Resources

To be a successful Couch Potato, it’s important to understanding the both the theory and practice of index investing.

Perfect_Portfolio_2013Dan Bortolotti’s The MoneySense Guide to the Perfect Portfolio (Rogers Publishing, 2013, third edition), is the only comprehensive guide to DIY index investing written specifically for Canadians.

The book outlines the basics of the strategy, explains how to settle on the right asset allocation, choose the appropriate funds, open an online brokerage account to assemble your portfolio, and how to stay the course when you’re tempted to bail. It also includes a list of recommended ETFs and model portfolios to get you started.

The printed version is now sold out, but you can purchase e-book versions for your Apple device, your Amazon Kindle, or your Kobo for just $4.99.

Here are some other recommended books to help you on your investment journey:

The basics

Millionaire Teacher, by Andrew Hallam (Wiley, 2011). Hallam was a highly successful stock picker, but that wasn’t the main reason he was able to amass a million-dollar portfolio. The blogger and schoolteacher explains why frugal living, diligent saving, and a diversified portfolio of index funds are the real keys to building wealth. See my review for more.

The Little Book of Common Sense Investing, by John C. Bogle (Wiley, 2007). John Bogle was the founder of The Vanguard Group, and he revolutionized the financial industry when he created the first index fund for retail investors in 1975. He remains one of indexing’s most tireless champions and this brief, readable book is the ideal introduction to the subject.

The Gone Fishin’ Portfolio, by Alexander Green (Wiley, 2010). Green made his fortune as a Wall Street stock picker and he believes that active investors can beat the market. But he argues passionately that individual investors are wasting their time if they try, because the vast majority will fail. A refreshing, practical perspective on index investing. See my review for details.

The Elements of Investing, by Burton Malkiel and Charles Ellis (Wiley, 2010). Two of the greatest champions of indexing explain the basics in plain English. This is an excellent choice for the novice investor who wants an introduction to the strategy. See my review for details.

The more advanced theory

The Empowered Investor, by Keith Matthews (2013, third edition). Matthews is a Montreal advisor with deep insights into the behavioural challenges of investing. This book is also a must for those interested understanding the factor-based strategies used by Dimensional Fund Advisors. A PDF version is available for free download.

The Power of Passive Investing, by Richard A. Ferri (Wiley, 2010). Ferri takes a comprehensive look at the active-versus-passive debate and makes a compelling case that indexing is most likely to lead to investor success. See my review for more.

The Quest for Alpha, by Larry Swedroe (Bloomberg Press, 2010). One of the most ardent advocates of passive investing makes his own case, citing decades of academic research that show why outperforming the market is so difficult.

A Random Walk Down Wall Street, by Burton Malkiel (Norton, 2011, 10th edition). First published in 1973, this classic by one of the earliest proponents of the indexing strategy was among the first to expose the folly of technical analysis, stock picking and market timing: “It is clear that if there are exceptional financial managers, they are very rare, and there is no way of telling in advance who they will be.”

All About Asset Allocation, by Richard A. Ferri (McGraw Hill, 2010, second edition). Choosing the right asset allocation is probably the most important investment decision you’ll make. Ferri explains correlation, diversification, risk premiums and the efficient frontier—all concepts that are at the heart of the indexing strategy.

The Smartest Portfolio You’ll Ever Own, by Dan Solin (Perigee/Penguin, 2011). Solin describes how small-cap and value stocks have delivered higher returns over the decades, and he provides a model portfolio for (American) investors who want to employ the strategy with ETFs. See my review for more.

The Fundamental Index: A Better Way to Invest, by Robert Arnott, Jason Hsu and John West (Wiley, 2007). A complete explanation of the fundamental indexing technique used by iShares, PowerShares and other fund providers.

The ETF Book, by Richard A. Ferri (Wiley, 2009, second edition). A book for the advanced Couch Potato who really wants to understand how exchange-traded funds work. It thoroughly describes the many ways that securities in an index are selected and weighted, which is one of the most important considerations when comparing ETFs.