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Does Couch Potato investing change in COVID?

When it comes to Canadian personal finance, you’ll be hard-pressed to find a more experienced and respected name than Dan Bortolotti. Dan has been a writer and finance expert for more than 20 years, publishing articles for MoneySense and his website, Canadian Couch Potato.

He’s currently a portfolio manager at PWL Capital. On this Real Money Talk episode, Dan sits down with Tyler and Ratehub founder and CEO Alyssa Furtado to talk about COVID, personal finance, and his favourite flavour of potato chips.

The Dan Bortolotti story

Dan started the Canadian Couch Potato blog over ten years ago. He saw a gap between what financial advice Canadians needed and what they were (or weren’t) getting. Top-level investment guidance was only available to the super-rich. Dan set out to change that. He shares his top tips and tricks to help all Canadians get the financial information they need on his blog.

Over the years he’s been writing, investing has gotten more accessible. From the ability to buy single ETFs to Robo-advisors, people with smaller portfolios now have access to almost the same services as the uber-rich.

Some people are skeptical of these services, believing they are too easy to be true. Dan’s response is, “we all have a tendency, I think, to overcomplicate investing. One of the challenges that I have encountered since the appearance of some of these easy solutions is people saying, ‘it can’t be that simple’… Just because it’s simple doesn’t mean it’s simplistic, and I think that’s an important distinction that has not really sunk in with most people yet.”

Has COVID changed couch potato investing?

The Couch Potato investing strategy is a way of building a diversified, low-maintenance portfolio designed to deliver the overall stock and bond markets’ returns at a minimal cost. Since the market crash caused by the COVID-19 pandemic, Dan has seen an uptick in investors thinking that this is a great time to pick individual stocks rather than a passive, well-diversified portfolio. The pandemic has hit companies like Air Canada hard, but they’re too big to fail, so isn’t buying their stock at a low price a good idea?

“Just because we are in a crisis, it doesn’t mean it’s any easier to identify which companies are going to out-perform in the future,” says Dan. People may think they know that a company’s return will boost their value, but Dan holds, “there is not any unique insight that only you have, and if the market knows what you know, then it’s priced accordingly.”

You can’t outthink the market.

There’s no way to predict when the market will recover or which stocks are going to perform best. Dan’s advice is to stick to a plan. “All you want to be conscious of is the money I’m investing today, do I have a reasonable expectation that it will be worth more when I need that money in retirement.”

How can you achieve your long-term investment goals?

Dan’s advice is to make a plan and stick with it, always. If he has a client who has some extra money to invest at the end of a month, he focuses on adjusting their asset class allocation to ensure it’s in line with their plan rather than assigning the extra money to a high-risk, high-reward stock. He says although it may not always lead to the highest returns, “it does build in a very disciplined process that removes the emotional decision making and emotional decision making is the biggest enemy of investing.”

Dan advocates for low-cost index funds for people who are just beginning to invest and don’t have a lot of money. “If, for example, you’re just getting started in investing and you’ve only got a few thousand dollars, it’s very hard to build a diversified portfolio any other way… by using these diversified funds, you can get access to a huge amount of the world’s stock and bonds markets with just a very small number of holdings.”

Dan’s dream for his kids’ financial future is that they’ll end up in a job with a defined benefit pension plan, but even if this dream isn’t realized, he’s optimistic about the future. He also hopes that “some of these old school ideas will have disappeared. This idea that you’ve got to hire someone to pick stock for you, and have you hire a fortune teller to predict where the economy is headed, and that there will just be simple, low-cost, easy to manage options available for everybody.”

Hear the full conversation with Dan, Alyssa, and Tyler on your trusted Canadian personal finance podcast, Real Money Talk. Also, to learn more about Dan’s work, check out his blog, and his podcast.