Couch Potato Investing
Adjust your investments only once a year!

Couch potato investing is a strategy attributed to Scott Burns, a financial writer for the Dallas Morning News.

It is designed for investors who don't want the worry of reading the financial press or doing all the other things that more active investors get up to.

The basic strategy is to seach for a mutual fund with the lowest possible expense ratio - which really means a stock index fund, as well as a Treasury portfolio of Fixed Income Securities, and put half your money in each.

Given that US stocks have yielded over 7 percent after inflation over the last 70 odd years and US Treasury bonds have yielded about 2 per cent a year after inflation with low volatility, the expectation is that you can earn close to an average 5 per cent after inflation with relatively low risk.

The approach would work using similar fund types in other countries and could be tweaked by altering the percentage of stocks to fixed income securities depending on the level of volatility that you are happy to handle.

The rationale is that the average active fund manager actually underperforms the stock market index over an extended period but charge much higher fees.

The combination of higher fees and lower performance allows the couch potato investor to enjoy life with minimum worries as to what is happening on the stock market.

So, summarising the features of this approach ...

No stock broker or financial planner needed

Plenty of diversification

No brokerage commission to pay

Minimum fees

Adjust your investments only once a year

NO WORRIES?

So is this the best and only way to invest? No - but it is a good start and is seen to be appropriate for investors who are wanting to maximise returns over the long term as well as to minimise risk ... with minimal hassle.

Do I use this approach? - No.

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