Description

The Coffeehouse Portfolio was popularized by financial advisor Bill Schultheis in the best-selling book The Coffeehouse Investor. It is part of what we could call "Lazy Portfolios".

The Coffeehouse Portfolio consists of 7 funds. It starts with a 60/40 stock bond allocation. The 60% in stocks is allocated to a large-cap fund, a large-cap value fund, a small-cap fund, a small-cap value fund, an international fund, and a REIT fund.

Asset Class Portfolio Weight

Large Cap 10%
Large Cap Value 10%
Small Cap 10%
Small Cap Value 10%
International 10%
REIT 10%
Total Bond 40%

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:
  • Looking at the total return, or performance of 41.7% in the last 5 years of Coffeehouse Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (115.1%)
  • Compared with SPY (71.1%) in the period of the last 3 years, the total return, or performance of 27% is lower, thus worse.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (16.6%) in the period of the last 5 years, the annual performance (CAGR) of 7.2% of Coffeehouse Portfolio is lower, thus worse.
  • Compared with SPY (19.7%) in the period of the last 3 years, the annual return (CAGR) of 8.3% is lower, thus worse.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Using this definition on our asset we see for example:
  • The historical 30 days volatility over 5 years of Coffeehouse Portfolio is 10.5%, which is smaller, thus better compared to the benchmark SPY (17.5%) in the same period.
  • During the last 3 years, the 30 days standard deviation is 10.7%, which is smaller, thus better than the value of 17.5% from the benchmark.

DownVol:

'Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Applying this definition to our asset in some examples:
  • The downside volatility over 5 years of Coffeehouse Portfolio is 7.3%, which is lower, thus better compared to the benchmark SPY (12.1%) in the same period.
  • Looking at downside deviation in of 7.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (11.5%).

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 0.45 in the last 5 years of Coffeehouse Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (0.8)
  • During the last 3 years, the risk / return profile (Sharpe) is 0.54, which is lower, thus worse than the value of 0.98 from the benchmark.

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Which means for our asset as example:
  • Compared with the benchmark SPY (1.17) in the period of the last 5 years, the ratio of annual return and downside deviation of 0.65 of Coffeehouse Portfolio is lower, thus worse.
  • Compared with SPY (1.49) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.81 is lower, thus worse.

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:
  • Looking at the Ulcer Index of 7.62 in the last 5 years of Coffeehouse Portfolio, we see it is relatively lower, thus better in comparison to the benchmark SPY (8.48 )
  • Compared with SPY (5.31 ) in the period of the last 3 years, the Downside risk index of 4.18 is lower, thus better.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Which means for our asset as example:
  • The maximum reduction from previous high over 5 years of Coffeehouse Portfolio is -20.1 days, which is higher, thus better compared to the benchmark SPY (-24.5 days) in the same period.
  • Compared with SPY (-18.8 days) in the period of the last 3 years, the maximum reduction from previous high of -12.8 days is larger, thus better.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs) in days.'

Applying this definition to our asset in some examples:
  • Looking at the maximum days under water of 630 days in the last 5 years of Coffeehouse Portfolio, we see it is relatively larger, thus worse in comparison to the benchmark SPY (488 days)
  • Looking at maximum time in days below previous high water mark in of 142 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (199 days).

AveDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Which means for our asset as example:
  • Looking at the average time in days below previous high water mark of 185 days in the last 5 years of Coffeehouse Portfolio, we see it is relatively higher, thus worse in comparison to the benchmark SPY (120 days)
  • During the last 3 years, the average time in days below previous high water mark is 44 days, which is lower, thus better than the value of 47 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Coffeehouse Portfolio are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.