The Coffeehouse portfolio is an indexed seven-fund portfolio popularized by financial planner and author Bill Schultheis. The portfolio holds the following asset classes:
- US large cap stocks
- US large value stocks
- US small cap stocks
- US small cap value stocks
- US REITS
- International stocks
- US intermediate bonds
The portfolio has a 60% equity/40% fixed income allocation and allocates a 10% slice to the six equity investments.
The Coffeehouse portfolio tilts the US stock allocation towards value stocks by devoting an equal allocation to large cap and small cap market index funds with large cap and small cap value index funds.
The portfolio uses a total international index fund for the international stock allocation, and a US intermediate-term bond index fund for bond allocations.
See the chart below (click image to enlarge).
The table below shows Coffeehouse portfolio allocations using Vanguard index funds and exchange-traded funds The portfolio can be implemented with index funds offered by other fund providers or exchange-traded funds.
Vanguard investors with larger portfolios can also use lower cost admiral shares for fund allocations.
Vanguard fund allocations
|Asset class||Vanguard investor share||Expense ratio||Vanguard admiral share||Expense ratio||Vanguard ETF||Expense ratio|
|US large cap||VFNIX||0.17%||VFIAX||0.05%||V00||0.05%|
|US large value||VIVAX||0.24%||VVIAX||0.10%||VTV||0.10%|
|US small cap||NAESX||0.24%||VSMAX||0.10%||VB||0.10%|
|US small value||VISVX||0.24%||VSIAX||0.10%||VBR||0.10%|
The returns history for an implemented Coffeehouse portfolio, included in the table below, consists of the performance history of Vanguard investor share index funds The second table provides compound returns and standard deviation of returns for 3 year, 5 year, 10 year, 15 year, 20 year, and full period returns.
The returns period includes portfolio performance during the two bear markets in the 2000 -2010 decade, as well as subsequent recoveries. Keep in mind that past performance does not forecast future performance.
|Term||CAGR return||Standard deviation|
Many roads to Dublin
A commonplace principle of prudent investing is to adopt and stick to a long-term diversified investment program. The tables below show results for the Coffeehouse portfolio along with 60/40 allocations for the popular three-fund and core four portfolios.
|Core four CAGR||8.86%||11.92%||7.18%||6.26%|
|Three-fund standard deviation||7.75%||7.44%||11.61%||11.88%|
|Core standard deviation||6.79%||7.11%||11.60%||11.48%|
|Coffeehouse standard deviation||6.71%||6.70%||11.57%||10.92%|
See Coffeehouse portfolio, google drive spreadsheet for return computations.