What is a couch potato portfolio?

A couch-potato portfolio is one where an individual invests money in low-cost index funds and then holds the investments for many years, according to CBS News. The strategy is based on the idea that, over time, simple index funds outperform actively traded funds that have high fees.

One way to manage a couch-potato portfolio is to put an equal amount of money into bond and stock index funds, according to Scott Burns, a columnist for The Dallas Morning News. One fund may outperform the other, so Burns recommends rebalancing the funds annually to ensure that each one makes up half of the portfolio. This process takes only a few minutes, earning the portfolio its nickname.