need help with a simple plan

[demrea]

I need help… I do have a financial planner, but want some other concensus on choices before i make a decision.

So I have an asset allocation as follows:

Emerging Market Index – 20% - unit value ~15
Canadian Equity Index – 40% - unit value ~12
US Equity Index – 20% - unit value ~7
Oil Equity Stock – 20% - unit value ~26

Now that’s what I have and I want to contribute $100 per week to my investments. It seems kinda silly to buy basically 1 or 2 shares of each index per week, should I put all $100 into alternating index’s? Should I just put it all in cash and try and time the market (which I have never in my life been able to do, so I don’t think this is a good choice). I just want to DCA and not have to study the market every week, or am I setting myself up for the poor house?

Someone give me a simple plan?

[Germack]

I do not really like your asset allocation, especially the no bonds part, the oil equity stock and too much money in emerging markets.

I would prefer something like this:
25% bonds
25% Canadian equity
25% US equity
25% International equity

This can be easily set-up with TD e-series index funds. Never ever try to time the market. It will not work and will cost you a lot of money long-term

[demrea]

I do not really like your asset allocation, especially the no bonds part, the oil equity stock and too much money in emerging markets.

I would prefer something like this:
25% bonds
25% Canadian equity
25% US equity
25% International equity

This can be easily set-up with TD e-series index funds. Never ever try to time the market. It will not work and will cost you a lot of money long-term

fair enough, but how would you invest in that mix with $100 per week? assuming you can only buy 1, maybe 2 units at a time if you stick to your allocation.

[asdfvcx]

It seems kinda silly to buy basically 1 or 2 shares of each index per week, should I put all $100 into alternating index’s?
Assuming you are referring to mutual funds, you shouldn't care about the amount the number of units you're buying.

If the unit values were instead only $1, you would then be buying 25 units of each fund. And so what? Either way you're still putting $25 dollars a week into each fund.

Assuming the mutual fund company allows you to contribute $25 weekly you might as well do it. (Although, do you get paid that often? It might be a lot easier to just contribute automatically the day you get paid).


(As well I agree with Germack that your asset allocation looks very out of whack. If you're financial planner come up with this, and it wasn't you insisting on this, I'd run away really quickly).

[sonypcs]

You are loaded with Equity, excepted if you can take maximum risk of just like the ones before, you should not put everything into the equity basket..

Remember the word "GLOBALIZATION !!!"..What has being done in the US or now, its China...will also harm every countries equity market...

You should make some money and take it off the table every time when the market reaches new high instead of thinking long term like the brainwashed banker / investment advisor told you to do!!

He/She or the BNN talking head with some investment strategist wants you to go long term because they will do less paperwork in the back end and he/she dont need to call you (like last time in 2008) because he/she think you will be long term investor and bearing losses is okay for you.

Lastly, BUY and HOLD story is too old and Do not think you are Warren because our world and the investment climate is changing every single minute ..!!!

Beware of a correction !!!

[dcaron9999]

Read up on the couch potato approach. You will see how this method makes a lot of sense and save you stress. See my captured notes below ...

"If you want to build your wealth, it pays to sweat the details. One great example is fees. Most actively managed mutual funds that invest in Canadian stocks charge 2.5% or more of your assets each and every year. Who cares about a measly 2.5%? You should. Since stocks historically have produced about a 10%-a-year return, you're handing over a quarter of your expected profits to your fund company. There's no evidence that expensive mutual funds do any better than cheap ones. That's why we're big fans of low-cost index funds that passively track the market. They usually charge 0.9% or less in fees. Largely because of their low fees, index funds beat 80% of actively managed funds over time.
--------------------------------------
We've talked about the importance of taking emotion out of decisionmaking. We've also mentioned the importance of diversifying your portfolio to reduce risk, and of keeping fees low to ensure that you and not your money manager reap the benefit of your investing. One simple way to put all these ideas into practice is what we call the Couch Potato Portfolio. It consists of a simple set of rules for investing. You begin by putting 60% of your money into stock index funds and 40% into bond index funds. You diversify your portfolio even further by splitting the stock component into three equal parts — one goes into the Canadian stock index, one into a U.S. stock index, and one into a European and Asian stock index. Then, once a year, you rebalance — selling whatever has shot up and reinvesting it in areas that have fallen — to get back to your original proportions.
That's it. Follow this system and your fees are minimal. You're always selling high and buying low without even having to think about it. Fads, hot trends and impulses have no impact on your decisions — and, for all these reasons, you do very well. Over the past 30 years the Couch Potato strategy has outperformed 80% of professionally managed money.

------------------------------
The first idea — as we've already seen — is to keep your costs low. This ensures that you, not your financial adviser, reaps most of the rewards from your portfolio.
The second idea is to diversify among different types of assets. By doing so, you ensure that no single blow-up can devastate your portfolio. We usually recommend that Couch Potato investors follow a classic balanced strategy, which consists of putting 60% of your money in stocks and 40% in bonds, but you may want to adjust the stock component upward if you're young and willing to take on additional risk in pursuit of larger returns. Conversely, you may want to dial down the stock portion if you're older and more conservative.
The third idea is to rebalance once a year to get back to your original asset allocation. If your stocks shoot up in value, for instance, you would sell some and put the proceeds into bonds. Doing so ensures you're constantly selling high and buying low.
That's it. If you follow those three ideas, you're going to do well. In fact, you can adapt the Couch Potato strategy to suit your individual situation and preferences. Our Classic Couch Potato Portfolio is a simple strategy that spans Canadian and U.S. markets. Our Global Couch Potato Portfolio takes things a step further and expands your portfolio to span the world. Both are just suggestions and can be tweaked to suit your purposes.
Ready to get going? We suggest you read our Couch Potato FAQs for a quick overview of the major issues. Then follow Do the Couch Potato for a step-by-step guide to implementing the strategy. Finally, visit Meet the potato family and choose the Couch Potato strategy that's right for you.
Here's where the Couch Potato strategy comes in. It's based on a simple idea: if active management doesn't beat the market, why not dump it and buy the market instead?
You buy the market by investing in a small collection of low-cost index funds. These funds passively follow the ups and downs of market indexes, such as the S&P/TSX Composite index of Canadian stocks or the Standard & Poor's 500 index of U.S. stocks. Your exact mix of funds can vary (and we'll get to the details in just a second), but the key advantage of the Couch Potato strategy is that it gives you wide diversification among hundreds of stocks and bonds at rock-bottom cost.
Why is this so important? Because low costs are crucial when it comes to investing success. Most investors pay about 2.5% of their assets each and every year to invest in actively managed mutual funds. On the other hand, you can become a Couch Potato for 0.5% a year or less. The couple of percentage points you save go directly to your bottom line and can have a tremendous effect over time.
Let's say you have a $200,000 portfolio. This year alone you would save about $4,000 by becoming a Couch Potato investor rather than an investor in actively managed mutual funds. Over a few years, assuming you reinvested all of your savings, the difference would grow and grow, because the money you would be saving would compound on itself. Assuming typical rates of return, the money you would save by becoming a Couch Potato would be more than enough to buy you a luxury car in 10 years' time even if you were never to invest another cent in your portfolio.
Whenever we lay out the math, people are naturally skeptical. It seems too good to be true. How can the mutual fund industry get away with charging us so much for so little? Doesn't all that expensive professional management accomplish something?
Sadly, no. If you doubt us, click here to see how our Classic Couch Potato portfolio has generated returns higher than 11% over the past 30 years. Or visit Scott Burns' site at Dallasnews.com and see how Burns, the inventor of the original Couch Potato approach, has fared. Compare the Potato's results to what the average actively managed mutual fund has accomplished — we think you'll be impressed. Then, if you want to better understand the reasoning behind Potato-hood, pick up Unconventional Success. It's a new book by David Swensen, the legendary investor who piloted Yale University's huge endowment fund to record-breaking performance. In his book, Swensen lays out a Couch Potato-like strategy of his own. Coincidence? We think it's merely another affirmation of the Couch Potato's unarguable logic.

Couch Potato Portfolio: How to set it up
Whether you're investing once a year or making monthly contributions, we show you what ETFs or funds to buy.
By Duncan Hood and Ian McGugan
/moneysense_magazine/index.jsp /moneysense_magazine/index.jsp
If you're interested in becoming a Couch Potato, you must first decide whether you will be investing only once a year or through regular monthly contributions.
If you're investing once a year, you should use exchange-traded funds or ETFs. These are index-fund-like investments that trade like stocks on major stock exchanges. Many ETFs charge ultra-low management fees (think 0.3% or less), but to buy or sell them you have to pay a brokerage fee just as if you were buying a stock. The fees aren't huge in themselves — $30 is typical — and if you're investing once a year, they are a minor annoyance when you consider the low management fees you're paying.
On the other hand, if you want to contribute monthly, paying $30 a pop for each transaction can send your overall bill soaring. You're better off to use index mutual funds. You'll pay a bit more in management fees, but you won't face brokerage fees on every contribution.
For purposes of illustration, we'll assume you're using our Global Couch Potato strategy (for other strategies, see Meet the potato family).
Once-a-year investors: Open a discount brokerage account. Deposit your money, then divide the total amount by five, and buy these ETFs:
The first pile
• (20% of your money) goes in the iShares Canadian Composite Index Fund [TSX: XIC]. (We've decided to replace the i60 Fund recommended in previous articles with this new, more diversified fund, but if you already have the i60, there's no need to switch.)
The second pile
• (20%) goes in the iShares Canadian S&P 500 Index Fund [TSX: XSP].
A third pile
• (20%) goes to iShares Canadian MSCI EAFE Index Fund [TSX: XIN].
Both the fourth and fifth piles
• (A total of 40%) go in the iShares Canadian Bond Index Fund [TSX: XBB].
Once a year, buy and sell your ETFs (or add new money) to get your portfolio back to its 20%-20%-20%-40% split.
The net result of all this is a very low-cost portfolio that has 60% of its money invested in a wide range of stocks in Canada, the U.S. and around the world, and 40% invested in Canadian bonds.
Monthly contributors: For purposes of illustration, we'll use TD eFunds, because they're particularly cheap. As above, you start by transferring your money into the account and splitting it up into five piles:
One pile
• (20% of your money) goes in the TD Canadian Index Fund.
The second pile
• (20%) goes in the TD U.S. Index Fund.
The third pile
• (20%) goes in the TD International Index Fund.
Both the fourth and fifth piles
• (40%) go in the TD Canadian Bond Index Fund.
Once a year buy and sell your funds (or add new money) to get them back to their original split.
That's it. Now sit back, put up your feet and enjoy life as a couch potato.

[demrea]

thanks for all your comments ..

1) my question wasnt really answered, if i want to DCA $100 a week into my portfolio does it make sense to break that $100 down as per my asset allocation or should i put it all into one asset per week?

2) my portfolio is the couch potato, with one exception. i chose to take my bond allocation and put it into an Oil fund. i understand its a completely opposite risk, but i am greedy and feel there is long term upside in oil. maybe i am wrong, im open to that possibility.

3) i am interested in the comment that i should be taking money off the table at the high's, so i should sell a portion and put it where? into cash? until the market dips then buy again?

[dcaron9999]

my question wasnt really answered, if i want to DCA $100 a week into my portfolio does it make sense to break that $100 down as per my asset allocation or should i put it all into one asset per week?

break it down, even though it may wind up buying you a fraction of a share. Doing otherwise would defeat the purpose of averaging.

my portfolio is the couch potato, with one exception. i chose to take my bond allocation and put it into an Oil fund. i understand its a completely opposite risk, but i am greedy and feel there is long term upside in oil. maybe i am wrong, im open to that possibility.

That risk is acceptable if you are young (far from retirement). Also, if the worst case scenario occurs, you are only exposing 20% of your portfolio.


i am interested in the comment that i should be taking money off the table at the high's, so i should sell a portion and put it where? into cash? until the market dips then buy again?
Put it back into the same funds, while respecting your initial ratios...

[demrea]

Put it back into the same funds, while respecting your initial ratios...


im confused ... so if my CDN equity goes up 20%, i trim off some of the gain and put it where? surely you arent suggesting i buy back at the price i sold, seems a waste of time. put into cash until it dips again?

[dcaron9999]

im confused ... so if my CDN equity goes up 20%, i trim off some of the gain and put it where? surely you arent suggesting i buy back at the price i sold, seems a waste of time. put into cash until it dips again?
Im no expert at this and just started with the couch potato approach about 6 months ago.

Dont look at one single fund but look at your portfolio as a whole. Then re-distribute evenly as per your original ratios in your opening posts. You do this once a year. voila ....

[GSRee]

im confused ... so if my CDN equity goes up 20%, i trim off some of the gain and put it where? surely you arent suggesting i buy back at the price i sold, seems a waste of time. put into cash until it dips again?

You put it into whatever will reset your allocation to its original state. So let's say you started with $10k

Emerging Market Index – 20% $2000
Canadian Equity Index – 40% $4000
US Equity Index – 20% $2000
Oil Equity Stock – 20% $2000

Some time in the future you may grow to $15k and end up looking like:

Emerging Market Index – 15% $2250
Canadian Equity Index – 50% $7500
US Equity Index – 18% $2700
Oil Equity Stock – 17% $2550

To get back to your original asset allocation, you'll want to buy/sell as necessary to look like this:

Emerging Market Index – 20% $3000
Canadian Equity Index – 40% $6000
US Equity Index – 20% $3000
Oil Equity Stock – 20% $3000