NCPA - National Center for Policy Analysis

Digging the Couch Potato Portfolio

February 5, 2003

You'll never find the Couch Potato Portfolio at the top of a performance list. You'll also never find it at the bottom. What it will do is provide somewhat superior performance with modest risk.

Financial writer Scott Burns says passive, balanced investments have continued to beat many managed funds -- which carry fees for investment advice.

A hypothetical Couch Potato Portfolio made up of 50 percent Vanguard 500 Index fund and 50 percent Vanguard Total Bond Index fund lost 6.95 percent in 2002. The aggressive 75-25 Couch Potato, which is three parts Vanguard 500 Index and one part Total Bond Market Index, lost 14.55 percent.

  • In 2002, the 50-50 Couch Potato Portfolio did somewhat better than the average managed balanced fund, but the 75-25 did worse.
  • Both performed better than the average domestic equity fund last year -- and at three, five and 10 years.
  • At 15 years, the Couch Potato portfolios do nearly as well or slightly better, with far less risk.
  • Over the last 15 years, the 50-50 and 75-25 Couch Potato Portfolios would have ranked among the top 24 percent and 15 percent of balanced funds, respectively.

Measured against large-blend equity funds, they would have been in the top 50 percent and top 33 percent, respectively, with far less risk.

Source: Scott Burns, "Couch Potato didn't do the market mash," Dallas Morning News, February 2, 2003.


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