Couch Potato vs. Permanent vs Actively Managed

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texasyankee
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Joined: Sun Dec 01, 2019 2:48 pm

Couch Potato vs. Permanent vs Actively Managed

Post by texasyankee » Sun Dec 01, 2019 2:58 pm

I always thought that the Couch Potato Portfolio made a lot of sense - but maybe it seemed too easy, and I went elsewhere for someone manage my retirement assets - now, I'm reconsidering the Couch Potato Portfolio, and I'd appreciate your thoughts.

I am 70 years old, single, no debt of any kind (clear title to my home and car), and currently have all of my assets (mid=>high 6 figures, outside of my home, a relatively small amount of PMs, and firearms) managed by a company that's focused seniors and preservation of assets, with only relatively small single-digit annual gains this past year - the gains look even smaller when compared to the returns from the S&P 500, DJIA, and the Couch Potato Portfolio. The company uses a clearly defined buy signal \ sell signal methodology, using diversified mutual funds in a mix of stocks, bonds, and cash, based largely on the S&P 500 EMA - their management fees are approximately 1.25%. In previous years, I have tried managing my assets myself with individual stocks, mutual funds, REITs, ETFs, PMs, etc, and that's not something that I want to get into again - to much complexity, too much anxiety and too much emotion - and too many mistakes. So, I bought in to the reality of how difficult it would be for my asset base to recover from a catastrophic market decline at my age with no employment income adding to (re-filling) my asset base and went with my current investment advisor. While I'm troubled by the gains that I'm leaving on the table, I'm extremely cautious of being significantly harmed by a big market decline, likely coming soon, or making my own stock picking mistakes, or the daily anxiety of watching over my investments - which my current adviser's strategy would seem to, not completely, but largely protect me from. I am very interested in using the Couch Potato approach, the Permanent Portfolio, or one of the variations - I like the higher historical returns than I'm seeing now, I like the manageable decreases when the market declines significantly, and I really like not having to fork over 1.25% of my money each year - plus, it's a once a year adjustment, versus nail biting every day. I figure I have about 20 years ahead of me, and in addition to Social Security and a small, modest pension from a former employer, I plan on drawing down my assets at a safe rate until I die. What are the downsides I'm not seeing with one of the Couch Potato type portfolios, and what else do I need to know?

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David Jay
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Re: Couch Potato vs. Permanent vs Actively Managed

Post by David Jay » Sun Dec 01, 2019 4:42 pm

Welcome to the forum!

Bogleheads is committed to DYI investing based simple portfolios utilizing low cost index funds. The couch potato portfolio is certainly in line with BH goals. Folks here would not recommend paying an advisor 1.25% of their returns portfolio every year.

In addition to the forums, we also have a comprehensive Wiki. Here is one example from the Wiki, the Boglehead Philosophy: https://www.bogleheads.org/wiki/Boglehe ... philosophy
Last edited by David Jay on Sun Dec 01, 2019 11:00 pm, edited 1 time in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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David Jay
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Re: Couch Potato vs. Permanent vs Actively Managed

Post by David Jay » Sun Dec 01, 2019 4:51 pm

texasyankee wrote:
Sun Dec 01, 2019 2:58 pm
I'm extremely cautious of being significantly harmed by a big market decline...
At BH, we teach that one should set an Asset Allocation (ratio of stocks-to-bonds) that one can hold through ups and downs. We do not recommend attempting to time the market.

This works with the couch potato portfolio. It is not required that you hold the couch potato at 50/50, you can be more conservative (40/60 or 30/70) or be more aggressive (60/40) without going beyond the two funds of the couch potato.

For comparison, you can also evaluate the 3-fund portfolio or the Core-4 portfolio. Any of these are low cost, simple to manage and adjustable to meet your level of comfort. Here is the Wiki page on portfolios: https://www.bogleheads.org/wiki/Lazy_portfolios

Reply and let us know your questions and how we can help you navigate your path.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

epictetus
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Re: Couch Potato vs. Permanent vs Actively Managed

Post by epictetus » Sun Dec 01, 2019 4:57 pm

would have to consider tax consequences, but you might consider one of the all-in-one-funds (Target Date funds which become more conservative over time or Lifestrategy funds which maintain a fixed-allocation over time).

this would let you put all the money into that one fund and you are done.
Focus on what you can control

pkcrafter
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Re: Couch Potato vs. Permanent vs Actively Managed

Post by pkcrafter » Sun Dec 01, 2019 5:51 pm

Welcome,

Here's another link to our 3-fund portfolio.

viewtopic.php?f=10&t=88005

and a link for asking portfolio questions which, if you follow it, will generate more helpful replies.

viewtopic.php?f=1&t=6212


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

ClaycordJCA
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Location: SF Bay Area

Re: Couch Potato vs. Permanent vs Actively Managed

Post by ClaycordJCA » Sun Dec 01, 2019 7:50 pm

You are not missing anything. In addition to the Bogleheads resources others cite above, read the March 31, 2019 article, “The Simplicity Manifesto,” on Scott Burns’ website, https://couchpotatoinvesting.com/the-si ... manifesto/. Assuming a $700,000 portfolio (mid to high six figures), your 1.25% annual advisor fee costs you $8,750 a year, in good times and bad. I’d much rather pay $980 using a target date fund with a .14% expense ration. You can adjust your asset allocation and withdrawal ratio to address your risk concerns.

retired@50
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Re: Couch Potato vs. Permanent vs Actively Managed

Post by retired@50 » Sun Dec 01, 2019 8:55 pm

David Jay wrote:
Sun Dec 01, 2019 4:42 pm
Welcome to the forum!

Bogleheads is committed to DYI investing based simple portfolios utilizing low cost index funds. The couch potato portfolio is certainly in line with BH goals. Folks here would not recommend paying an advisor 1.25% of their returns every year.

In addition to the forums, we also have a comprehensive Wiki. Here is one example from the Wiki, the Boglehead Philosophy: https://www.bogleheads.org/wiki/Boglehe ... philosophy
I'm sure the above is just a typo but, it's DIY for Do It Yourself, and it's more likely 1.25% of the managed portfolio than 1.25% of the returns.

Regards, :sharebeer

Topic Author
texasyankee
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Joined: Sun Dec 01, 2019 2:48 pm

Re: Couch Potato vs. Permanent vs Actively Managed

Post by texasyankee » Mon Dec 02, 2019 9:59 am

Thanks, all, for sharing your insights and expertise. Based on what I've read here and in other Bogleheads discussions, I'm focusing away from the Permanent Portfolio and more on the Couch Potato and now the Three Fund Portfolio - but at this point, I'm really more interested in the Three Fund portfolio - both are very simple, very easy to manage. I still have some homework to do as far as understanding exactly which asset classes go into which of my accounts (cash versus tax-advantaged), as I have IRAs (55%), ROTH (10%), and cash accounts (35%) - and for me, I imagine that I'll have to shore up my personal discipline as far as "staying the course" and sticking to the plan.

Three additional questions:

1 - At my age (70), would either approach (Couch Potato versus Three Fund) offer a significant advantage(s)?

2 - Also, I'm not a doom and gloom guy, but I just can't see how the world's level of all kinds of debt (personal and sovereign) is sustainable, and I believe that taxes are bound to increase sooner versus later for a variety of reasons - given those two concerns, would Couch Potato or Three Fund be a better approach? Or maybe a completely different approach would be better - Permanent Portfolio, Golden Butterfly, etc.??

3 - I'll need to make annual or monthly withdrawals from my assets to support my lifestyle - assuming that my cash assets should be drawn down first, then IRAs, do these drawdowns change any of the assumptions regarding the CP or Three Fund investment approach?

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