Coffee House Lazy Portfolio And Its Tactical Portfolio Version

Includes: BND, VB, VBR, VEU, VNQ, VTI, VTV
by: MyPlanIQ

Bill Schultheis' "Coffeehouse" portfolio is a 7-fund portfolio popularized by his book. This portfolio is a moderate risk portfolio with 40% in an intermediate bond fund and in equal weight 10% in 5 risk stock asset classes.

Large Blend 10%

Large Value 10%

Small Blend 10%

Small Value 10%

Total International 10%

REIT 10%

Intermediate Term Bond Index 40%

More information can be found in The Coffeehouse Investor. Paul Farrell at also maintained this portfolio on his lazy portfolio page.

For retirement plan investors, it is thus interesting to adopt the above lazy portfolio in one's IRA or taxable account. However more and more active investors are concerned about the economic 'structural' problems including high private household's debts, national debts and our long term work force or next generation competitiveness. The behavior of stock markets in the last several weeks is a reflection on this.

In such an environment, it is key to have proper asset allocation in place for one's retirement investment portfolios. In addition to lazy or strategic asset allocation, one can look into tactical asset allocation. We use the following ETFs to form an investment plan The Coffee House Lazy Portfolio ETF Version:

Asset Class Ticker Name
Intermediate-Term Bond BND Vanguard Total Bond Market ETF
SMALL BLEND VB Vanguard Small Cap ETF
SMALL VALUE VBR Vanguard Small Cap Value ETF
LARGE BLEND VTI Vanguard Total Stock Market ETF
Foreign Large Blend VEU Vanguard FTSE All-World ex-US ETF

The Coffee House Lazy Portfolio ETF Version's 401K plan consists of 7 funds. These funds enable participants to gain exposure to 4 major assets: U.S. Equity, Foreign Equity, REITs, Fixed Income.

As of Sep 8, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:

Diversification -- Rated as poor (9%)

Fund Quality -- Rated as above average (70%)

Portfolio Building -- Rated as average (54%)

Overall Rating: average (45%)

Two model portfolios are constructed: one is based on strategic asset allocation and the other is based on tactical asset allocation. The following shows the performance comparison for the two model portfolios, compared with a standard four core asset ETF plan.

Performance chart (as of Sep 8, 2011)

[Click to enlarge]

Performance table (as of Sep 8, 2011)

Currently Commodities, International Bonds and Fixed Income are doing well. Unfortnately, Coffee House plan only allows exposure to the fixed income (bond) at the moment to take advantage of the current trend.

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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