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.'

Using this definition on our asset we see for example:
  • Looking at the total return, or increase in value of 37.6% in the last 5 years of Coffeehouse Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (106.2%)
  • During the last 3 years, the total return is 27.2%, which is lower, thus worse than the value of 69.9% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Looking at the compounded annual growth rate (CAGR) of 6.6% in the last 5 years of Coffeehouse Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (15.6%)
  • Looking at compounded annual growth rate (CAGR) in of 8.4% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (19.5%).

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Which means for our asset as example:
  • The historical 30 days volatility over 5 years of Coffeehouse Portfolio is 10.6%, which is lower, thus better compared to the benchmark SPY (17.6%) in the same period.
  • Compared with SPY (17.7%) in the period of the last 3 years, the 30 days standard deviation of 10.8% is lower, thus better.

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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.'

Which means for our asset as example:
  • The downside deviation over 5 years of Coffeehouse Portfolio is 7.4%, which is lower, thus better compared to the benchmark SPY (12.2%) in the same period.
  • Looking at downside risk in of 7.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (11.6%).

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.74) in the period of the last 5 years, the Sharpe Ratio of 0.39 of Coffeehouse Portfolio is lower, thus worse.
  • Compared with SPY (0.96) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.55 is lower, thus worse.

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:
  • Compared with the benchmark SPY (1.08) in the period of the last 5 years, the excess return divided by the downside deviation of 0.56 of Coffeehouse Portfolio is lower, thus worse.
  • During the last 3 years, the excess return divided by the downside deviation is 0.81, which is lower, thus worse than the value of 1.46 from the benchmark.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:
  • The Downside risk index over 5 years of Coffeehouse Portfolio is 7.62 , which is lower, thus better compared to the benchmark SPY (8.48 ) in the same period.
  • Compared with SPY (5.32 ) in the period of the last 3 years, the Downside risk index of 4.19 is smaller, thus better.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:
  • The maximum drop from peak to valley 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.
  • During the last 3 years, the maximum DrawDown is -12.8 days, which is greater, thus better than the value of -18.8 days from the benchmark.

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 below previous high of 630 days in the last 5 years of Coffeehouse Portfolio, we see it is relatively greater, thus worse in comparison to the benchmark SPY (488 days)
  • Compared with SPY (199 days) in the period of the last 3 years, the maximum days under water of 135 days is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (120 days) in the period of the last 5 years, the average time in days below previous high water mark of 184 days of Coffeehouse Portfolio is larger, thus worse.
  • Looking at average days below previous high in of 43 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (46 days).

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.