The spirit lingers! Every newsstand is lit up like a Christmas tree with bright, cheery year-end magazines oozing with optimism. Most have colorful covers and upbeat titles like "Where to Put Your Money in 2006!"

Trouble is, after looking at my favorites, I'm totally confused. And I'll bet you are too. BusinessWeek, Smart Money, Fortune, Kiplinger's, Money and Forbes. Yes, they are entertaining, but not much help. Why? Too many alternatives. Too many contradictions. Too much happy-talk. Like a big Christmas dinner, you eat too much, get indigestion.

Big questions haunt you: Will large-caps really outperform small? Growth beat value? Should you dump housing? Bet on tech? Are ETFs better than mutual funds? And what about emerging markets? Forty percent? In Japan, Korea, China? Or India? Hedge funds? Gold? Cash or inflation-protected bonds? Six magazines, a thousand pages -- tip saturation, indigestion.

Throw them away! Seriously, you can't possibly make wise picks from the hundreds of so-called "recommendations" in these "Where to Invest in 2006" oracles. Remember, most people only need 10 or so investments anyway. Don't waste your time.

Look Past the Tinsel, Glitter and Glitz

Seriously, how good are you at picking from tens of thousands of stocks, bonds and funds out there? Not long ago I calculated that if you stay up on the news in the press, magazines, online and cable, you'll be exposed to at least 42,000 "tips" every year from pundits and ads. They're just confusing us, our brains can't process this info overload. You may as well throw darts at the magazines.

Remember a year ago? Same resolve, same optimism, same futile "picking." Yet bad news, S&P 500 returns are less than 7% (before taxes!). The Dow is still in negative territory six years after the January 2000 peak.

And the warning signs suggest a recession and market collapse: Out-of-control deficits, energy costs, understated P/E ratios, huge insider sales, underfunded pensions -- the list goes on. And yet "hope springs eternal," as the guru-optimists participate in this ancient year-end ritual of forecasting another record-breaking market next year, every year.

Yes, it's overwhelming. So let's you and me head over to our favorite coffeehouse, relax over a latte and muffin. I'll tell you how you can set up your portfolio now, today. How to set it and forget it for 2006. So you can go live your life. Remember, you've got more to do with your life than waste time picking stocks, bonds and funds using the endless flood of self-serving and misleading tips from Wall Street gurus, fund managers and commissioned brokers.

Decaf Latte Beats Triple Espresso

About this time every year I figure it's time to catch up with Bill Schultheis at his virtual coffeehouse. Actually, he reminded me it was time in his winter newsletter. Bill's simple strategies caught my eye several years ago and became one of our favorite "lazy portfolios."

In the go-go days of 1999, when everyone was betting on high-flying tech and dot-coms, Bill (a reformed Salomon Smith Barney broker) launched his famous Coffeehouse Portfolio with the publication of "The Coffeehouse Investor."

"Boring" screamed Wall Street! Decaf latte in a triple-espresso world. Remember, investors expected 100% plus returns in 1999. And more than a hundred funds delivered. We were convinced we'd all retire rich and early. Wall Street laughed at Bill's quaint Coffeehouse Portfolio with 40% of his asset allocation "wasted" on low-return bond funds, when tech equities were returning 100% to more than 300%!

Back in 1999 the Coffeehouse was a joke. But the laughing stopped in the bear years of 2000-2002. It beat the S&P 500 by 15 percentage points each of the three bear years, while hundreds of dot-coms filed for bankruptcy, while the Nasdaq dropped 80% and while the stock market lost $8 trillion. But, of course, Wall Street wants you to forget all that.

The truth is, folks, the Coffeehouse Portfolio is a winner in bull and bear markets. And, get this: It wins with no trading, no rebalancing, no tinkering with asset allocations. And it still is one of the great performing "lazy portfolios" we've been tracking, outperforming Wall Street hotshots who've been losing your money for years.

Seriously, according to Schultheis, as of mid-December, the Coffeehouse Portfolio has returned 6.88% year to date, beating the S&P 500's 4.57% and the Dow Jones Industrial Average's 0.86%. And even more significant, the Coffeehouse returns averaged 7.65% annually the past five years, beating the S&P 500's 0.38% and the Dow's 0.86%. So keep that in mind the next time you optimists think you can win by playing Wall Street's "beat the market" game.

How to Win in Both Bull and Bear Markets

Here's how the super-simple seven-fund Coffeehouse Portfolio works: Asset allocation is just 40% in an intermediate bond index fund and 10% in each of six equity index funds. It's that simple. Here's what it looks like with seven no-load Vanguard index funds:

(40%) Total Bond Market Index (VBMFX)
(10%) Vanguard 500 Index (VFINX)
(10%) Large-Cap Value Index (VIVAX)
(10%) Small-Cap Index (NAESX)
(10%) Small-Cap Value Index (VISVX)
(10%) Total International Stock Index (VGTSX)
(10%) REIT Index (VGSIX)

But this strategy must be "too simple." Why? Less than 8% of investors use indexing. The rest get conned into playing Wall Street's game, end up losing and just make Wall Street richer. Yes, lose! Research studies consistently prove that investors rarely beat the market.

Bottom line: The Coffeehouse Portfolio is clearly one of the safest of the "Lazy Portfolios" we've been tracking. It beat America's blue-chips the past five years during the historic 2000-2005 bull/bear/bull cycle by a total of more than 30 percentage points.

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