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Scott Burns is an American newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the "Couch Potato Portfolio" investment strategy, which advocates the use of index funds over managed funds or stock-picking. [1] In 2006, he co-founded the Web startup AssetBuilder, where he is chief investment strategist.
Burns graduated from the Massachusetts Institute of Technology with a degree in humanities and biology (1962).
Burns began his career as a newspaper columnist at the Boston Herald in 1977 where he was also the financial editor. The column was nationally syndicated in 1981 and is now distributed by Universal Press Syndicate. [2] In 1985 he joined the staff of The Dallas Morning News where his column became one of the most widely read features in the paper. Retiring as a Dallas Morning News staff member in 2006, he continued to contribute to the paper through his ongoing syndication. He announced his retirement in 2017
In August 2006, Burns co-founded AssetBuilder, a registered investment advisory firm, with former Microsoft executive Kennon Grose. The firm offers investors a means to employ an advanced version of Burns's "Couch Potato Portfolio" investment methodology through a Web-based service platform. Burns is chief investment strategist for AssetBuilder.
In December 2001 the National Center for Policy Analysis published a paper Burns co-authored with benefits attorney Brooks Hamilton titled, "Reinventing Retirement Income in America." The paper was influential in advocating automatic enrollment, automatic increases in contributions, managed accounts, and little or no company stock, all of which have become trends in corporate retirement plans.[ citation needed ]
Burns's book The Coming Generational Storm was co-authored with Boston University economist Laurence J. Kotlikoff. The book was endorsed by five Nobel laureates, listed as one of the 25 best books of 2004 by Barron's, and named one of the top 10 business books of 2004 by Forbes.[ citation needed ] The book warns of a worldwide generational financial crunch and advises investors on how to protect themselves.
Kotlikoff and Burns recently wrote a second book, Spend 'Til the End, presenting new ideas in financial planning based on consumption smoothing. The book was published by Simon & Schuster in June 2008.
The original Couch Potato Portfolio strategy included investing half of the investor's assets in a Standard & Poor's 500 Index fund and half in a fund mirroring the Shearson/Lehman Intermediate Bond Index. Burns used the Vanguard 500 Index and Vanguard Total Bond Fund Index.
As described by Shauna Croome-Carther in Investopedia: [3]
Those with higher risk tolerance can modify the 50/50 asset allocation strategy to 25% in the Vanguard Total Bond Fund Index and 75% in the Vanguard 500 Index. The 25/75 allocation is known as the 'sophisticated couch-potato portfolio'. The higher weighting in equities is more suitable for younger investors, and those closer to retirement need more security. Ever since the concept originated, the couch-potato strategy has been modified to suit individual needs from various countries.
Originally it had been designed for the US market, but the term "couch potato portfolio" is now a general term for "a technique for building a diversified, low-maintenance portfolio designed to deliver the returns of the overall stock and bond markets with minimal cost". [4]
Burns's articles and columns have appeared in Worth, Boston, Playboy, Vogue and Harper's Bazaar.
Passive management is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common on the equity market, where index funds track a stock market index, but it is becoming more common in other investment types, including bonds, commodities and hedge funds.
An index fund is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that it can replicate the performance ("track") of a specified basket of underlying investments. While index providers often emphasize that they are for-profit organizations, index providers have the ability to act as "reluctant regulators" when determining which companies are suitable for an index. Those rules may include tracking prominent indices like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax-management, tracking error minimization, large block trading or patient/flexible trading strategies that allow for greater tracking error but lower market impact costs. Index funds may also have rules that screen for social and sustainable criteria.
A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe, and the open-ended investment company (OEIC) in the UK.
An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. The list of assets that each ETF owns, as well as their weightings, is posted on the website of the issuer daily, or quarterly in the case of active non-transparent ETFs. Many ETFs provide some level of diversification compared to owning an individual stock.
The Vanguard Group, Inc., is an American registered investment advisor based in Malvern, Pennsylvania, with about $7.7 trillion in global assets under management, as of April 2023. It is the largest provider of mutual funds and the second-largest provider of exchange-traded funds (ETFs) in the world after BlackRock's iShares. In addition to mutual funds and ETFs, Vanguard offers brokerage services, educational account services, financial planning, asset management, and trust services. Several mutual funds managed by Vanguard are ranked at the top of the list of US mutual funds by assets under management. Along with BlackRock and State Street, Vanguard is considered to be one of the Big Three index fund managers that play a dominant role in corporate America.
Burton Gordon Malkiel is an American economist, financial executive, and writer most noted for his classic finance book A Random Walk Down Wall Street.
In finance, a portfolio is a collection of investments.
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a selected period of time was 1% better than the market during that same period; a negative alpha means the investment underperformed the market. Alpha, along with beta, is one of two key coefficients in the capital asset pricing model used in modern portfolio theory and is closely related to other important quantities such as standard deviation, R-squared and the Sharpe ratio.
In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate. Some choices involve a tradeoff between risk and return. Most investors fall somewhere in between, accepting some risk for the expectation of higher returns. Investors frequently pick investments to hedge themselves against inflation. During periods of high inflation investments such as shares tend to perform less well in real terms.
A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment. A fund of funds may be "fettered", meaning that it invests only in funds managed by the same investment company, or "unfettered", meaning that it can invest in external funds run by other managers.
Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. The focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an approach that focuses on individual assets.
In finance, assets under management (AUM), sometimes called fund under management, measures the total market value of all the financial assets which an individual or financial institution—such as a mutual fund, venture capital firm, or depository institution—or a decentralized network protocol controls, typically on behalf of a client. Funds may be managed for clients, platform users, or solely for themselves, such as in the case of a financial institution which has mutual funds or holds its own venture capital. The definition and formula for calculating AUM may differ from one entity to another.
Laddering is an investment technique that requires investors to purchase multiple financial products with different maturity dates.
Thomas Rowe Price Jr. was the founder of T. Rowe Price, an American publicly owned investment firm, established in 1937 and headquartered in Baltimore, Maryland. The company offers mutual funds, subadvisory services, and separate account management for individuals, institutions, retirement plans, and financial intermediaries. Along with Philip Fisher, Price was an early proponent of the growth investing strategy.
Tactical asset allocation (TAA) is a dynamic investment strategy that actively adjusts a portfolio's asset allocation. The goal of a TAA strategy is to improve the risk-adjusted returns of passive management investing.
A target date fund (TDF), also known as a lifecycle fund, dynamic-risk fund, or age-based fund, is a collective investment scheme, often a mutual fund or a collective trust fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date approaches.
In finance, investment advising, and retirement planning, the Trinity study is an informal name used to refer to an influential 1998 paper by three professors of finance at Trinity University. It is one of a category of studies that attempt to determine "safe withdrawal rates" from retirement portfolios that contain stocks and thus grow irregularly over time.
A portfolio manager (PM) is a professional responsible for making investment decisions and carrying out investment activities on behalf of vested individuals or institutions. Clients invest their money into the PM's investment policy for future growth, such as a retirement fund, endowment fund, or education fund. PMs work with a team of analysts and researchers and are responsible for establishing an investment strategy, selecting appropriate investments, and allocating each investment properly towards an investment fund or asset management vehicle.
A quantitative fund is an investment fund that uses quantitative investment management instead of fundamental human analysis.
Dedicated portfolio theory, in finance, deals with the characteristics and features of a portfolio built to generate a predictable stream of future cash inflows. This is achieved by purchasing bonds and/or other fixed income securities that can and usually are held to maturity to generate this predictable stream from the coupon interest and/or the repayment of the face value of each bond when it matures. The goal is for the stream of cash inflows to exactly match the timing of a predictable stream of cash outflows due to future liabilities. For this reason it is sometimes called cash matching, or liability-driven investing. Determining the least expensive collection of bonds in the right quantities with the right maturities to match the cash flows is an analytical challenge that requires some degree of mathematical sophistication. College level textbooks typically cover the idea of “dedicated portfolios” or “dedicated bond portfolios” in their chapters devoted to the uses of fixed income securities.