Couch Potato Portfolios: Simple, Cheap, and Diversified Still Works

Scott Burns of the Dallas News is known for his “Couch Potato Portfolios”. These are literally the simplest, laziest, easiest portfolios that you will ever see. The Basic Couch Potato Portfolio is 50% Total US Stock and 50% Total US Bond funds/ETFs. The Margarita version is 1/3rd US Stocks, 1/3 International Stocks, and 1/3 Bonds. Can’t get much easier to remember than that! You may be surprised at how well they have performed despite their simplicity.

Indeed, Burns recently provided another update on his Couch Potato portfolios, this time for theoretical retirees from various periods including those who retired in the year 2000 to the end of March 2020 (emphasis mine):

In this scenario, you’d be:

– Retiring just as the Internet bust was starting.
– Getting run over by the 2008-09 financial crisis.
– And ending with the coronavirus crash through the end of March.

In spite of all that, you wouldn’t be broke.

Here is a chart of how a 65-year-old couple would have done if they retired in various years from 1989 to 2015 and went with a 4% withdrawal rate (adjusted annually for inflation).

These retirees may not be shopping for a yacht, but they are still hanging in there. Simple, cheap, and diversified does much of the heavy lifting required. I appreciate that he included the likelihood that one or both of the couple would survive until 2020 as well. You may be surprised by how long your portfolio might have to last, but we also have to balance the risk of running out of time with the risk of running out of money.