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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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“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.

The third quarter is in the books, and thank goodness we’ve got that one behind us.

The S&P 500 index fell 14% over the past three months, brought down by several factors, including a slowdown in world economies (most notably China), sovereign debt trouble in Europe, and a challenging political climate in the U.S.

Now for the bad news.  Our one month of summer weather in Seattle has come and gone.

Back to the cold, wet rain, and that is just the way I like it.

It is much easier to work in my woodshop and on my second book when it is cold, wet and rainy.  When it’s sunny, I want to be outside, running, climbing, playing golf.

Working in my garden.

Back to the markets.  I remember in the late 1990s when the stock market was going up 20, 25 and 30% a year.  It was such an exciting time to be an investor with stocks like Microsoft, Intel and Cisco seeming to double each year.

Except that I wasn’t excited.  I was depressed. I knew that I had at least another 25 years to invest for my retirement, and that I was going to be buying stocks at unheard of valuations, which didn’t bode well for future returns.

Fast forward to today.  A quick glance at the weekend’s edition of The Wall Street Journal talks only of gloom and doom.  Greece is still in trouble.  China’s economy is slowing.  The world is headed for a double-dip recession.  The stock market is down 9% for the year, and I am getting excited.

Why?  At these valuations, the future returns on common stocks look pretty good.  Not great, but good.  I have another 15 to 20 years of earnings and savings left in me, and I like the chance to be looking out on the horizon with the opportunity to capture some pretty decent returns with the money I will continue to save and invest for retirement.

Are you taking the same long-term view on your common stocks?


I am a big proponent of “knowing what you own.”

Yet many investors have in their retirement portfolio something they couldn’t begin to explain. 

Stable Value Funds are one of the least understood investments in defined contribution, or “401k” type plans.  Despite that, these funds have accumulated over $540 billion of retirement money.

Stable Value Funds, created in the late 1980s, traditionally pay higher yields than money market funds, and continue to be the “conservative investment” choice by investors. Yet few investors really understand the inner workings of these securities.

This past week, an investor (thanks Rick!) drew my attention to this article written by Bloomberg financial columnist Elizabeth Ody. 

For those of you who own Stable Value Funds in your retirement plan or are considering this investment, take a moment to read it, and increase your fund of knowledge along the way!

Have a great weekend. . .

I have always been a big fan of keeping things simple. 

One of my favorite quotes on this topic was shared by someone who, in an interview upon being hired to a high-level position at Microsoft a few years back, said, “Complexity kills.” 

I try to live by that philosophy in my daily life, especially while working at Soundmark Wealth Management

For instance I don’t ever discuss things like Monte Carlo, Beta, Standard Deviation or Risk Adjusted Returns. 

Risk Adjust Returns?  What’s that?  In my opinion that is something that has been created by somebody with way too much time on their hands that serves no useful purpose in helping investors reach their financial goals.  And yet the Wall Street crowd uses it all the time. 

The simpler I keep things, the more our clients understand all dimensions of their portfolio and financial plan.  The more they understand it, the more they take ownership of it. The more they take ownership of it, the more they stay committed to the Coffeehouse philosophy in both up and down markets. 

The payoff, or reward?  Investors who have stayed committed over the past ten years have generated Coffeehouse-like portfolio returns in a most challenging investment climate.   For them, it wasn’t a “lost decade,” experienced by so many other investors.  It was quite the opposite. 

Speaking of keeping things simple, this past weekend a friend of mine forwarded to me an article that greatly simplifies an investment owned by many people in their 401k retirement plans.  Stay tuned.