The Coffeehouse Portfolio by Bill Schultheis is a traditional 60% stock portfolio that seeks to capture market returns while subdividing the stocks into several targeted funds.
Asset Allocation
Change the home country to translate the portfolio to local assets, currency, and inflation. This affects every section of the page.
Author
Bill Schultheis
Bill Schultheis is a Wall Street veteran and a financial adviser at Soundmark Wealth Management. He talks about the Coffeehouse Portfolio in his book The Coffeehouse Investor.
Overview
The Coffeehouse Portfolio straddles an interesting line between promoting a conservative Classic 60-40 mindset while mixing in a more aggressive slice and dice approach to factor investing. Its author Bill Schultheis believes that the most important concepts in investing are actually not so much about specific asset choices but about three key principles:
- Don’t put all your eggs in one basket
- There’s no such thing as a free lunch
- Save for a rainy day
In fact, in his unique humble style Schultheis underplays the specific asset allocation on his Coffeehouse Investor blog. He once explained that his initial portfolio recommendation was intended to be just one example of a Coffeehouse-style portfolio, but that his suggestion soon took on a life of its own. As he described it:
Despite its enduring popularity, the portfolio benefit isn’t found in its specific construction nor its 20-year returns. It’s found in investors “capturing their fair share of market returns” over time, as Mr. Bogle was fond of saying.
So one could argue that the Coffeehouse Portfolio might best be described as a mindset rather than a single specific asset allocation. Still, I think Schultheis perhaps sells himself a little short in his recommended portfolio. Even if it was just one example, I find a lot of wisdom in his work and believe his instincts are absolutely worth further study.
Performance
Since 1970, an investor in the United States holding the Coffeehouse Portfolio earned an average 6.1% real return, with a baseline CAGR of 4.9% over 15 years. It supported a 5.2% safe withdrawal rate for 30 years and 4.3% indefinitely. Its worst peak-to-trough loss was 35%, and the longest a new investment spent below water was under 10 years.
Coffeehouse Portfolio Performance
| # | Metric | What it measures |
|---|---|---|
| 6.1% | Average return | Mean annual return after inflation |
| 4.9% | Baseline real return (15 years) | What 15-year stretches returned in the weaker outcomes |
| 5.2% | Safe withdrawal rate (30 years) | Highest spending rate that lasted 30 years in the worst case |
| 4.3% | Long-term withdrawal rate | The SWR floor over very long retirements |
| 35% | Deepest drawdown | Worst peak-to-trough loss after inflation |
| 10 years | Longest drawdown | Longest a new investment stayed below what you put in |
| 10.4% | Volatility (standard deviation) | Year-to-year variation in returns |
Charts
Different ways to visualize the Coffeehouse Portfolio
Comparisons
How the Coffeehouse Portfolio compares to other options
Alternatives
Portfolios with a similar structure or design intent
Classic 60-40 — The same percentage of stocks and bonds without the stock tilts
Merriman Ultimate — The same basic idea with several more assets
Ideal Index Portfolio — Similar allocation with a growth fund and more international
Articles
Insights that mention the Coffeehouse Portfolio
Discussion
Join the conversation
