To be a successful Couch Potato, it’s important to understanding the both the theory and practice of index investing.
Dan 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.
Here are some other recommended books to help you on your investment journey:
Wealthing Like Rabbits, by Robert Brown (Redford Enterprises, 2014). Before you rush out and start buying ETFs, take a step back and consider your larger financial picture. This entertaining book is an ideal place for young investors to begin their journey. It explains the most important ideas in personal finance in a witty and engaging way.
Stop Over-thinking Your Money!, by Preet Banerjee (Penguin, 2014). One of the biggest obstacles for new investors is analysis paralysis. Banerjee explains why you should look after the most important pieces of your financial life (including a savings plan, insurance and low-cost investing) before tackling the small details that lead to procrastination.
A Wealth of Common Sense, by Ben Carlson (Wiley, 2014). An experienced portfolio manager explains how most investors are their own worst enemy and “why simplicity trumps complexity in any investment plan.”
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 Value of Simple, by John Robertson (Blessed by the Potato, 2014). If you understand the theory and need help putting it into practice, this book can help. It includes step-by-step instructions for implementing index portfolios with Tangerine Investment Funds, TD e-Series funds and ETFs, all of which are options in my own model portfolios.
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 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.