This website is not a stock picking website. We don’t recommend specific stocks, or speculating on alternative assets such as commodities or Bitcoin. There is nothing inherently wrong with making investments in specific companies, but I personally do not want to do the ongoing research into the fundamentals of specific companies. This is consistent with how we manage our own investments.
We instead focus on making the investing process as simple as possible. To that end, the Canadian Couch Potato does provide three simple portfolios that are appropriate for most investors.
One alternative to the Canadian Couch Potato portfolios are the Vanguard asset allocation ETFs. Each of these portfolios contain the same underlying ETFs, but with different risk characteristics:
- The Vanguard Conservative Portfolio (TSX Ticker: VCNS) is risk weighted at 40% equities, 60% fixed income
- The Vanguard Balanced Portfolio (TSX Ticker: VBAL) is risk weighted at 60% equities, 40% fixed income
- The Vanguard Growth Portfolio (TSX Ticker: VGRO) is risk weighted at 80% equities, 20% fixed income
These portfolios invest in other Vanguard ETFs, resulting in a one-fund portfolios that rebalances periodically back to their target asset allocations.
These funds provide the following advantages:
- They are very low cost, with management expense ratios (MERs) expected to be in the range of 0.25%;
- They eliminate the need to rebalance your portfolio – something that individual investors aren’t as disciplined about doing;
- They are denominated in Canadian Dollars, making them very simple to invest in; and
- It’s easier to remove the emotional elementof investing, as you don’t see the performance of a specific ETF that may be underperforming in the short-term.
These funds would be less appropriate in the following circumstances:
- You aren’t comfortable trading your own stocks. ETFs trade on public stock exchanges, meaning that the process of purchasing them is similar to buying an individual stock. Not everyone is comfortable placing a limit order, or understands what a bid/ask spread is. If this is the case, then you might want to stick with mutual funds;
- If investments must be held in taxable accounts, which is not uncommon for retirees that don’t spend the entire amount of their minimum RRIF withdrawals. This is because the fixed income portion of these ETFs will be taxed at a high marginal tax rate compared to equity dividends and capital gains;
- You’re unable to execute trades during the TSX’s market hours (9:30 AM to 4:00 PM EST from Monday to Friday) or
- You are uncomfortable with self-managing through an online discount brokerage.
We personally use the Vanguard Growth Portfolio ourselves as a low-effort way to invest, allowing me to focus my time on other things that matter more to me. I execute the trades during the lunch hour once a month.
By keeping it simple, we are more likely to stick to our plan, and not obsess about the ups and downs of the market. We contribute to our accounts on a monthly basis. A few days after the transfer I sign into our broker’s app on my phone and purchase the funds (total cash available divided by the current ETF share price). I can do this in under 5 minutes.
If you do need a discount brokerage, then consider using Questrade. I have found their customer service quite good, and the interface very simple to get used to.
(Note: if you are considering opening a Questrade account, please consider using our referral code to support the website, and get a bonus $25-$250!)