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Canadian Couch Potato Investment Strategy Review

Find out how you can invest in a balanced portfolio that offers reasonable returns in line with the market average.

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Looking to follow a passive investment strategy that will deliver long-term gains? Then you might like to check out the Canadian Couch Potato Investment Strategy. This is a strategy that relies on making regular investments into index and exchange traded funds over time, without having to worry about what the market is doing.

With this strategy, you can earn money on the average gains that your investments make without needing to buy and sell stocks or attempt to predict top-performing funds. This strategy relies on the belief that your investments will trend upwards over time in line with historical market tendencies.

Quick take

  • Think about this trading strategy if you want to manage your own investments and you’re interested in building up your savings over the long term.
  • Choose something else if you want to take advantage of quick gains or you’d prefer to trade a number of different stock options.

How does Canadian Couch Potato work?

Canadian Couch Potato is an investment strategy designed to allow Canadians to take a more passive approach to their investments. This strategy gives you the freedom to invest money on your own terms at a lower cost (since you won’t pay high fees to trade funds or have someone manage your account).

It doesn’t require you to anticipate market movements, and you won’t need to pick individual funds based on their performance. Instead, you’ll invest in “baskets” of well-performing stocks and bonds and accept the average rate of return on these groups of investments.

What is the Canadian Couch Potato Investment Strategy?

The Canadian Couch Potato strategy is a way of investing that aims to maximize your returns in line with the upward trend of the market over a period of 20 to 30 years. The types of investments that this strategy promotes are index funds and exchange traded funds (ETFs).

Index funds

An index fund is a group of stocks or bonds used to measure the performance of a particular market. This type of investment is essential to the couch potato investment strategy since it’s designed to let you earn the average return on a basket of well-performing stocks and bonds (instead of you needing to forecast which individual investments will perform well on the market).

How to invest in index funds

Exchange traded funds

Exchange traded funds (ETFs) are very similar to mutual funds in that they also hold a mix of stocks or bonds. However, unlike mutual funds, it’s possible to trade ETFs on the stock market for a very low fee. These funds are available from a number of banks and major trading platforms. They also come in all of the major asset classes, including Canadian and US stocks, international stocks and domestic and foreign bonds.

Who is Canadian Couch Potato best for?

Canadian Couch Potato is an investment strategy that’s ideal for beginner DIY investors that don’t want to actively manage their portfolios. It lets you take advantage of the market average instead of pursuing an aggressive investment strategy. This saves you money on fees and is a very effective long-term investment strategy.

This way of investing likely won’t be a good fit for investors who are looking for noticeable short-term returns on their investments. It’s also not a good fit for active traders who are interested in forecasting the performance of individual stocks and bonds. This is because you won’t be monitoring the performance of your investments, and you aren’t supposed to pull your money out if your investments take a nosedive.

How easy is the Canadian Couch Potato strategy to follow?

The Canadian Couch Potato strategy is very easy to follow because it only involves picking a type of fund to buy and then investing in stocks and bonds in a desired ratio. Stocks typically offer higher returns than bonds, so you’ll want a higher ratio of stocks if your risk appetite is high. You’ll want a higher ratio of bonds if you’re a more conservative investor.

If you’re still not quite sure how to get started with a passive investment strategy, you can find a number of educational resources online (including the Canadian Couch Potato blog) to learn more. You can also invest with just about any brokerage offering free ETF trading.

What’s the Canadian Couch Potato blog?

The Canadian Couch Potato blog is a reputable blog that’s managed by Dan Bortolotti, an associate portfolio manager with PWL Capital Inc. He outlines the couch potato strategy and provides a number of model portfolios that new investors can try out to get their desired results in the long term. The Canadian Couch Potato blog also provides print resources and podcasts to help you get started with this investment strategy.

What research options can I take advantage of with this strategy?

You won’t need to dabble in research tools with this strategy since it doesn’t require you to try to predict market trends or decipher which stocks will likely perform well. This means that you won’t need specialized tools to chart out how individual stocks and bonds might do in the future.

All you need to do is park your money in a handful of index funds or ETFs and then let the stocks and bonds pooled inside these investments do the work for you.

Pricing and fees

This strategy requires you to spend less on fees than other trading strategies since you won’t be required to pay commissions to sell investments. You can also purchase ETFs with several trading platforms in Canada for free. This will allow you to save money when you’re initially buying into ETFs and index funds.

You also won’t have to worry about paying for a financial consultant to manage your account. That’s why the couch potato strategy is one of the most affordable investment options out there for people who want a hands-off approach to managing their long-term investments.

Which brokers offer commission-free ETFs in Canada?

There are a number of brokers offering free ETF purchases in Canada in line with the Canadian Couch Potato Investment Strategy. These include the following:

  • Wealthsimple Trade. This mobile platform lets you buy and sell thousands of stocks and exchange traded funds (ETFs) for free. The only downside is it doesn’t offer a desktop application so your account will have to be managed exclusively from your mobile phone.
  • Questrade. This web-based trading platform lets you purchase ETFs for free. It also offers deposit insurance through the Canadian Investors Protection Fund, so you know your money will remain safe. The downside is you’ll have to have a minimum balance of $1,000 in your account to start trading.
  • Virtual Brokers. This trading platform allows you to purchase commission-free ETFs. You’ll only have to pay to sell your ETFs, though you will need to pay account management fees with this software (which can make it a less appealing option for some investors).

Is the Canadian Couch Potato Investment Strategy safe to use?

The Canadian Couch Potato strategy can be very safe to use because it’s based on the long-term performance of the stock market. That said, you’ll need to be able to stick to your investment strategy even when market conditions get rough.

This can involve losing a big chunk of your investments during market downturns. That said, the overall strategy is proven to result in financial gains over the long term for many investors.

How can I keep my money safe when I use this investment strategy?

You’ll typically want to start investing with a brokerage that’s a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). This will make sure that your money is regulated by Canadian authorities and protected up to a certain limit if your brokerage goes bankrupt or can no longer fulfill its obligations.

Pros and cons

Pros

  • Easy to follow. You won’t need to forecast trends or chart the investment history of individual stocks or bonds to make money.
  • Low-fee strategy. You can usually purchase index funds and ETFs for cheap, and you won’t need to pay a financial consultant to manage your account.
  • Hands-off approach. This passive investment strategy involves purchasing a handful of index funds or ETFs and then sitting back while they earn money.
  • Free educational resources. You can find a number of free print materials, blog posts and podcasts online to help you refine your approach to index fund and ETF investing.

Cons

  • Can be risky. As with all forms of investing, you may lose money if your investments go down or the market takes an unexpected turn for the worse.
  • No dedicated support. You won’t get dedicated support from a financial adviser to help guide your investment decisions.
  • Self-directed investing. The strategy requires that you manage your own investments, so it may not be a good fit for those looking for a completely hands-off approach.

Compare online trading platforms

Name Product Available asset types Stock Fee Option Fee Account Fee ETF Transaction Cost
Questrade
Stocks,Bonds,Options,Mutual funds,ETFs,GICs,International Equities,IPOs,Precious Metals
$4.95 - $9.95
$9.95 + $1 per contract
$0
Free
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
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Compare up to 4 providers

Name Product Minimum deposit to invest Funding methods Management fee Available asset types
Wealthsimple
$1
Direct deposit,Bank transfer
0.40% - 0.50%
Stocks,Bonds,ETFs,Commodities
Get a $50 bonus when you open and fund your first Wealthsimple Invest account with a minimum initial deposit of at least $500. Trade and Cash accounts are not eligible.
Moka
$0
Automatic bank withdrawals
$3/month
ETFs
The Moka app rounds up every purchase you make to the nearest dollar and invests the spare change into low-cost exchange-traded funds (ETFs).
CI Direct Investing (formerly WealthBar)
$1,000
Direct deposit,Bank transfer
0.35% - 0.60%
Mutual funds,ETFs
CI Direct Investing offers access to an exclusive and personalized investment portfolio. Get up to $10,000 managed free for a year when you sign up for your first CI Direct Investing account and fund your account.
Justwealth
$5,000
Direct deposit,Bank transfer,Automatic bank withdrawals
0.50%
ETFs
Receive a cash bonus of $50.00-$225.00 when you open a new Justwealth account. RESP accounts require no minimum deposit to begin investing.
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Compare up to 4 providers

Name Product Minimum Opening Deposit Commission Available Markets Platforms
Forex.com
US$100
Minimum US$25
Forex
Metals
Commodities
Indices
Shares
Forex.com Desktop, Forex.com Web Trading, Forex.com Mobile Trading, MetaTrader 4
Trade 80+ currency pairs and 220+ CFDs in equities, commodities and indices on Forex.com.
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Compare up to 4 providers

Bottom line

Canadian Couch Potato is an investment strategy that allows you to make money on passive investing. It involves putting your money into index and exchange traded funds without trying to predict which funds will perform well. Find out more about how the Canadian Couch Potato strategy works and learn where you can invest your money to get the lowest fees.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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