When we sit down with folks to discuss investment strategies and financial plans, we don’t analyze Monte Carlo methods or evaluate standard deviations. We ask questions about their lives, their families, and goals for the future. What activities do they enjoy doing, what kind of legacy do they want to leave behind, what are their current financial concerns? We focus on people and their everyday lives.

Jonathan Clements shares a list of his greatest pleasures and derives one common denominator – a person doesn’t need to be wealthy to enjoy these things. We tend to agree. The Coffeehouse Investor book is full of enjoyable experiences including hiking, camping, and baking pies. Our day-to-day routines should be full of small joys, that over the course of a lifetime, create self-fulfillment and happiness.

What is on your greatest pleasures list? Do you know? If you don’t, it’s time to create your own list and start living a life full of joy and leave the Monte Carlos behind.



“After living this routine for many years, I realized on a cold, desolate mountain, somewhere in the middle of nowhere, I was addicted to the clutter of everyday life, and it finally dawned on me that the clutter in my life might be keeping me from pursuing my dreams and living a life I would choose to live if given a chance to do it all over again.

This left me with two options:

Remove some clutter and strike a balance, or pray that someday I would get a second chance.

It’s easy to strike a balance on Denali – the balance of sitting tight in a blinding snowstorm and moving higher when the weather breaks, in search of a goal called the summit. The real challenge we face is to strike a balance in the valleys of our everyday lives, because it’s in the valleys – not on some desolate mountain – that we pursue our dreams, live our lives, and make things happen.” – Bill Schultheis, The Coffeehouse Investor

Can you define the clutter holding you back? Don’t let the noise of Wall Street cloud your valleys, stay focused on what matters the most.

Hedge funds

For some reason, investors are drawn to complicated investing strategies, and over the past twenty years, Hedge funds have been at the top of the “complicated” list.

Hedge funds have traditionally had an aura of “sophistication” about them. A perusal of the daily financial news will highlight comments by some prominent hedge fund manager. Nevertheless, hedge funds have collectively trailed the returns of the Standard & Poor’s 500 Index for eight consecutive years ending 2016.

As this article points out, more and more college endowment funds, realizing that “complicated” means “underperform”, are moving toward the straightforward portfolio principles embraced by the Coffeehouse Investor and Soundmark Wealth Management.


“From a financial planning perspective, the goal isn’t to try to avoid bear markets; it is to choose an allocation between stocks and bonds in such a way that you never have to sell your stocks in a bear market to pay your monthly bills.”

With various world events unfolding, stockholders often wonder how and where to invest in light of these unknowns. However, when investors build portfolios diversified in index and passively managed funds, the “how” and “where” questions often become unsubstantiated. In my latest column, I discuss the advantages of diversification and its performance in light of economic events. I encourage all investors to participate in life’s events, not only with careers, but also with financial practices.



CaptureMyopic what? Yes, you read the title correctly – myopic loss aversion. The term describes a point when you try to avert losing money quickly by selling stocks or other poor knee-jerk reactions that can happen when you watch the daily movements of the market. You can avoid this tendency by simply ignoring the market and reviewing your portfolio only once a year. Bill discusses the advantages to shifting your attention away from the daily ticker tape and gaining control of your wealth building efforts. His advice in 425 Business is simple yet profound in steps to leading a life of fulfillment and greater happiness.


Not that I am following the stock market or anything . . . but a quick glance at the performance of domestic stocks through 2014 reveals that the stock market sold off about 5% to start the year, before quickly retracing that loss through the past 6 trading days, and now, through February 14, shows a slight gain for the year.

As much as The Coffeehouse Investor encourages you to “Build Wealth, Ignore Wall Street and Get On With Your Life,” it seems that many investors continue to do just the opposite. They pay too much attention to the market, and as a result, their emotions push them to make the wrong decisions at the wrong time.  This type of investor behavior, documented by such companies as Dalbar is absolutely destructive in an effort to build long term wealth through a diversified portfolio of stocks and bonds.

Let’s take a closer look at the above, summed up succinctly (if unknowingly) in two separate articles, running side by side, in The Wall Street Journal . . .

On page C4 of the February 7 edition, The WSJ ran the following article titled “Investors Switch From Equity Funds to Bonds,” starting out with . . .

Investors swapped out of U.S. equity funds and into bonds at the fastest clip on record last week, according to Lipper Inc., as they grasped for safety while the stock market swooned.

The irony of this was that another article adjacent to the one mentioned above was titled “Dow’s Rise Is Biggest Advance Of the Year.”

Let’s see. . . . after one of its strongest years ever, the stock market has a slight hiccup, and investors flee it as if another crash was coming, only to miss out on one of the strongest 6 trading days of the past couple years.

How can you avoid this?  A good place to start is to ignore the stock market as much as you can.  It might not be possible to tune it out completely, if you catch a market report on a radio station or nightly news report.

It is possible to ignore (not monitor) your account on a daily basis. You have complete control over that.  By not monitoring it on a daily, or even weekly basis, you are more apt to have common sense (not your emotions) guide you in your portfolio decisions.

In fact why monitor it at all, except maybe twice a year when you consider rebalancing?



Starting with next Wednesday’s webinar (click here to register), the overriding theme of The Coffeehouse Investor in 2014 will be,

“Keep It Simple.”

Ever since I started working on The Coffeehouse Investor over 20 years ago, I have been fairly religious about keeping my story simple, so that investors of all types can understand the message.

Over the years, I have received numerous comments from these same investors acknowledging their appreciation at my attempt to accomplish just that.

Coming from a professional background in the financial services industry (working as a stockbroker for over 10 years at Smith Barney – now Morgan Stanley), I found a little irony in reading that the head of Merrill Lynch’s Wealth Management division has now found the same religion of “simplicity.”   To quote . . .

“We’re going to make sure that we get the right outcome for clients, but do it in a way that’s in plain language, that people can understand, so we once again don’t make the mistake of leading with complexity when our clients are looking for simplicity.”

In the coming weeks and months, I am going to be explaining to you why  things like Monte Carlo simulations, standard deviations, Trinity studies and three factor models are irrelevant (and maybe counterproductive?) to you reaching your long term financial goals.

In place of all that financial jargon, I will reveal to you, using terminology that you can easily understand, why you need to develop a “pass-book savings” mentality to become a successful investor.

I will be sharing with you what you have requested of me: Clarity on achieving financial goals.

This New Year promises to be an exciting one, and I look forward to connecting with you to accomplish just that.  Hope you can tune in to next Wednesday’s webinar. 



Happy New Year from The Coffeehouse Investor – and what a year it has been.  Starting yesterday, December 31st, at about 1:15 p.m. Pacific time, my e-mail inbox started filling up (like clockwork) with requests from investors across the country who wanted to know the year-end Coffeehouse portfolio returns.

So, without further ado . . .

1 year       14.88%

3 year       9.48%  (annualized)

5 year      12.6%

10 year     7.51%

20 year    8.87%

In looking back over the past few years, a few things stand out.

2013 was the fifth consecutive year of positive returns for the portfolio.

Since 2009, the seven-fund portfolio has generated a total return of 81%.

Of the portfolio’s 40% that is allocated to fixed income, this portion generated a negative 2.14% return, showing a decline for the first time since 1999.

Looking at the 20 year annualized return of almost 9%, one could say, “It has been quite a run,” and it has.  But don’t expect anything close to those numbers over the next 20 years.  I have this discussion every day in my work at Soundmark Wealth Management, especially with folks who have been embracing the straightforward approach since 2000 and whose portfolios have generating some eye-catching numbers during that stretch.

Maybe the most impressive number over of the whole lot is 6.32%.  That is the annualized return over the past 6 years that includes the nasty bear market of 2008.  Why do I call attention to this number?  Because it reminds us of the importance of staying the course in the next (inevitable) bear market!

Why are returns likely to be significantly less going forward, why does it matter to you, and what can you do to accentuate those returns?

I invite you to tune in to the next Coffeehouse Investor webinar  on January 22nd at 6:00 p.m. Pacific to learn more!



I’m telling ya, there is no stopping the stock market.  It seems like for the past two years all the prognosticators have been calling for a market correction, and still the market keeps on setting record highs.

Through the end of November, the S&P 500 had recorded eight straight weeks of gains.  According to The Wall Street Journal, it hasn’t had a run like this in over a decade.

But with each passing day that the stock market sets a new record, another market guru seems to come out of the weeds and scare us into thinking the market is overdue for a big correction.  Today the guru happens to be Bill Gross who is telling us to watch out for a stock market bubble.

Here are some thoughts to ponder . . .

First, while the stock market IS overvalued, it isn’t by much, at least according to Vanguard.  With large cap stocks sporting a price-to-earnings ratio of 17.6, this is hardly bubble territory.

The stock market has had quite a run, up over 20% so far this year.  Time to take profits? Maybe, maybe not.  According to Jeffrey Keintop, chief market strategist at LPL Financial, the average return on common stocks after a yearly gain of 20-25%, is 13% the following year.

Oh, and one more thing . . .

Why all the fuss over a market drop?  Isn’t that what stock markets are supposed to do every once in a while.  The stock market is two steps forward, one step back. Always has been, always will be.  Sometimes the steps are big, sometime the steps are small.

If you are squirming over a potential market drop, it means one of two things. Either you need to get on with your life and ignore the market, or reallocate dollars out of the market so that you don’t need to sell stocks for living purposes during the next market decline (and then get on with your life.)

That is where your financial plan comes in handy.

What matters most when integrating all this stuff into your portfolio and into your life, is not what the stock market does over the next 4 months, but what it does over the next 10-15 years.  Almost assuredly, stocks will significantly outperform bonds during this stretch, and good reason to have a healthy chunk in your portfolio today.

With the city of Detroit falling into bankruptcy, there is a lot of discussion on what will happen to the pension benefits of city employees.

But Detroit isn’t the only municipality that is struggling to meet its pension obligations.  It seems to be endemic across our country’s state and local landscape.

For the most part, state and local municipalities are saving too little caused in part by rates of return on projections that are too high.  This causes future pension balances to be overinflated base on what is likely to unfold.

As individual investors, we can learn from the pension struggles of municipalities.  In my work as an advisor with Soundmark Wealth Management, I address these issues with folks every day.

It is important to keep portfolio growth expectations in check when putting together your financial plan.  Using return expectations of 7% or 8% can provide for a rosy outlook on your worksheet projections, but this will only require you to save substantially more than you anticipated, closer to retirement, if the returns don’t come to pass.