Coffeehouse Portfolio
Diversified value tilt with a 60/40 foundation
Philosophy
Build wealth through a diversified, low-cost portfolio and ignore the noise of Wall Street.
Origin
1999 — Published in Schultheis' 1999 book, splitting equities across six sub-asset classes at 10% each.
Key Principles
- ✓ 40% bonds for stability, 60% equities split across six sub-classes
- ✓ Equal weighting across equity sub-classes avoids concentration risk
- ✓ REITs add real estate diversification within the equity sleeve
- ✓ Ignore market forecasts — invest, rebalance, and get on with your life
Target Allocation
| Asset | Category | Weight |
|---|---|---|
| Large-Cap Blend | Equity | 10% |
| Large-Cap Value | Equity | 10% |
| Small-Cap Blend | Equity | 10% |
| Small-Cap Value | Equity | 10% |
| International Stocks | Equity | 10% |
| REITs | Real Estate | 10% |
| US Total Bond Market (BND) | Bonds | 40% |
Advantages
- Strong value tilt may boost long-term returns
- REIT exposure adds real estate diversification
- 40% bond allocation provides meaningful stability
- Equal-weight equity slices prevent single-style dominance
Considerations
- Seven funds is more complex to rebalance
- Value stocks can underperform growth for extended periods
- No international bond or commodity exposure
- Small-cap value tilt increases volatility relative to 60/40
Best For
Investors who want a balanced 60/40 foundation with broader equity diversification.
About the Author
Bill Schultheis spent 13 years as a financial advisor at Smith Barney before writing The Coffeehouse Investor.
Frequently Asked Questions
What is the Coffeehouse Portfolio?
The Coffeehouse Portfolio, created by Bill Schultheis in 1999, uses a 60/40 foundation but splits the equity portion across six sub-classes at 10% each (large blend, large value, small blend, small value, international, REITs), with 40% in bonds.
Why does the Coffeehouse Portfolio include REITs?
REITs (Real Estate Investment Trusts) add real estate exposure as a distinct asset class within the equity sleeve. They provide diversification benefits and potential inflation protection that pure stock-and-bond portfolios lack.
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