Coffeehouse
Forty percent in bonds, and the rest in six equal slices of stocks: large, large value, small, small value, international and real estate.
Designed by Bill Schultheis, The Coffeehouse Investor (1999; coffeehouseinvestor.com). His site gives 40% bonds (an intermediate bond index) and 10% each of six stock slices; 'international' is left open.
Before the numbers. A hypothetical backtest, not a forecast: Jun 30, 2000 to Oct 9, 2026 (26.2 years), the window every published portfolio shares. Rebalanced once a year at 10 basis points a trade. The bar is the three-fund at the same stock share, 60%.
Funds younger than the window are extended by older series, each junction validated (how): BIV by VBIIX before 2007-04-10; VB by NAESX before 2004-01-30; VBR by VISVX before 2004-01-30; VNQ by VGSIX before 2004-09-29; VOO by VFINX before 2010-09-09; VTV by VIVAX before 2004-01-30; VXUS by VGTSX before 2011-01-28.
What it holds
| Asset class, and the fund this backtest holds it through | Weight | Fund fee |
|---|---|---|
| Intermediate-term bond index BIV · Vanguard Intermediate-Term Bond |
40% | 0.03% |
| US large-cap blend VOO · Vanguard S&P 500 |
10% | 0.03% |
| US large-cap value VTV · Vanguard Value |
10% | 0.03% |
| US small-cap blend VB · Vanguard Small-Cap |
10% | 0.05% |
| US small-cap value VBR · Vanguard Small-Cap Value |
10% | 0.07% |
| International stocks (total) VXUS · Vanguard Total International Stock |
10% | 0.05% |
| US real estate (REITs) VNQ · Vanguard Real Estate |
10% | 0.13% |
| Together | 100% | 0.05% |
The funds are the ones this backtest uses for each asset class, not a list to buy: any fund tracking the same asset class holds the same thing.
Its record against the three-fund at 60% stocks
| Statistic | Coffeehouse | Three-fund at 60% stocks |
|---|---|---|
| Value per $10,000 | $63,671 | $51,136 |
| Total return | 536.71% | 411.36% |
| Annual return (CAGR) | 7.30% | 6.41% |
| Standard deviation | 10.13% | 9.57% |
| Max drawdown | -38.30% | -35.82% |
| Worst calendar year | -19.13% | -21.15% |
| Longest time underwater | 630 days | 831 days |
| Ulcer Index | 6.85% | 8.03% |
| Sharpe ratio | 0.56 | 0.50 |
| Sortino ratio | 0.81 | 0.73 |
| Ulcer Performance Index | 0.79 | 0.57 |
The crises
| Deepest decline from a prior peak | Coffeehouse | Three-fund at 60% stocks |
|---|---|---|
| 2000–02 | -15.9% | -23.8% |
| 2008 | -38.3% | -35.8% |
| 2020 | -24.2% | -21.3% |
| 2022 | -20.2% | -22.4% |
2000–02 is measured from June 2000, the window's start, after the March peak; 2008 from October 2007 to June 2009; 2020 from February to April; 2022 through 2023.
Calendar years
The first and last years are partial.
The trade-off
Bill Schultheis built it for investors who would rather spend their time elsewhere: index funds, rebalanced once a year, and a spread across kinds of stocks. His site gives the six slices and 40% in an intermediate bond index; he leaves “international” open, and this backtest uses the total international market.
Six stock funds where one would do give tilts toward value and small companies and a slice of real estate, with only a tenth of the portfolio abroad. Over this window it returned 7.30% a year with a worst decline of -38.3%, against 6.41% and -35.8% for the three-fund at 60% stocks.