Chapter 9 Couch Potato Investing

Imagine a couch potato for a moment. A beer resting on his gut, he lies on the sofa watching football. The only time he perks up is when the home team scores or when a streaker (why are they always men?) races across the turf.

It might be hard to believe, but an investment strategy inspired by sloth runs circles around most professionally managed portfolios. Practitioners of the strategy spend less than an hour each year on their investments. They don't have to follow the economy, read the Wall Street Journal, subscribe to online investment publications, or hire an advisor. This champion slacker is called the Couch Potato portfolio.

Devised by former Dallas Morning News columnist Scott Burns, the original Couch Potato portfolio is an even split between a stock and a bond market index. It's easier to manage than a crew cut. If you invest $1,000 per month, you would put $500 into the stock index and $500 into the bond index. After one year, you would see whether you had more money in stocks or more in bonds. If you had more in stocks, you would sell some of the stock index, using the proceeds to buy more of the bond index. Doing so realigns the portfolio with its original allocation: 50 percent stocks, 50 percent bonds. Scott Burns says anyone who can fog a mirror and divide by two can pull this off.

Don't Bonds Tie You Down?

Many investment cowboys think bonds are boring and unprofitable, and have no place in a portfolio. It's a good thing ...

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