“I’m an indexer. I don’t care what the indexes did today!”
— Preet Banerjee (2014)
These words are from financial Media Maven Preet Banerjee . In that quip, he captures the essence of Index Investing. Couch Potato investing is another name for it.
Some think it is prudent to monitor the stock market closely. I know people that do that. Some people get upset by the “moods of the markets”, my question is: why?
If you are that worried about your investments, maybe you should not be investing in stocks. If you are a day trader, then yes, you should be on top of things. NO you should not be a day trader. If you feel your investments are that “tenuous” then you really need to review your Savings plan, and maybe get out of securities.
Couch Potato investing assumes you are not changing your portfolio often. 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? (yes that is a link to the 2008 crash that we all seem to have forgotten about) 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). I am 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).
Index Investing Bubble ?
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 am mostly invested in Index Funds and Index Based ETFs, however, it is not completely. 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 a hypocrite is “Do as I say, not as I do”, then yes, I am an Index Fund Hypocrite. Maybe I am a Couch Yam?