Coffeehouse ETF Portfolio: Boring, But Simple

Back in 1999 when everyone was betting the ranch on tech and dot-com, Bill Schultheis, a former Salomon Smith Barney broker and the author of The Coffeehouse Investor, launched his Coffeehouse Portfolio.

This portfolio was as boring as a cup of instant coffee on a street full of Starbucks. Investors, except those that read this site of course, were riding the tech wave. Returns were expected to exceed 100 percent annually. And more than a hundred funds delivered. Everyone was going to retire early.

During this period of irrational exuberance, brokers laughed at Bill's “overly conservative” Coffeehouse Portfolio. After all, who would sock 40% of one's assets on low-return bond funds at the same time that tech stocks were doubling? The Coffeehouse was laughable.

But the smiles turned to frowns during the bear years of 2000, 2001, and 2002. During this time, the Coffeehouse Portfolio beat the S&P 500 by roughly 15 percentage points each of the three bear years. At the same time, several hundred dot-coms filed for bankruptcy sending the Nasdaq down 80%. But enough of the doom and gloom.

Here's how Bill's very simple portfolio works. Put 40 percent in an intermediate-bond index fund and 10 percent in each of six equity funds. That's all there is to it. Here's the portfolio using exchange traded funds (ETFs).

(40%) Total Bond Market Index – AGG
(10%) Standard & Poor's 500 – SPY or IVV
(10%) Large-Cap Value Index – IVE
(10%) Small-Cap Index – IJR
(10%) Small-Cap Value Index – IJS
(10%) Total International Stock Index – EFA
(10%) REIT Index – ICF or IYR

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  1. Esther,

    Sorry, but I have to draw the line at providing specific investing advice to specific individuals. I think that sort of thing gets uncredentialed people like me into trouble. Good luck with your ETF search!

  2. Avatar photo

    Thanks for catching the error. I've updated the article. Sometime these symbols are too much alike!

    As for putting dates on articles, I'll have to think about that one. I can see why the information would be helpful.

  3. Re the CoffeeHouse Portfolio.
    You have IJR listed as your Small Cap Index holding and also the REIT holding.
    I think you may want IYR as the REIT.

    I wish you would date your articles, just a thought.

    Thanks for the interesting insights.

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