The Couch Potato Portfolio

I am in the midst of planning for my retirement and i will share whatever knowledge i pick up with you here. I will share the Couch Potato Portfolio today.

Scott Burns launched the Couch Potato Portfolio (US-centric) in 1991. The portfolio is a perfect candidate for the laziest portfolio. Before Scott introduced this portfolio, he back-tested the data from 1973 to 1991. It performed an incredible 10.29% average annual return for that 18 year period. The result is incredible considering the 1982 bear market and the black monday crash of 1987. The Couch Potato achieved this extraordinary results with:

• No complicated accounts.
• No diligent reading of the financial newspaper
• No phone calls to brokers for "opportunities"
• No meeting with investment advisers
• Simple tax returns

To create a couch potato portfolio, you need only 2 funds in a 50-50 asset allocation. This mix will see you through all situations.

1. 50% Vanguard 500 Index (i.e. S&P500 no-load fund) The Fund's expense ratio is only 0.18 (versus actively managed fund of at least 1.5). <---- Currently only Lion Capital offers a similar Infinity US500 fund but the expense ratio is higher at 0.97.
2. 50% Vanguard Total Bond Market Index Fund. This fund matches the performance of Lehman Brothers Aggregate Bond Index and has an expense ratio of 0.22. <--- Havent found a similar fund in Singapore yet. If you can find a similar one with such low expense ratio, please share with me.

The portfolio is rebalanced every year (takes only about 10 minutes) to ensure the 50-50 ratio in terms of value stays. No brokers or investment advisers will recommend you index funds but even Warren Buffet advises that most investors are better off putting money in index funds with low management fees than with the hyped up fund managers that charged high management fees. The returns over time from index funds outperformed most actively managed funds.

I am contemplating starting a regular savings plan (say S$1,000 per month) into a no loads index funds (still trying to find a suitable one in Singapore) but the only choice i have right now is the S&P500 offered by Lion Capital mentioned above. I may be forced to wire my funds to my US brokerage account to search for a suitable no-loads index fund by Vanguard. Anyway, i will keep you posted. If you have any experience in this, do share with me. There are many things which i will share later (e.g. SRS Account, using CPFIS etc). If you have already gone through all these hassle, please share them with me. :)

Regards,
NT