The Coffeehouse Three-Principle Investing System
Build wealth through three simple principles while ignoring Wall Street
The Coffeehouse Investor system distills successful investing into three core principles. First asset allocation: divide your portfolio between stocks and bonds based on your time horizon and risk tolerance as this single decision determines over 90% of your long-term performance. Second approximate the stock market average by using low-cost index funds rather than trying to pick winners because most professional fund managers fail to beat the index over time and fees compound devastatingly over decades. Third save regularly by consistently investing a portion of your income regardless of market conditions because time in the market matters far more than timing the market. The beauty is radical simplicity: once set up you can literally ignore Wall Street and focus on things that truly matter like family career and personal fulfillment.
- Asset allocation determines over 90% of long-term portfolio performance
- Trying to beat the market is a losing game for most investors
- Low-cost index funds outperform most active funds over time
- Consistent saving matters more than brilliant investing
- Time in the market beats timing the market
- Determine your asset allocationBased on your age risk tolerance and time horizon decide what percentage should be in stocks versus bonds. This is the most important investment decision you will ever make as it determines the vast majority of your long-term returns and risk level.
- Build a diversified portfolio using index fundsFor the stock portion use a mix of low-cost index funds covering large-cap small-cap and international stocks. Split across several categories to capture returns from different market segments. Never pick individual stocks or actively managed funds.
- Set up automatic regular contributionsEstablish automatic monthly transfers into your investment accounts. The amount matters less than consistency. By investing the same amount every month you naturally buy more shares when prices are low and fewer when prices are high through dollar-cost averaging.
- Rebalance annually and ignore everything elseOnce per year check whether your allocation has drifted from target. If stocks grew larger than target sell some and buy bonds and vice versa. This forces you to sell high and buy low. Beyond this annual check ignore your portfolio entirely.
Schultheis contrasts a simple index fund investor who sets up a portfolio and ignores Wall Street with an active trader who spends hours researching and trading. Over 20 years the index investor's low costs and consistent contributions outperform the active approach.
Schultheis uses climbing Mt. Rainier to illustrate perspective. At 14,410 feet he could see the curve of the earth. This long-range view parallels how investors should view portfolios over decades not from daily noise at ground level.
Bill Schultheis spent thirteen years working with retail and institutional accounts at a major Wall Street firm in Seattle before deciding to take a break. During conversations with people across the Pacific Northwest he discovered that for every person caught up in Wall Street's daily drama there were many more who simply wanted a successful portfolio without spending any energy on it. These were people passionately involved with their families and careers who needed a radically different investment story than Wall Street's traditional narrative of active management.