MoneySense Guide to the Perfect Portfolio

Canadian Couch Potato is pleased to announce the birth of The MoneySense Guide to the Perfect Portfolio. My new book has just hit the shelves across Canada: look for it on the magazine stand at Shoppers Drug Mart, Walmart, Chapters/Indigo and Loblaws stores, or buy it online. At just $9.95, it’s the same price as a single ETF trading commission.

The MoneySense Guide to the Perfect Portfolio is a roadmap for the do-it-yourself investor in Canada. It begins with my best attempt at laying out the case for passive investing: I explain the problems with mutual funds and active stock-picking strategies designed to beat the market, and I encourage investors to focus on the things they can control rather than basing their financial lives around the pursuit of an unlikely goal.

The next two chapters explain the importance of saving, setting targets and making a financial plan. This is an often neglected part of the investing process: it makes no sense to dwell on individual securities or funds unless you have some context for your investments. I look at the importance of gauging your risk profile and explain how you can build a portfolio that is suited to your goals.

Chapter 5 is a complete guide to choosing the most appropriate index funds or ETFs for your portfolio, while the next two give step-by-step instructions on opening a discount brokerage account and placing mutual fund and ETF orders. Many experienced investors take this stuff for granted, but it’s intimating for novices, and it’s one of the main obstacles preventing people from becoming DIY investors. I want to thank Ram from Canadian Capitalist, Michael James, and Mike from MoneySmarts for reviewing this material and offering suggestions.

The next two chapters deal with rebalancing (download my rebalancing spreadsheet to help you) and staying the course. As many index investors know, it can be difficult to stick to your plan when markets go south, so I offer some suggestions for tuning out the noise.

To put a human face on all of this, we’ve included five stories from real investors. One is Andrew Hallam, author of Millionaire Teacher, who explains why he gave up stock-picking even after a decade of tremendous success. We also hear from several other MoneySense and Canadian Couch Potato readers: my thanks to all of them for sharing their experiences as DIY index investors.

Portfolio performance data is here at last

The final chapter of the book includes my Model Portfolios, and that leads to my next announcement. With the help of Justin Bender of PWL Capital in Toronto, I am now publishing monthly performance data for the Model Portfolios and their underlying ETFs. I’ll upload a new PDF report each month (there’s a permanent link on the Model Portfolios page) as soon as the data are available. A few important notes:

  • The portfolio returns only go back to the beginning of 2011. Many of the ETFs I recommend are new, and I did not want to simulate performance using index data. It would have been nice to provide backtested three-year numbers—stock markets are up 30% to 50% since then—but that would have been dishonest. (Actual 10-year performance numbers for the Global Couch Potato using TD e-Series funds are available here.)
  • All returns are expressed in Canadian dollars. Readers should find this extremely useful, as all of the publicly available performance data for the Vanguard ETFs I recommend are in US dollars.
  • These are total returns, which means they include dividends and interest. This makes them far more useful than tools like Google Finance, which only graph price changes and ignore distributions.
  • Trading commissions and taxes (including withholding taxes) are ignored, since they will be different for every investor.

PWL Capital has also provided a link to its own monthly market statistics, which include index data that may help you benchmark your own portfolio. Click the banner in the right-hand sidebar to access the most recent report.

Hope you’ll pick up a copy of the book, and that you’ll track your Couch Potato portfolio’s performance here on the site.

43 Responses to MoneySense Guide to the Perfect Portfolio

  1. Al October 26, 2011 at 8:43 am #

    Love the blog, hope the book does well. May even buy it. But doesn’t past performance not relate to future performance?

    Signed,

    Shoulda stuck to Real Estate

  2. Preet October 26, 2011 at 9:19 am #

    This is fantastic news on all fronts Dan!

    Signed,

    Shoulda started investing in 1981 and bought an annuity in 2007

  3. Peter Scholtens October 26, 2011 at 9:19 am #

    If you’re interested in a review, send me a copy and I’ll post one on my blog!

  4. Chad October 26, 2011 at 9:42 am #

    Great job Dan. Spread the word about passive investing!

  5. Jim Yih October 26, 2011 at 11:01 am #

    Great book Dan! I read it and thought you did a great job making investing easy to understand. I will be recommending it to others!
    Jim

  6. Canadian Couch Potato October 26, 2011 at 11:05 am #

    Thanks, Jim, and everyone else for the good wishes. Hope you enjoy the book.

    Signed,

    Shoulda put it all in gold, baby

  7. Sean October 26, 2011 at 1:07 pm #

    Your blogs are very informative and current.
    I’ll buy your book when I see it in stores.
    Keep up the good work!

  8. Squawkfox (Kerry) October 26, 2011 at 5:49 pm #

    A frugal and fantastic gift for everyone in my family. Congratulations, Dan!

    Signed,

    Where the heck were you 10 years ago?

  9. Mike Holman October 26, 2011 at 6:50 pm #

    Congrats! Looking forward to reading it.

    Signed,

    Need to write another book

  10. The Dividend Ninja October 26, 2011 at 10:14 pm #

    Dan,

    Excellent work and congratulations are all in order! I’m looking forward to reading through and probably buy a few copies for friends. I’m glad you have directed this towards the beginning investor. It’s great that your guide and Andrew’s Millionaire Teacher of course are brining index investing to the general public. I know so many people who don’t know where to get started, and your right it is overwhelming for the newbie DIY investor. I like the fact you also made it accessible through MoneySense on store shelves instead of just bookstores…

    I bet the mutual fund industry just loves you guys :)

  11. Ryan October 27, 2011 at 7:10 am #

    Does your monthly return spreadsheet include dividends?…or is it ETF price only?

  12. Dan Hallett October 27, 2011 at 7:55 am #

    I flipped through the book at the grocery store on Sunday and it looks great. Congratulations Dan.

  13. Canadian Couch Potato October 27, 2011 at 8:30 am #

    @Ryan: The monthly returns in the reports are total returns: they include dividends, interest and all other distributions.

    @Dan H: Many thanks. But why did you flip through it without buying it? :)

  14. My Own Advisor October 27, 2011 at 8:47 am #

    Great stuff Dan!

    I’m looking forward to reading it!

    At the price of a single trading commission, this book is a no-brainer :)

  15. finances123 October 27, 2011 at 10:40 am #

    Hey guys! Here’s a suggestion for you… Next week is Financial Literacy Week in Canada and ABC Life Literacy Canada has created a website where people can share their financial tips and learn from each other’s saving experiences. Go to http://abclifeliteracy.ca/flw/share-your-tips

  16. Sandy Kemsley October 27, 2011 at 1:35 pm #

    Is there an e-book version available?

  17. Canadian Couch Potato October 27, 2011 at 1:45 pm #

    @Sandy: Sorry, no e-book version. We made an effort to keep the price extremely low, and the book’s design is definitely an added appeal you wouldn’t get on a Kindle. :)

  18. Silvio Stroescu October 27, 2011 at 1:47 pm #

    Great work & Congrats!!! Well written, simple and easy to understand.
    Picked up a copy @ Chapters a couple of days ago… Was so impressed that I went back to Chapters this morning & picked up 50 copies for our entire team… :)
    Cheers,
    Silvio

  19. Canadian Couch Potato October 27, 2011 at 1:56 pm #

    @Silvio: Wow, thanks so much for your support. You’re on my Christmas list this year!

  20. Raman October 27, 2011 at 1:58 pm #

    The book sounds great, Dan. I’m going to look for a copy when I go out to Loblaws his afternoon…

    The model portfolio tracking looks awesome, by the way. I noticed that in your model portfolios that some of the ETFs in the Über–Tuber portfolio recently changed from the Vanguard funds VTI, VTV, and VB changed to Powershares ETFs. What was the reason for this change?

    Thanks,

    Raman

  21. Canadian Couch Potato October 27, 2011 at 2:09 pm #

    @Raman: Thanks, hope you like the book. I tweaked the Uber-Tuber portfolio based on feedback from some Dimensional advisors. The idea was to get as close as we could to a DFA-type portfolio (in terms of value and small-cap tilt) without too many ETFs, and this is what we came up with. I used the new portfolio in the book, so for consistency I’ve changed it here on the site as well.

    There’s some detail in this post:
    http://canadiancouchpotato.com/2011/05/30/a-portfolio-makeover/

  22. Engineering Income October 27, 2011 at 7:45 pm #

    Dan,

    I always look forward to your posts and am not typically disappointed. I was just thinking about compiling some historical data for couch potato portfolios as a benchmark for myself as of year end (as I haven’t seen the light yet…). Now I can just come here and refer to yours!

    Thanks again for your good work,
    Nathan

  23. David Hallett October 27, 2011 at 7:48 pm #

    Bought two copies of Perfect Portfolio 2 weeks ago. Dan has done a great job putting together an excellent product.

  24. Canadian Couch Potato October 28, 2011 at 1:03 am #

    @Nathan and David: Thanks for the kind words. Much appreciated.

  25. Dan Hallett October 28, 2011 at 8:33 am #

    Dan B. – Maybe I didn’t buy a copy (yet) but at least one “D Hallett” appears to have purchased a couple :)

  26. Canadian Couch Potato October 28, 2011 at 8:51 am #

    @Dan H: Yes, it seems your twin picked up a copy for you as well. :)

  27. Rich Baker October 28, 2011 at 12:26 pm #

    I came across it while looking for the new issue of money sense magazine at the local CoOP, what a score! Great book Dan , thanks a lot. This book along with Andrew Hallam’s Millionaire teacher and Daniel solins the smartest portfolio in my opinion are the 3 books you can read and have all the info you will need to DIY.

  28. Jerry October 30, 2011 at 3:25 am #

    Slight thread highjack (apologies) –

    What do you make of the new ZDV? If one already holds CDZ and XDV (as a direct result of your observation that they don’t really overlap) does ZDV add anything to the mix?

    Thanks

  29. Canadian Couch Potato October 31, 2011 at 2:34 pm #

    @Jerry: I haven’t looked too closely at ZDV, but it is clearly not as bank-heavy as XDV. It looks it would be fine to hold on its own, actually, as it has pretty good sector diversification for a Canadian equity fund. Note, however, that it does not track an index, so it’s not clear exactly what the selection criteria are.

  30. Dan H. November 4, 2011 at 2:30 am #

    Hi Dan !

    I just buy your “Guide to the perfect portfolio” today. Well done ! Even if I know almost everything you wrote in the book, I buyed it. I will eventually pass it to other people, just to make sure that they start from scratch a new portfolio.

    Here in Quebec, there’s not much information concerning passive investing. Almost nothing in french. But I’m the living exemple that we can make it. I choose the e-series way with TD.

    After 2 years now, I’m convinced about the benefits of couch potato investing.

    Thank you.

  31. Canadian Couch Potato November 4, 2011 at 8:16 am #

    @Dan H: Glad you enjoyed the book. Maybe some day we can publish a French translation for pommes de terre in Quebec. :)

  32. Brad November 4, 2011 at 12:52 pm #

    Hi Dan,
    Bought your book and loved it! I have a question re index funds vs. ETFs and the break even point. Should the loss of monthly deposits and dollar cost averaging also be factored in when determining the break even point? I currently put rergular $500 monthly deposits into an index fund. My account is now over $50,000 puting me at my break even point. Therefore, would it be better for me to switch to ETFs and put $6,000 into them once a year instead of $500 per month? I calculate the loss of interest to be about $180/yr.
    Thanks Brad.

  33. Canadian Couch Potato November 4, 2011 at 11:43 pm #

    @Brad: Yes, these are factors to consider, but the value of dollar-cost averaging is impossible to quantify. Some years it will work out better than making a lump sum contribution, and other times it will be bad timing, and there’s no way to predict that in advance.

    As for the loss of interest, how did you get $180 a year? Cash is paying 1% these days, so the opportunity cost of letting $500 contributions sit in cash for a year would be trivial.

    Personally, I would stick with the index funds until the cost savings of the ETFs was unequivocal.

  34. ACMZ November 6, 2011 at 7:08 pm #

    Hi Dan,
    It was a pleasure reading you book this weekend. I picked it up on Friday and returned to get a copy for my sister. Education is a powerfull thing. Thank you very much for sharing your knowledge of index funding. The book is a masterpiece. It was an eye opener once I started investigating the funds purchased by my adviser. I have better places to invest those kinds of fees. I have a question concerning the e-series index funds. Is the MER already accounted for when they post the performance or must one deduct the amount from the posted performance values? Thanks again, I now have some restructuring that has to happen. I intend to start 2012 fully indexed and be my own adviser.

  35. Canadian Couch Potato November 6, 2011 at 7:12 pm #

    @ACMZ: Thanks so much for your comment, and very glad to hear you found the book helpful.

    All published mutual fund and ETF returns are net of fees, so you never have to worry about subtracting the MER. If fund with a 0.5% MER reports a return of 6%, it means the fund actually returned 6.5% before fees.

    All the best with your investing.

  36. David November 7, 2011 at 6:34 pm #

    What is the cost? Your site says $9.95 but Chapters is charging $19.95. Unable to find it at Walmart, in Calgary anyway.

  37. Canadian Couch Potato November 7, 2011 at 7:01 pm #

    @David: The price on the Chapters website refers to a planned future edition, which will have a different format. It will be available in bookstores only. The price of the current edition is $9.95. If you’re unable to find it, it is available online with a small shipping cost. Thanks for your interest.

  38. Trevor January 14, 2013 at 4:27 pm #

    Will there be a 2013 edition coming out? I’m sure 90% of the information will be the same but the slight differences (like new Vanguard ETFs for example) which may be included would be of interest.

    If it is planned, when will it be available and will it be available to hard copy as well as an e-version?
    Thank you.

  39. Canadian Couch Potato January 14, 2013 at 4:36 pm #

    @Trevor: Not sire whether we will do a new version for 2013, though I hope so. Any changes would be very minor, and any changes to the model portfolios would be mirrored on the blog. Definitely not a reason to wait for a new edition.

Trackbacks/Pingbacks

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