Coffeehouse
Coffeehouse Portfolio
Where it stands today
Our calculation, 1926-07 – 2026-09
Growth of $10,000
Where it came from
Bill Schultheis began as a trader in the wheat pit at the Chicago Board of Trade and later became an adviser at Smith Barney (later Salomon Smith Barney), where he spent about thirteen years. In 1998, according to a Penguin listing of the book, he wrote 'The Coffeehouse Investor' as a short, plain-language guide for people overwhelmed by the stock market. It was reviewed on NPR in November 1999 and later reissued under the Portfolio imprint.
The book boils his message down to three principles - save, invest, plan - and argues that most professionals fail to beat the market average. The seven-slice mix now called the 'Coffeehouse Portfolio' was offered as one example of diversified indexing rather than a formal product; Schultheis has said it became far more popular than he intended and that there is no single official coffeehouse portfolio. A 2011 article by the White Coat Investor says the allocation was developed roughly a decade earlier.
In 2009 he followed with 'The New Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get on with Your Life' (Portfolio). The Portfolio Charts page quotes him as saying the benefit lies not in the specific construction nor in its 20-year returns, but in capturing market returns by diversifying and saving consistently.
Its popularity grew in online communities such as the Bogleheads forum, where a member computed returns for it and where it is treated as a 'slice-and-dice' alternative to a total-market three-fund portfolio: roughly a 60% stock / 40% bond portfolio, but with stocks split into six equal parts that deliberately overweight small and value companies and REITs.
What is in it
| US large-cap blend stocks | 10% | |
| US large-cap value stocks | 10% | |
| US small-cap blend stocks | 10% | |
| US small-cap value stocks | 10% | |
| International (developed ex-US large-cap blend / total international) | 10% | sources differ on the exact label |
| REITs | 10% | |
| Bonds (intermediate-term; Portfolio Charts uses US intermediate Treasuries, White Coat Investor says total bond or intermediate bond index) | 40% |
How we model it
| Intermediate government bonds (10 y) | 40% |
| US large companies (S&P 500) | 10% |
| US large value stocks | 10% |
| US small companies | 10% |
| US small value stocks | 10% |
| Developed markets outside the US | 10% |
| Real estate (REITs) | 10% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| Intermediate government bonds (10 y) | 40% | iShares USD Treasury Bond 7-10yr UCITS ETF (Dist) IE00B1FZS798 |
| US large companies (S&P 500) | 10% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
| US large value stocks | 10% | iShares Edge MSCI USA Value Factor UCITS ETF IE00BD1F4M44 |
| US small companies | 10% | SPDR Russell 2000 U.S. Small Cap UCITS ETF IE00BJ38QD84iShares MSCI USA Small Cap ESG Enhanced CTB UCITS ETF USD (Acc) IE00B3VWM098 |
| US small value stocks | 10% | SPDR MSCI USA Small Cap Value Weighted UCITS ETF IE00BSPLC413 |
| Developed markets outside the US (closest match) | 10% | iShares Core MSCI Europe UCITS ETF EUR (Acc) IE00B4K48X80iShares Core MSCI Japan IMI UCITS ETF IE00B4L5YX21 |
| Real estate (REITs) | 10% | iShares US Property Yield UCITS ETF IE00B1FZSF77iShares Developed Markets Property Yield UCITS ETF IE00B1FZS350 |
The idea
Keep investing simple and low-effort: broad diversification across equity styles with a 40% bond ballast, few changes, annual rebalancing. Deliberate tilts toward small and value stocks and REITs add return sources beyond cap-weighted indexes.
How people buy it
Index funds or ETFs for each slice; for bonds Schultheis generally used a broad index fund such as a total bond market or intermediate bond index fund (per White Coat Investor). Specific tickers are not given by the author in the sources read.
Rebalancing as published
Commentators say investors rebalance about once a year; Schultheis's own rules were not found in the sources read.
Variants
- Portfolio Charts alternatives: Classic 60-40, Merriman Ultimate, Ideal Index Portfolio.
- Critic suggestion (White Coat Investor): more international stock (20-50% of equities) and fewer REITs.
Criticism
- International stocks only about one-sixth of equities - 'a little light' (White Coat Investor, 2011).
- REITs at one-sixth of equities are 'a bit much' (same source); REITs fell about 75% in 2008.
- Morningstar X-ray shows about 17% of the portfolio in small-value versus about 3% of the overall US market - a large factor tilt that may not persist (same source).
- Portfolio Charts shows a deep drawdown (35%) and a decade below prior high despite 40% bonds.
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| Roaring Twenties boom | 1926-07 – 1929-08 | +74.9 % | +19.3 % | −4.6 % | +153.7 % |
| Wall Street crash and Great Contraction | 1929-09 – 1932-07 | −54.9 % | −23.9 % | −64.6 % | −78.2 % |
| New Deal recovery | 1932-08 – 1937-02 | +213.2 % | +28.3 % | −29.8 % | +268.7 % |
| Recession within the Depression | 1937-03 – 1938-03 | −38.0 % | −35.7 % | −39.1 % | −49.5 % |
| Rearmament and World War II | 1938-04 – 1945-09 | +187.5 % | +15.1 % | −18.3 % | +205.8 % |
| Postwar expansion | 1945-10 – 1965-12 | +670.3 % | +10.6 % | −17.7 % | +1212.9 % |
| Golden age of the 1950s | 1950-01 – 1959-12 | +244.9 % | +13.2 % | −10.4 % | +438.8 % |
| Go-go years and nifty-fifty | 1966-01 – 1968-12 | +42.9 % | +12.6 % | −11.3 % | +34.0 % |
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +159.6 % | +7.3 % | −25.0 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | −22.3 % | −11.8 % | −24.6 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +58.7 % | +13.4 % | −11.5 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +1019.1 % | +14.9 % | −18.0 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −13.6 % | — | −18.0 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +6.2 % | — | −11.5 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −5.5 % | — | −7.1 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +14.7 % | +10.8 % | −9.7 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | +9.0 % | +3.3 % | −7.2 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +88.3 % | +13.7 % | −5.4 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −26.0 % | −18.2 % | −31.4 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +199.8 % | +10.8 % | −9.2 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −9.2 % | — | −9.2 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +27.6 % | +13.6 % | −12.6 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −14.4 % | −14.4 % | −19.2 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (1192) | −45.5 % | −5.9 % | +10.9 % | +27.4 % | +140.1 % |
| 3 y (1168) | −27.3 % | +0.9 % | +10.4 % | +18.6 % | +38.4 % |
| 5 y (1144) | −12.0 % | +3.8 % | +9.8 % | +16.1 % | +30.3 % |
| 10 y (1084) | +0.6 % | +6.3 % | +10.1 % | +14.4 % | +17.6 % |
| 15 y (1024) | +3.3 % | +7.2 % | +10.1 % | +14.1 % | +17.0 % |
| 20 y (964) | +5.4 % | +7.5 % | +10.4 % | +13.8 % | +15.0 % |
| 30 y (844) | +7.8 % | +8.7 % | +10.8 % | +12.3 % | +14.1 % |
How it behaved in history
- 2000-2002. The 1999-2011 comparison above implies the diversified mix with small/value and REITs held up far better than a plain S&P 500 fund in the 'lost decade' (secondary source, forum calculation). www.whitecoatinvestor.com
- 2008. Portfolio had a calendar-year loss of about 20% per the White Coat Investor; REITs alone fell about 75%. www.whitecoatinvestor.com
Published results (by others)
- Average real return, US investor (1970-2025): 6.1% per year portfoliocharts.com
- Deepest drawdown after inflation (1970-2025): 35% portfoliocharts.com
- Longest time below prior high (1970-2025): 10 years (text says under 10) portfoliocharts.com
- Volatility / baseline real return / 30-year safe withdrawal rate (1970-2025): 10.4% / 4.9% / 5.2% portfoliocharts.com
- Annualised return roughly 9% over 1991-2010; worst year 2008 about -20%, best years about +23% (1991-2010): ~9% www.whitecoatinvestor.com
- Bogleheads member calculation: 6.35% annualised vs 1.65% for Vanguard S&P 500 fund (1999 to about 2011): 6.35% vs 1.65% www.whitecoatinvestor.com
What we could not verify
- Original 1998 publisher, and whether the seven-slice portfolio appears in the 1998 edition or only later (only the 1998 and 2009 editions were found).
- Schultheis's own rebalancing guidance.
- Bogleheads wiki page could not be opened (HTTP 403).
- Forum-calculated returns are low-reliability.
Sources
- portfoliocharts.com
https://portfoliocharts.com/portfolios/coffeehouse-portfolio/ - www.whitecoatinvestor.com
https://www.whitecoatinvestor.com/the-coffeehouse-portfolio/ - www.penguin.com.au
https://www.penguin.com.au/books/the-coffeehouse-investor-9781591845843 - www.npr.org
https://www.npr.org/1999/11/15/1066638/-i-the-coffeehouse-investor-i
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.