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The Coffeehouse Investor newsletter provides you with brief bursts of inspiration in your journey toward simplifying your investment decisions and increasing your investment returns!


The Coffeehouse Book

The New Coffeehouse Investor Book

The Coffeehouse Investor

How to Build Wealth, Ignore Wall Street & Get On With Your life by Bill Schultheis

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Earlier this week I had a chance to share some thoughts on investing on National Public Radio’s local station 88.5 KPLU , with “All Things Considered” host, Dave Meyer. 

Hope you enjoy!

Every once in a while I come across an article, or column that makes me think twice about what is unfolding in this country of ours. 

I am pretty “middle of the road” when it comes to political beliefs, and always try to see and understand, if not always agree on, the energy behind a nation-wide movement, such as the Tea Party, or the current, Occupy Wall Street. 

New York Times columnist David Brooks wrote a compelling piece this morning titled, The Milquetoast Radicals.” 

Give it a read, and share your comments. . .


Pursuit of Performance.  It is the American way.

Or so it seems, at least when it comes to investing.

I am sure there are a few studies out there showing that money flows into mutual funds that have good track records, and flows out of funds that don’t.

And so, there is an enormous incentive for mutual fund managers to “beat the market” with the funds they manage.

When it comes to making portfolio choices, individual investors also have a tendency to get caught up in this same pursuit of performance, egged on by the financial media who glorifies a “beat the market” mentality. 

For instance, a week ago last Saturday, The Wall Street Journal ran an article titled, “Beat The Market, With Less Risk.”

Another article in the same paper highlighted someone’s book that included the tagline, “. . . the Indicators Smart Investors Watch to Beat the Market.”  

Promoting the notion of “Beating” the market is thriving, as well it should be – hey, this is America.

But for individual investors, the question should not be, “Which fund should I own that will outperform others?”

The question should be, “Which investment strategy and funds can I stick with, in good times and bad, throughout my investing lifetime?”

This is especially important for Coffeehouse Investors, in part because there is an overwhelming number of new index funds appearing on the investment landscape.  The urge to switch from one strategy to another can be tempting, especially during periods of market turmoil.   



“Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition.”

In an article and moving tribute to Steve Jobs, the Apple co-founder was quoted in sharing his thoughts on life.  Profound words from an amazing man. 

One of the reasons I looked up to Mr. Jobs as an important figure was his ability to keep things simple.

In fact, in a recent blog posting, I wrote about this very subject.

Over the past 13 years I have tried my best to integrate technology, and the personal computer, into my efforts at The Coffeehouse Investor.    

Back in 1996 or 1997, just as the internet was starting to become a common presence in our lives, I remember thinking to myself, “Wow! I can use this internet thing to connect with people from all across the nation and around the world to introduce The Coffeehouse philosophy.”

And so, I signed up for a class at the local college to learn HTML and how to build a web site, which I did, using Microsoft’s Frontpage software. 

For eight years I posted my weekly column on that web site, starting back in 1999, which probably makes me one of the original bloggers of financial advice.   

But technology doesn’t come easy to me, and I have spent many a moments over the past 13 years gnashing my teeth, muttering to myself, “Why do they make this stuff so complicated?” 

For instance, even now, when I try to download pictures taken on my Windows7 phone, it seems like I have to jump through 6 hurdles before I get the job done.

But I also remember buying my first iPod, and purchasing some songs on iTunes. Next I wanted to burn a CD to listen to these tunes in my car.  I was so frustrated trying to burn that CD, expecting to have to go through 6 steps to get the job done, that I finally ended up taking my PC into the local Apple store for guidance in walking me through those 6 steps. 

The Apple employee heard me out, then smiled, pointed to a button on iTunes, and said, “See that little button that says “Burn CD”?  Try clicking that.   

And so I did. 

Steve Jobs spirit lives on in all whose lives he touched, including mine, for his gift of keeping things simple.

If you have followed The Coffeehouse Investor for any part of the past 13 years, you probably caught on pretty quickly that I am an ardent fan of using “index” funds to build portfolios.

I am a fan, but not for the reasons you might think.  Let me explain.

There are at least two components to performance in your portfolio compared to a benchmark; investment performance and investor performance.  

Investment performance is when the investment you own, let’s say Janus Growth Fund, performs better or worse than the S&P 500 Index Fund over the next ten years.

Investor performance is determined by your own actions over the next ten years.  Are you going to stay the course with your Janus Growth Fund, or are you going to “go to the sidelines” during the next bear market, or switch it to another fund in the event Janus Growth Fund underperforms for a stretch? 

Returning to “Investment Performance” for a moment, statistics show that, because the vast majority of actively managed funds underperform the market, you are better off owning an index fund to maximize your return chances in a particular asset class, or dimension of the market. 

If you choose an actively managed fund instead, from a statistical standpoint, I suspect you would find that you underperform a benchmark by the costs of the fund, including the stated cost (expense ratio), and hidden costs, like trading expenses. 

In my opinion the cost incurred by an actively managed fund pales in comparison to the “Investor” cost borne out by the underperformance I  experience by making the wrong decisions over the next ten years by not sticking with my chosen investment, in this case, “Janus Growth Fund.”

And so, first and foremost I embrace “index” funds because it minimizes, if not completely eliminates, the “Investor” cost component to my portfolio returns.

Why is this important?  I came across an article in this weekend’s The Wall Street Journal that reminded me yet again why I am such a strong advocate of the three Coffeehouse principles. 

Stay tuned.