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Bill Schultheis builds the Coffeehouse portfolio. In this article, you can find a description of the Coffeehouse portfolio. You can also find the performance of the investment index portfolio, and you can find out how you can implement it yourself.
Bill Schultheis’ Coffeehouse Portfolio, Relax, And Get On With Your Life Portfolio?
- Bill Schultheis’ Coffeehouse Portfolio, Relax, And Get On With Your Life Portfolio?
- Who is Bill Schultheis?
- What is Bill Schultheis’ Coffeehouse Portfolio?
- Building the portfolio(s)
- Asset allocation piechart for Bill Schultheis’ Coffeehouse Portfolio
- Returns and risk for Bill Schultheis’ Coffeehouse Portfolio
- Asset allocation for the Coffeehouse portfolio
- How we select the right ETFs
- Advantages and disadvantages of the Coffeehouse portfolio
- Suggestions for your next steps
Who is Bill Schultheis?
Bill Schultheis is a financial adviser and co-founder of the wealth management firm Soundmark Wealth Management. He authored the famous book The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life.
We consider him to be one of the good guys in investing. He focuses on the long term, low cost, and, most importantly, doing the right thing for his clients.
“The simplest approach to diversifying your stock market investments is to invest in one index fund that represents the entire stock market.”
– Bill Schultheis
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 describes the use of the investment portfolio.
He stresses that to be successful at investing, you need to:
- Save money
- Diversify your investments
- Use low-cost index funds.
The index portfolio is a variation on the 60/40 investment portfolio, with the stock portion sliced up into smaller allocations.
Building the portfolio(s)
Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.
Asset allocation piechart for Bill Schultheis’ Coffeehouse Portfolio
Returns and risk for Bill Schultheis’ Coffeehouse Portfolio
|Name||Asset class count||Year to date||Return in 2019||10 year return||CAGR since 1989 (%)||Risk level||Expense ratio|
|Bill Schultheis Coffeehouse Portfolio||7||-6.74||19.27||8.50%||8.69||2||0.07%|
|Coffeehouse Three ETF||3||-6.22||18.62||7.23%||7.76||2||0.15%|
The portfolio has about half the drawdown of the S&P 500 but also lower returns. But it still manages to perform extremely well!
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)
How we select the right ETFs
There are a lot of ETFs out there. Most of them can be discarded because:
- They are too expensive
- They hold too few assets and are therefore too illiquid
- They do not meet the criteria for representing the asset class they are supposed to mirror.
We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?
If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).
As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.
You can find the socially responsible investing ESG ETFs in the same article.
Advantages and disadvantages of the Coffeehouse portfolio
- Bill Schultheis’ investment portfolio allocates and bets on value stocks (20%). Historically, value stocks have outperformed growth stocks.
- The portfolio has 20% allocated to small caps, historically small caps have outperformed large-cap stocks.
- The Coffeehouse index portfolio is a “sleep-well” portfolio. It is less risky than the overall market due to its 40% bond allocation.
- The portfolio has excellent diversification within the U.S.
- Bill Schultheis represents one of the good guys investing.
- The investment portfolio may not have enough international exposure. It only has 10%. This may not be a problem for you. John Bogle is famous for not allocating to foreign stocks.
- Rebalancing could be expensive due to the many funds you need to touch every year. In 2020 this should not be an issue as a lot of brokers including Vanguard and Schwab, have removed commissions on stocks and ETFs.
- The 40% bond allocation that the portfolio sports can drag on your returns.
Bill Schultheis’ YouTube channel
Bill Schultheis has a very informative Coffeehouse website that he updates regularly
His wealth management firm is called Soundmark.
Suggestions for your next steps
Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone
If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.
You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool
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 Schultheis is a means to an end – it’s not an end in itself.
We like the Coffeehouse portfolio a lot.
But what is one thing that is wrong with this investment portfolio?