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The Potato is ultimately about common sense. It rests on three ideas:
The first idea — as we've already seen — is to keep your costs low. This ensures that you, not your financial adviser, reaps most of the rewards from your portfolio.
The second idea is to diversify among different types of assets. By doing so, you ensure that no single blow-up can devastate your portfolio. We usually recommend that Couch Potato investors follow a classic balanced strategy, which consists of putting 60% of your money in stocks and 40% in bonds, but you may want to adjust the stock component upward if you're young and willing to take on additional risk in pursuit of larger returns. Conversely, you may want to dial down the stock portion if you're older and more conservative.
The third idea is to rebalance once a year to get back to your original asset allocation. If your stocks shoot up in value, for instance, you would sell some and put the proceeds into bonds. Doing so ensures you're constantly selling high and buying low.
That's it. If you follow those three ideas, you're going to do well. In fact, you can adapt the Couch Potato strategy to suit your individual situation and preferences. Our Classic Couch Potato Portfolio is a simple strategy that spans Canadian and U.S. markets. Our Global Couch Potato Portfolio takes things a step further and expands your portfolio to span the world. Both are just suggestions and can be tweaked to suit your purposes.
Ready to get going? We suggest you read our Couch Potato FAQs for a quick overview of the major issues. Then follow Do the Couch Potato for a step-by-step guide to implementing the strategy. Finally, visit Meet the potato family and choose the Couch Potato strategy that's right for you.
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