I owned Fuss's LSBRX 2006-2013, I held on and even added to it in 2008, so I did well in the end, but I wanted my bond fund to provide ballast, to go up when my stocks when down so I could take cash from it instead of having to add to it. It's not Fuss's fault that his fund didn't act that way, it was my fault for not understanding the fund.
I sold my stake in LSBRX and bought SUBFX. So far that has been a poor decision, but my hope is that SUBFX will hold up well if the markets crash, and that's what I want from a bond fund. (I'm 85% equities, so I really need the bond funds in my portfolio to be bulletproof.)
Then again, with its negative duration, I am beginning to fear that SUBFX will not provide much protection if the economy stalls and interest rates drop yet further, though I suppose its 50% cash stake will provide a cushion. Can anyone who understands bonds better than me comment on this?

FYI: What if you were the World’s Greatest Market Timer?
Regards,
Ted
http://www.washingtonpost.com/business/barry-ritholtz-time-not-timing-is-key-to-investing-success/2014/08/21/b3443d9a-27d2-11e4-86ca-6f03cbd15c1a_story.html

........ but I think there will be an entry point in the next 6 months that even I can recognize.
.......one-time contribution to my new grandchild's retirement fund. $3K now presumably produces over $4M at 70, if it's shifted into a Roth when she starts earning money.

Yeah, the math is pretty compelling. Assuming any taxable distributions are paid from outside the account. Here's what happens to a one time investment of $3,000 assuming a rate of return of 10%, allowing for 70 years of compounding:
$3,000 invested at 10.0% annually for 70 years yields: $2,369,241
Interesting, that $3,00 is just the amount needed to invest in the Vanguard Total Stock Market Index Fund.......and imagine if the person holds that investment for 70 years. [Actually, you can invest in VTI, the etf version, with no minimum].
Regarding "I think there will be an entry point in the next 6 months".....just wondering what gives you this confidence of what will happen in the next 6 months? How much of a drop are you expecting, and how much would be an acceptable entry point for you?

@Bee, Read that good article a while back. There was another WealthTrack interview with Dan Fuss earlier this year (I believe) that he explained the terrible loss in 2008 (-22% versus LB Agg Bond Index has a +5% gain). During the crisis, risky asset including junk bonds were sold indiscriminatively. Fundamentally the default rate of junk bonds has not worsen in that period, and his holdings continued to pad their dividends. His fund nevertheless has to report the depressed bond price at the end of the day. Dan went on to say he bought more in that period and wished he has more cash. For those who stayed with The fund, it returned 36% in 2009 that far outpaced vast majority of bond funds.
Also I am not a fan of unconstrainded funds - it is another term for bond funds with flexible mandates.

The new Unconstrained funds everyone is jumping into?
Considering we are in a rising interest rate environment, which bonds if any will do better that others? What if you are close to or in retirement age? What to do.

The new unconstrained bond funds are in response to the fact that interest rates have gone down since September 1981, and they can't go down forever. We have been in a bull market for bonds lasting 33 years. On September 8, 1981, the 10-Year Treasury had a yield of 15.59%. Those who bought and held it made 15.59% each and every year for 10 years, risk free, then got their full principal back.
https://research.stlouisfed.org/fred2/series/DGS10
The same 10-Year Treasury has a yield of 2.4% today.
The unconstrained funds typically have a lower duration, with the express purpose of decreasing interest rate sensitivity. A bond fund with a duration of 6 years will experience a 12% loss of NAV if the corresponding interest rates of those bonds rise 2%.
Add in the yield to that loss of NAV and the total return is calculated.
Full disclosure: I have no interest rate forecast nor will I ever have one.
In exchange for interest rate risk, the unconstrained bond funds, flexible income funds, "tactical income funds", or whatever you wish to call them, take on more credit risk.
Why do they have to take on more credit risk as a result of decreasing their duration/maturity? Because very high quality bonds, such as Treasuries, have such a low yield, that when you shorten the maturity of the bonds and subtract the expense ratio of the active bond fund, you are not left with much yield. Therefore, bank loans and junk bonds and other high credit risk securities enter into the portfolios of these mutual funds.

I'm in the process of a 401k to IRA rollover now. I put 25% towards my equity goal to start. Plan to DCA over the next 6 months or so

MikeM, not sure what you are referring to
Any money that was in equities in the 401k would typically just be put into equities in the IRA as a lateral transfer, lump summed in, no?
Dollar cost averaging in this case applies to money that has not been in equities but will be put there now.
Another example is selling one actively managed equity mutual fund and doing a lateral lump sum transfer to a different equity mutual fund.

Professor Robert Shiller:
http://www.cnbc.com/id/101930841
30 year TIPS were negative in 2012......'that looks a little bit like a bubble'
'the whole thing might correct, both stocks and bonds'
"The bond market is looking expensive"
"how can it be that everything is expensive....but it can be"
Professor Jeremy Siegel:
http://www.cnbc.com/id/101931511
The fair market value of the Dow is approx. 19,000
Current 2014 P/E is 16.5, which is very reasonable considering low interest rates, low inflation and good corporate earnings.

Concentrating on the topic of owning bond funds in a rising rate environment; there are plenty of fear stories out there that talk of armeggedon and losing your money. This is fear mongering to me. I see the downside at the beginning of the rate rise but managers would adjust and the comeback would even things out. Nobody talks of the total return of bond funds in these circumstances. The focus is on the principle or the NAV.
A bigger question might be how stock funds will react in the same environment? Will the comeback be different? The thread about the Callan tables seems to answer these questions.
Am I looking at this wrong?

@JohnChisum, the whole issue of fixed income investing in a rising rate environment is very important. I think we should talk about it more on MFO. And, 'fixed income investing in today's environment'. Even Dan Fuss and the Loomis Sayles people feel that 'the 30 year bull market in bonds is now over', and significant adjustments to bond investing need to be made. The manager of Templeton Global Bond was on Connie Mack's TV show WealthTrack in June 2014. Check out the first 8 minutes or so for his bearish US bonds thesis:

He thinks interest rates could rise in a short period of time.
I have no idea personally. Let me play devil's advocate for the bond bear case:
Let's say interest rates rise 2% over one year. Take a bond fund with a duration of 6 and a yield of 2.5%. Rates rise 2% in one year, the NAV goes down 12%, the 2% yield has now risen but it takes a while for all the bonds in the fund to mature and be replaced with new bonds yielding 2% more can't prevent a fairly large negative total return.
Some bond funds could have double digit losses, especially intermediate to long term bond funds.
You suggested "I see the downside at the beginning of the rate rise but managers would adjust". I'm not convinced that the managers would adjust in an effective or timely manner. Also, many funds can't adjust, because their Prospectus does not allow for flexibility, e.g., many funds are based on the Barclays Aggregate Bond Index. I think many of the unconstrained bond funds will adjust, and most of the core funds may not be able to based on the fund mandate in the Prospectus.
So Treasuries may do very badly in a rising rate environment, depending on how fast the rates rise.
The catch 22: Treasuries and high quality investment grade bonds provide the most effective diversification against stock market declines. The unconstrained bond funds typically hold a lot of non-treasury and lower rated debt, which might do better in a rising rate environment, but would do much worse in a stock bear market or if the economy falters and does not recover well.
So JohnChisum and MFOers, how shall we invest in fixed income at the present time?
I don't have the answer.

Hi STB65,
Good stuff! I especially liked your revision to Gresham's Law. There is indeed much drivel generated by various elements of the investment community.
But there are also some infrequent gems. It does take a little unpleasant digging to separate the rare diamonds from the heaps of dung. The diamonds are there. A second level of complexity and uncertainty is introduced to characterize if these rare gems are the products of luck or skill.
Over the last few years Michael Mauboussin has contributed much to uncovering how to distinguish between luck and skill. His “The Success Equation” book does yeomen work on this subject. He is an engaging speaker. Here is a Link to a one-hour video that focuses on “Untangling Skill and Luck”:

I also agree with your assessment that the general investment skill level in both the professional and amateur ranks has remarkably improved over the last two decades. Low hanging fruit is a rapidly disappearing commodity as the knowledge base has expanded both in its depth of understanding and in its wide distribution.
Benjamin Graham recognized this trend many years ago, and reported his belief in the fifth version of his famous “The Intelligent Investor” book. He cautioned the “Superinvestors of Graham and Doddsville” about the challenges of finding the far fewer improperly priced investment opportunities.
I’m a much slower learner. About a decade ago, my mutual fund portfolio was almost 100% populated by actively managed products. Today, that concentration has been reduced to roughly a 50/50 mix of actively and passively managed holdings.
I do plan to reduce my actively managed funds still more, but I also plan to retain some active elements. Some managers do outperform their benchmarks for an extended time horizon. There are superior fund managers.
So, although I agree with much of what Charles Ellis and Jason Zweig advocate, I am not as hard over to the Index end of the spectrum that these gentlemen represent. I respect our differences; that’s a needed part in the marketplace’s price discovery mechanism.
Best Wishes and thanks for your viewpoint.

I take the "Botton Line Personal" and saw the article. However, I can not find a link, either, to post it at MFO for others to read. However, one can subscribe for one year, 24 issues, $ 59.90 by calling 1-800-274-5611.

He wrote an article "Daring Investor Faltering Fund," for the above publication.
The article basically discusses briefly how the Homestead Small Company Stock Fund and Mairs & Power Growth Fund have surpassed the S&P 500 over the past 10 and 15 years, but stumbled as of late.
We cannot find a link for the article.

Hello,
I have enjoyed reading how others currently see and are managing their own portfolios during these uncertain times.
For me … During periods of high market valuations I feel more comfortable with a high cash position, a moderate equity position and a low fixed income position since interest rates are now at historic lows. One of the things that is presently a major driver for equities is that fixed income, in general, is currently paying very little to own and has driven some investors to purchase the higher paying dividend equities. This has lead to some high P/E Ratio for equities with them becoming overbought by my thinking due to this strong demand.
So … What is an investor to do?
For me … I have made some adjustments from my normal asset allocation targets. Currently, I am heavy in cash and in the growth allocation to equities within my portfolio. In addition I favor large caps (65%) over mid caps (25%) and small caps (10%). I am light in the income area and a little light on the international side but overweight emerging markets. In my global growth sleeve I am about 40% emerging markets and the other 60% is invested towards a global developed market theme split between the US, Canada, Greater Europe and Asia.
So Far … So Good … as I am currently up, overall, 7.11% which is bettering my benchmarks the Lipper Balanced Index which is up ytd 5.26% and Morningstar’s Moderate Target Risk Category which is up ytd 5.92%. It appears the adjustments I made to my portfolio's overall asset allocation are currently favoring me well with the better returns along with some good jingle in my pocket from the profits of recently sold positions.
My perference with new money is to position cost average into a targeted position until the position is fully funded rather to fully fund the position at the time of inital purchase. There are several ways one can position cost average into a position. One is to buy in using an over time strategy, another is to buy in at certain predetermined price targets, and another is to use some combination of both. I very seldom go all in with a bulk purchase.
I wish all … “Good Investing.”
Old_Skeet

Okay, forget 08-09. I just charted way way too big / 'what, are you nuts' FCNTX and way way too-volatile-for-anyone FLVCX against SP500 for 5/3/1y.
And since I am fundamentally too impatient to invest in mfunds in the first place, I also checked 3m and 1m.
Ooh, look, and guess what?

Agree with John. But I think it all depends on where the market is valued. I'm not going all in with the market at an all time high.
I'm in the process of a 401k to IRA rollover now. I put 25% towards my equity goal to start. Plan to DCA over the next 6 months or so to get to my goal but will accelerate that if we get a "nice" correction. Got to correct some time. Sooner the better I hope.
I do plan to deviate a little from that plan with my 'alpha' bucket. May start putting a little into Europe.

MJG provided link to this site (thank you!) in post [*] discussing Callan Periodic Tables. Since I don't recall seeing it discussed before (but could be wrong) here is separate post for site.
Portfolio Visualizer:http://portfoliovisualizer.com/
Note that it includes 6 tools arranged in a 2 row by 3 column array. The center column includes tools for:
Fama French Factor Analysis: http://portfoliovisualizer.com/factor-analysis
Efficient Frontier Construction: http://portfoliovisualizer.com/efficient-frontier
[*] http://www.mutualfundobserver.com/discuss/discussion/15187

As I lose neurons, myocytes, and fast twitch fibers, I slowly realize that the age of mega-data means that the areas of inefficiency which smart people with lots of research time to exploit "the market" become smaller. That allows smart managers of all asset, all authority funds a narrowing window of opportunity to exploit specific areas of the market and world. Small cap foreign or frontier funds have several years left, but big data will flatten that world fairly soon also.
I think the remaining decision left for indexers is whether to indulge in market timing. Is there a presidential cycle effect? should you sell in May? Do you believe Schiller and go to cash, or at least add no new money?
Running a mutual fund is a lucrative profession, if one can find investors (That's why there are so many of them). OTOH, why should I allow a failed mutual fund manager to advise my investments? Is he or she now more adept because smaller amounts are involved? Will they work for $500/hr for 2 hours, which may be all the advice I want for the next 6 or 12 months?
I doubt mutual fund managers will go the way of travel agents, but some salaries may decrease. Maybe this will attract people who enjoy the challenge of "beating the market" more than the desire for a 7 figure income, and I REALLY hope I find a couple of them.
Obviously, I do not believe we are entering a new age of active managers, although I do believe that some managers of small funds can out-perform until they become larger funds.
Depending on one's point of view, everything is drivel; and absolute drivel drives out pure drivel, which drives out relative drivel (such as this). I think that's Gresham's Law of Drivel.

Aston/DL Core Plus Bond Fund hits 3-yr mark, with a M* 5-star. :)
http://astonfunds.com/news?newsID=1431
Aston has released lengthy, interesting (yes, IMFO) interview with Gundlach, previously only available to advisors. Part I covers bond investing in the near-term, and challenges upcoming; Part II covers broader economic issues, as well as reflections on the operation of the DoubleLine investment management firm. Both parts can be read online by going to Aston home page, click "News" then click "Manager Insights" (as of today, Parts I-II top of list). Alternatively, there is a pdf which fuses both into a nice single doc, which I'll try here:
http://astonfunds.com/includes/modules/assets/controllers/Files/download.php?file=1406838212_AstonInterviewSinglefinal.pdf&r=/news/manager-insight

@Ted and @MJG, thank you for your posts. This is great information that I've seen before but never spent more than a short while analyzing (shame on me).
Anyway, having done some work to review the data, I find it most interesting that if you'd completely avoided developed international markets (MSCI EAFE) for the last 20 years or the last 10 or 15 years, you would have had a very good chance of doing better with that money almost anywhere else. Considering the demographics and the economic challenges that both the Europeans and the Japanese face, I'm wondering why we should think the next 10 or 20 years will be any different? Would anyone take the chance of an all US/Emerging Markets portfolio (considering just equity)?
Another interesting, but maybe not surprising, tidbit is that small-caps in developed international markets, and I only had data since 2001, were much better performers in the last 13 years and outperformed their large cap EAFE colleagues by far more than small-caps in the US or emerging markets outperformed those markets' large cap indices. So then a follow-up question... if you wouldn't avoid developed international markets totally, would you consider focusing investments in developed international markets on small-caps?

FYI: (Click On Article Title At Top Of Google
It's the investing equivalent of "don't run with scissors": Nearly all advisers agree that trying to time stocks is futile. Naturally, people do it anyway.
Research firm Dalbar earlier this year published 30 years of data on what typical mutual-fund investors earned and the results weren't pretty: An annualized return of 3.69% in stock funds and 0.7% in bond funds. Yet someone fully invested in the S&P 500 over that period would have earned eight times as much as a typical equity-fund investor. Results for bonds were similar.
Regards,
Ted
https://www.google.com/#q=yes,+you+can+time+wsj

FYI: So you have been bitten by the gold bug? Here are six easy ways to add a little gold to any portfolio — and the pros and cons of each. (Sources: GoldResource.net, SeekingAlpha.com, Morningstar Inc. and Kapitall Inc)
Regards,
Ted
1. Mutual Fund
The $70 million Gold Bullion Strategy Investor Fund (QGLDX) is currently the only mutual offering pure-play exposure to the price of gold. Launched 12 months ago, the fund gains exposure to the gold through a 25% allocation to gold futures contracts and a 75% weighting in short-term bonds.
Pros: Liquidity. Also works as an interest rate hedge. No transaction costs.
Cons: Above average expense ratio. Relatively untested strategy.
2. Exchange-Traded Funds
The financial services industry created multiple ways to generate long- or short-exposure to the price of gold. But, keep in mind, whether the various exchange-traded products are offering long or short exposure, they are essentially designed to track the price of gold, as opposed actually owning the precious metal.
Pros: Inexpensive to own and easy to buy, with all-day liquidity. A good vehicle for traders.
Cons:Transaction costs. Most company-sponsored retirement plans still do not offer exchange-traded product
3. Gold bullion
There is no greater commitment to gold investing than direct ownership and possession of gold coins and bullion.
Pros: A sense of security like none other, assuming you have a secure storage facility. The best price you’ll get when buying physical gold.
Cons: There is a mark-up when purchasing bars and ingots, and when selling you might need to hire a professional appraiser. Bullion is also less liquid than coins, and can be difficult to use as an actual currency for smaller purchases.
4. 4. Gold coins
Coins introduce a different level of physical gold ownership because the value is affected by multiple factors, including brand, country of origin, and supply of specific coin brands by location.
Pros: When demand for gold is high, gold coins can sell at a premium to the price of gold. Can be used as currency.
Cons: Easy to purchase, but there is usually a steep convenience upcharge, and the spreads rarely favor smaller investors.
5. Futures and options
Not for the meek or inexperienced investor, trading futures and options is considered among the best ways to make money in gold, assuming you have a solid understanding of how it’s done. It is a strategy best left to the professionals.
Pros: A lot of money can be made without putting up a lot capital, because this is a market designed for speculators.
Cons: You can lose your shirt in a hurry.
6. Gold-mining stocks
A less direct way to gain exposure to the price of gold, mining company stocks generally benefit from rising gold prices, but the correlation can be unpredictable because of other factors driving revenues and profits.
Pros: There is usually dividend income. The stocks can sometimes outperform gold prices.
Cons: Transaction costs for buying and selling the securities. There is always a risk that the company stock prices will move way out of step with the price of gold.