian bonds; the remainder are invested in Canadian, U.S. and international stocks:
1) Canadian equity (20%)
2) U.S. equity (20%)
3) International equity (20%)
4)+ 5) Canadian bond (40%)
High-Yield Couch Potato
If you want a portfolio that delivers steady income and allows you to take advantage of the government's tax break on dividends, this might be the portfolio for you:
1) Canadian dividend (25%)
2) Income trusts (25%)
3) U.S. dividend (25%)
4) Canadian bond (25%)
High-Growth Couch Potato
This portfolio has a higher exposure to stocks. It's more volatile than other Couch Potatoes, but may produce higher returns over time:
1) Canadian equity (25%)
2) U.S. equity (25%)
3) International equity (25%)
4) Canadian bond (25%)
To figure out exactly which securities you should buy, see Building blocks.
Updated January 24, 2007
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