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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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Happy Fourth of July.

Last autumn, while In Philadelphia, I had a chance to tour many of the museums that are dedicated to the independence we now enjoy as a country.  That experience, along with the reading of David McCullough’s “John Adams” offered a renewed appreciation for those who gave their hearts and souls, and in many cases, their lives, so that we can enjoy the freedoms of today. 

Take a moment to read “The Price They Paid” to learn more about the lives of the signers of the Declaration of Independence.

In reading McCullough’s book on John Adams, I marvel at the breadth of life experiences Adams, and others, like Benjamin Franklin and Thomas Jefferson, embraced.  These folks were “getting on with their lives” in a profound manner. 

Learning more about their lives prompts me to reflect on how I am “getting on with my life,” to embrace the world in my own unique way. 

The way I look at it, as Warren Buffett said about himself, “I won the gene-pool lottery.”  I was born a white Caucasian male in the early 1960s, and have lived in arguably the most prosperous time of any country ever.

But am I taking full advantage of this prosperity – and of the freedom of this country, to “get on with my life?” 

In the coming days, I will share a little more.

The Palouse


I receive a surprisingly large number of questions from investors here at the Coffeehouse, asking my opinion on the short term direction of the stock market.  They are usually centered around the following two concerns . . .   

“What is the stock market is going to do? I can’t afford to sustain a loss similar to what I endured in the last downturn.” 


“I have a bunch of money on the sidelines.  I want to allocate most of it to the stock market, but am afraid that, after I do, the stock market is going to plummet.”    

In reflecting on the concerns and anxieties of investors, it is important for ALL of us to remember that bear markets (declines of 20% or more) are a reality of life.  

When someone asks me if I think we might endure another bear market, I am inclined to respond, “I sure hope we have another bear market!”  That means the capital markets are alive and well.  

In reflecting on the Coffeehouse philosophy over the past ten years, and seeing the three principles in action with clients at Soundmark Wealth Management, I am more convinced than ever before that an investor’s goal shouldn’t be to avoid bear markets (a loser’s game anyway).  

It should be to allocate one’s assets to the stock market so that bear markets don’t negatively affect lifestyles in the short run, while allowing for an opportunity to accentuate portfolio returns in the long run. 

When creating a financial plan for yourself, have you ever run a “portfolio fire-drill” to see how a bear market would negatively impact your lifestyle, or cause you to work a few more years before retiring?  

If not, why not?  Next time you review your financial plan, put that fire-drill in there.  When you create an awareness of the impact a bear market will have on your lifestyle and life-decisions, it does two things. 

This exercise allows you to make adjustments to your portfolio if needed.  More importantly, it should reduce your anxiety regarding the next bear market, as you accept the reality of bear markets with a new-found awareness of the minimal impact bear markets will have on your life today.

In the good old days, or at least before 1982, the year the stock market started its 17 year bull run, investing was pretty simple.  Most folks kept their investments in savings accounts, a CD, a corporate or government bond. 

Want to build wealth?  Simple.  Save more than you spend. 

The fact that the stock market was in the midst of a 16 year period of low returns didn’t entice many investors to wade into common stocks back then.  

Fast forward to today.  We are a society that is fairly consumed with what the stock market does on a day to day and week to week basis, with our emotions in tow. 

Let’s take a look at the past two months.  The stock market rallies and everything is cool.  Then the stock market drops, and the world is falling apart.  This past week, the stock market rallies, and everyone’s talking a big bull market through year end 2011. 

Want to build wealth?  Simple.  Predict the weekly swings in the stock market. 

It’s insane. 

The goal for you – the goal for me – is to return to the good old days of building wealth.  That means that we have to put this stock market thing in its place.  Make it work for us in the long run, not drive us bananas in the short run. 

Stay tuned.

Dear Coffeehouse Investor

How did you react a few years ago as the market tanked?  I’d love to hear how you controlled your emotions during such turmoil.

 On a personal level, it has never been much of a problem to control my emotions when it comes to investing.  First, I am 51 years old, love my work, and don’t intend to retire anytime soon – certainly not before age 65. 

Because I have at least another 15 years of saving and investing before I start drawing on my portfolio, what the stock market does over the next couple of years is largely irrelevant to reaching my financial goals (in fact a bear market might benefit me).  How much I save over the next 15 years, when I retire, and my stock/bond allocation at age 65 is relevant. 

Another reason I didn’t get emotional when the market tanked is because I don’t watch my account balance on a daily, weekly, or even monthly basis. 

What good does it do to monitor your account each day?  Nothing.

Studies have shown that when an investor monitors his or her account on a regular basis, the pain of losing money on down days exceeds the joy of making money on up days, causing investors to make unwise decisions at untimely moments to alleviate the pain. 

Working as an advisor at Soundmark Wealth Management and helping clients to control their emotions is a far greater challenge, and a gratifying one at that. 

Tomorrow I will share a few ideas on how you can control your emotions that will greatly benefit your experience (and returns!) over your lifetime of investing.

In addressing the question posed Friday by a 24 year-old Coffeehouse Investor, the following is a recent column I presented to a local newspaper . . .

Start saving now, and try to save at least 5-10% of your paycheck in a tax-deferred retirement account such as an Individual Retirement Account (IRA) or workplace sponsored 401k plan.  If you are like me, saving can be a battle, both emotionally and financially, but I have found that the best kept secret to saving is to do it automatically with a monthly or bi-weekly deduction directly from your paycheck.  With bills to pay, cars to purchase, and homes to own, there will always be countless other interests competing for your paycheck, but if your savings dollars are already spoken for when you get that paycheck, your savings battle is already won! 

What happens if school loans need to be paid off, or other accumulated debt needs to be reduced?  Start saving anyway in your retirement account.  Get that account established with regular contributions.  The tax-deferred compounding over time will prove to be invaluable as you approach your retirement years.  After that, start working at paying down your debt. 

Now that you have established your retirement account, you will be faced with a myriad of investment choices from which to select.  Feeling overwhelmed already? You needn’t be.  Your selection process should be quite simple, and here are a few suggestions to keep you on track.

The most efficient way to build wealth with your investments over time is to invest in low-cost index funds – mutual funds that match the returns of broad market indices over time.  Keep it simple, sticking with stock and bond index funds, and ignore all the esoteric funds like gold, commodity and energy funds for someone else. 

When dividing your retirement dollars between stock and bond index funds, a good “rule of thumb” is to allocate your age into bonds.  This means that a 25 year old would have 25% of their portfolio in bonds, and 75% in stock index funds.

Why index funds?  These investments allow you to maximize your return potential in your portfolio.   This is because most professional stockpickers underperform the stock market averages over time, due to the efficiency of the marketplace. 

An equal, if not greater benefit of owning index funds is that you don’t have to monitor the performance of your investments each week compared to a benchmark, because you “own” the benchmark! 

This allows you to attend to the most important wealth-building tool of all; how much you save.  More importantly, instead of following the stock market, you can use your creative energy to get on with your life, immersed in your new job, pursuing your dreams and making a difference in this world! 

The Vanguard Group, located in Philadelphia, PA, is a leading provider of index funds (  This company offers an abundance of information for investors who want to learn more about the basics of investing, including many of the principles discussed in this column.  In addition to providing retirement account options, its online calculators are useful tools to see if you are saving enough to reach your financial goals.