“I’m an indexer. I don’t care what the indexes did today!”
— Preet Banerjee (2014)
These words were spoken by a well known financial Media Maven Preet Banerjee , and in that quip he captured the essence of the Index’ing (and Couch Potato) investing method.
As an investor aren’t you supposed to watch the markets every single day, to make sure your investments are doing OK? I know people that do that, and I know people who get upset by the “moods of the markets”, my question is: why?
If you are that worried about your investments, and you feel you must be that “on top” of things, maybe you should not be investing in stocks ? If you are a day trader then yes, you should be on top of things (and NO you should not be a day trader, if you are asking me), but if you feel your investments are that “tenuous” then you really need to review your Savings plan, and maybe get out of securities?
The whole idea of Couch Potato investing (in my opinion) is you can check your portfolio once a quarter (every 3 months) or even once every 1/2 year and see if your portfolio is balanced, and if not, take corrective measures. I guess your only problem after that is figuring out what you can do with all that spare time? There are enough things in life to worry about, watching your investments daily simply makes you more tense.
How you rebalance your portfolio is up to you, you can add more funds and use that to get back to your goal distribution of funds, or you can “buy and sell” to rebalance the existing funds. No matter how you rebalance, that is about all you are doing with your investments.
What if the markets crash? Not much to do about it, better to not look then especially! Market corrections happen, as with most investing strategies, attempting to dodge a market correction is a tricky dance, and most “market timing” strategies will fail in the long run (in my opinion, of course). I am sure there are folks who will sell you a great “market timing” strategy, and they are rich (selling the strategy, not the market timing). Still investigating the Fibonacci method for market timing, anything that has Fibonacci in it is fun to read (but NO I will not use it, I just like reading about strategies and attempt to debunk them).
For full disclosure, most of the folks who claim to be Index Fund Investors (or Couch Potatoes), typically are not solely invested in Index Funds (or ETFs), they will hold securities in single companies as well, or they might use Dividend Investing ideas as well. I will confess that even though I am mostly invested in Index Funds and Index Based ETFs I do hold a few stocks in a few of my portfolios. Why am I still holding these stocks? Mostly they keep performing well, and pay nice dividends, I have expunged a few Single stocks from my RRSPs (Power Corp, to name one), but I hold onto my other Single Stock darlings mostly because I can’t seem to convince myself to sell them (and simply buy more Index Funds). Am I a hypocrite? If hypocrite is “Do as I say, not as I do”, then yes, I am an Index Fund Hypocrite, or maybe a Couch Yam?