The Schultheis Three-Principle Passive Wealth System
Build wealth through three simple principles while ignoring Wall Street
This system distills successful investing into three core principles. First asset allocation: divide between stocks and bonds based on time horizon and risk tolerance since this single decision determines over 90% of long-term performance. Second approximate the stock market average using low-cost index funds because most professional managers fail to beat the index and fees compound devastatingly over decades. Third save regularly regardless of market conditions because time in the market matters far more than timing. The beauty is radical simplicity: once set up you can ignore Wall Street and focus on family career and fulfillment.
- Asset allocation determines 90% of performance
- Beating the market is a losing game
- Index funds outperform most active funds
- Consistent saving beats brilliant investing
- Time in market beats timing
- Set your asset allocationBased on age risk tolerance and time horizon decide stock versus bond percentages. This is the most important investment decision determining the vast majority of long-term returns and risk.
- Build with index fundsUse a mix of low-cost index funds covering large-cap small-cap and international stocks split across categories to capture returns from different market segments. Never pick individual stocks.
- Automate contributionsEstablish automatic monthly transfers into investment accounts. Consistency matters more than amount. Monthly investing naturally buys more shares when prices are low through dollar-cost averaging.
- Annual rebalance then ignoreOnce yearly check if allocation drifted from target and rebalance by selling winners and buying lagging asset class. This forces selling high and buying low. Beyond this ignore portfolio completely.
Schultheis contrasts an index investor who sets up and ignores portfolio with an active trader spending hours researching and trading. Over two decades the index investor low costs and consistent contributions significantly outperform the active approach.
Schultheis uses climbing Mt. Rainier to illustrate perspective. At 14,410 feet he could see the earth curve. This long-range view parallels how investors should view portfolios over decades rather than from daily market noise at ground level.
Bill Schultheis spent thirteen years working with retail and institutional accounts at a major Wall Street firm in Seattle before taking a break. During conversations across the Pacific Northwest he discovered many people simply wanted a successful portfolio without spending energy on it. These people passionately involved with families and careers needed a radically different story than Wall Street traditional narrative of active management.