Bill Schultheis is a financial adviser and co-founder of the wealth management firm Soundmark Wealth Management.
Bill Schultheis’ Coffeehouse Portfolio: Relax And Get On With Your Life Portfolio?
- 1 Bill Schultheis’ Coffeehouse Portfolio: Relax And Get On With Your Life Portfolio?
- 2 What is Bill Schultheis’ Coffeehouse Portfolio?
- 3 Asset allocation piechart for Bill Schultheis’ Coffeehouse Portfolio
- 4 Returns and risk for the Three-fund portfolio
- 5 Building the portfolio
- 6 Advantages and disadvantages of the Coffeehouse portfolio
- 7 Resources
- 8 Summary and your next steps
What is Bill Schultheis’ Coffeehouse Portfolio?
In his book, The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life Bill Schultheis presents his Coffeehouse portfolio. It has been featured in The New York Times, The Wall Street Journal, TIME magazine, and Marketwatch.com. His website details the use of the portfolio.
He stresses that to be successful at investing you need to:
- Save money
- Diversify your investments
- Use low-cost index funds.
The portfolio is a variation on the 60/40 portfolio with the stock portion sliced up into smaller allocations.
Asset allocation piechart for Bill Schultheis’ Coffeehouse Portfolio
Returns and risk for the Three-fund portfolio
|Portfolio Name||Number of asset classes||1 year return 2018||YTD (August 2019)||10 year return||Drawdown||Risk Level||Market Correlation||Dollar Value|
|S&P 500 (Benchmark)||1||-4.52%||19.24%||12.97%||-37.71%||5 - very high risk||0.99||$167,045.76|
|Bill Schultheis Coffeehouse Portfolio||7||-5.29%||11.87%||8.48%||-20.21%||2 - low risk||0.9||$108,918.59|
Building the portfolio
Below you can see which mutual funds or ETFs you can use to build the portfolio. They are the best-in-class funds and ETFs for this purpose. They are low-cost index funds that best capture the asset class. Read here how we selected the best funds.
Asset allocation for the Coffeehouse portfolio
- 10.00% US Large Cap Value (VTV)
- 10.00% US Large Cap (VV)
- 10.00% US Small Cap Value (VIOV)
- 10.00% US Small Cap (VIOO)
- 10.00% REITs (VNQ)
- 10.00% International All-World ex-US (VEU)
- 40.00% Total US Bond Market (BND)
Advantages and disadvantages of the Coffeehouse portfolio
- Allocates and bets on the value stocks (20%), historically value stocks have outperformed growth stocks.
- Has 20% allocated to small caps, historically small caps have outperformed large-cap stocks.
- A “sleep-well” portfolio. It is less risky than the overall market due to its 40% bond allocation.
- Good diversification within the U.S.
- Bill Schultheis represents one of the “good guys” investing.
- Not enough international exposure, only 10%.
- Rebalancing is expensive due to the many funds you need to set it up.
- The 40% bond allocation can drag down your returns.
Go here for a rebalance excel worksheet.
Summary and your next steps
The Coffeehouse portfolio is a variant on the 60/40 portfolio. Bill Schultheis built the portfolio in 1999 realizing that the average investor just wants a good portfolio that he can trust. Money to Bill is a means to an end – it’s not an end in itself.
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