Hi Guys,
Most of the time the investment marketplace seems to behave like an erratic bouncing ball. Its erratic returns generate fear and uncertainty for the investing public which translates into panic selling at precisely the wrong time.
Mitigating that bouncing ball is a partially doable task by reducing portfolio returns variability. Asset allocation that fully embraces a broad diversification policy is king in executing this goal. None of this is new stuff. Here is a Link to the classic paper that initiated a host of continuing complimentary studies:
http://www.cfapubs.org/doi/pdf/10.2469/faj.v51.n1.1869
Two decades later, one of the original researchers updated his interpretation of that study. Here is a Link to that update:
http://www.retailinvestor.org/pdf/Hood20yrsLater.pdf
The paper ends with the following summary advice: “Our message today remains the same as before: Carefully consider what goal you are trying to achieve, how important it is to achieve it, and how much risk you are willing to tolerate in pursuing it. Then, create a policy portfolio that reflects that goal and your risk tolerance for the probable outcomes—because executing that policy will have a dominant effect on your success.”
Independently, a recent Vanguard study further emphasizes the benefits of broad diversification. Vanguard expands the data sets to include foreign marketplaces. Here is a Link to that study:
https://personal.vanguard.com/pdf/s324.pdf
For 4 international marketplaces, Vanguard concludes that “For investors who held broadly diversified portfolios, asset allocation was the primary driver for return variability.”
Although these generic findings are not new stuff, an individual investor’s access to test the robustness of his asset allocation planning and decisions in a user friendly format is indeed new stuff.
Recently I’ve been emphasizing the advantages of Monte Carlo analyses, especially using a version of that tool on the Portfolio Visualizer website. That website also offers a very nice Back-Testing tool that enables investors to easily explore alternate asset allocations on a side-by-side basis, and, for different time periods. Here is a direct Link to that Back-Testing code:
https://www.portfoliovisualizer.com/backtest-asset-class-allocation
In addition to a benchmark comparison option, the referenced code allows for side-by-side comparisons of 3 additional portfolios simultaneously. The stability of various asset allocations over any timeframe is effortlessly tested with the click of a single starting date input. The summary relative outputs as a function of time are useful for decision making.
One disadvantage of the site is that it only has data for the broad categories of investment options. The site does not offer data for specific mutual funds. I believe that is a minor shortcoming. Individual fund performance returns will hover both above and below the category averages. Statistically, any departures will likely cancel each other out.
I suggest you give this Back-Testing program a few trial runs. It’ll provide some guidance when you’re mulling over some portfolio asset allocation changes. Additionally, it’s fun.
Best Regards.

I charted an investment in FCNTX on the day Will Danoff became the funds manager (09/17/1990) vs. LEXCX.

I wanted to indulged your chart a bit further. 1990 was about the time when I first invested in Vanguard Healthcare, VGHCX. Here are LEXCX, FCNTX, and VGHCX over the last 25 years:. All three seem to have great market cycle performance (30ish years).

On LEXCX: expenses are about 0.51%. Turnover is 0%. The portfolio was set in 1935 and hasn't changed since then except to account for corporate events such as mergers, acquisitions and spin-offs. When there are inflows, the fund (it doesn't even have a manager) buys an equal number of shares of every holding; when there are outflows, it sells an equal number of each.
If my folks had been able to chuck $100 at the fund on the day I was born, it would be worth $34,000 today. An investment in the average LCV fund would have grown to $25,000.
David

Let's create a slightly longer list:
This one has been around the block:
LEXCX - 21 holdings and (edit: 0% turnover...thank you DS)

This is fairly new:
JOHIX - 31 holdings and 60% turnover

Additional Article on the topic:
the-risks-and-rewards-of-concentrated-funds

Do You Own Puerto Rico In Your Muni Fund?
"According to Morningstar almost 70% of municipal bonds mutual funds hold Puerto Rico bonds as of February 6, 2014."
do-you-own-puerto-rico-in-your-muni-fund

FYI: Ultra-high-net-worth investors rank smart investing just below hard work and education as the key factors that are responsible for their financial success
Regards,
Ted
http://www.investopedia.com/articles/professionals/051215/look-how-ultrawealthy-invest.asp?partner=YahooSA

FYI: Jeffrey Gundlach, chief executive of investment firm DoubleLine Capital, said Puerto Rico municipal bonds represent about 1 percent of his DoubleLine closed-end fund.
Regards,
Ted
http://www.reuters.com/article/2015/05/12/investing-doubleline-gundlach-idUSL1N0Y32UX20150512
M* Snapshot DSL: http://www.morningstar.com/cefs/XNYS/DSL/quote.html

I worry that people invest in things that they don't fully understand, though Junkster can explain the mechanics and risks of bank loans better than I.
Here's a good, current (Feb 2015) column from Schwab describing some of the risks involved. It includes a graphic on default rates illustrating Junkster's point that bank loans closely track junk bonds.
http://www.schwab.com/public/schwab/nn/articles/Things-You-Should-Know-About-Bank-Loan-Funds
Regarding PRFRX and RPIFX - they have the same manager and their portfolios are somewhat similar, but not so close that I'd call them clones; they certainly are not different share classes of the same portfolio.
With respect to the "three best bond funds" - I concur with John Bogle that the US Aggregate Bond Index (and funds that track it) are too heavily weighted in treasuries. If you want an intermediate term fund, I might go with VFICX instead - fewer treasuries, shorter duration, higher SEC yield, with the tradeoff being higher risk (fewer treasuries). Still, about 80% A (or better) rated bonds.

>>>>However, look at the credit quality.
So if the economy does well, they probably do well.
If we have negative surprises and the economy does quite poorly.........that's a different matter entirely.<<<<<<
Very good point Robert. My fear is 2015 will be the year of nowhere to hide in Bondville. Subject to daily changes, I am now around 30% bank loan with the rest in junk corp. Had been heavier in the bank loan. But more often than not the bank loan funds have been tracking the corp junk. Albeit corp junk has been a tad more stellar YTD. And I can think of a 1001 bank loan funds better than PRFRX.

The floating rate funds do look promising.

John, I think they do look promising from the viewpoint of their lack of sensitivity to interest rate increases. For example, the fund below has a duration of 0.40 years.
T. Rowe Price Floating Rate PRFRX
However, look at the credit quality.
So if the economy does well, they probably do well.
If we have negative surprises and the economy does quite poorly.........that's a different matter entirely.

"I suspect you detest and distrust..." Get back to me when you have some actual facts. Thanks.
Within this one thread you've now made the following accusations: vituperous, tasteless, and inaccurate; total fabrication; continuing and gratuitous tirade; spiteful and nasty nature; ill-conceived vendetta; vindictive nature; vituperative character; foul smell of a fetish; tiresome and even dishonest" . Surely your thesaurus of nasty words must be near exhaustion.
Your choice of language and your dismissive attitude towards other contributors speaks for itself, much more so than anything that I can add. Over and out.

@MJG:
With respect to "vituperous", if you check thesaurus.com as you suggested, you will note: "vituperous: see definition of vituperous" . That link takes you to http://dictionary.reference.com/misspelling?term=vituperous where you will be informed that there is no such word. To quote an unimpeachable source (that would be, of course, yourself) "In this instance, you were definitely inaccurate. That’s sloppy reading."
You've made the following accusations: vituperous, tasteless, and inaccurate; total fabrication; continuing and gratuitous tirade; spiteful and nasty nature; ill-conceived vendetta; vindictive nature; vituperative character; foul smell of a fetish. And that's just within this one post! "Happy warrior", indeed.
You're fond of claiming that others "misrepresent my post[s]". I suggest that your posts are quite representative of themselves. It wasn't me who characterized them as "haughty and verbose", although I must concede agreement in that evaluation.
As I mentioned earlier, I never did put much stock in your "Best Wishes", especially when used to end one of your many polemics. Kinda sounds insincere, if you follow me.

I said countless times not to expect the returns that these funds provided last year (or in general) to continue/be consistent.
I'm not against managed futures, but last year's performance was an exceptional year for a strategy that is generally more about hitting singles/doubles in good times and bad and having performance that is uncorrelated. Managed futures can also not work for stretches.
One of the largest (if not the largest) hedge funds in this category is +6.5% or so after a not very good April (-3.5%).
Pimco's fund is -3.5% YTD, AQR's fund is +3.8% YTD.
These funds follow trends, up and down. If there is not a consistent trend/they get whipsawed - problem.

There were several posts last year that generated some interesting threads re. managed futures strategies within a mutual fund wrapper. A number of board participants were pretty optimistic about the change in their returns, to the positive side, and had put some moola into them. Recent results suggest how quickly these returns can turn southward.
http://www.investmentnews.com/article/20150511/FREE/150519982/after-big-2014-trend-chasing-mutual-funds-drop-as-oil-prices-rebound?issuedate=20150512&sid=INTEL&utm_source=MarketIntel-20150512&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text
Transitory? I dunno. Part of the recent decline is due to central banks giveth-ing and central banks taketh-ing it back. So, what is their posited function in a portfolio supposed to be, again? And are they worth the ticket price, even if only held as a sliver?

Hi Junkster,
In a very short space, your comments managed to be vituperous, tasteless, and inaccurate. That’s quite a trifecta for a single entry.
Good health is an essential ingredient to the likelihood of an extensive longevity. I hope you enjoy your hiking and continue to do so for a long time. That exercise program is a major contributor to a positive lifespan outcome. I too hike, but for much shorter distances these days.
I’m surprised that MFO’s own Mini-Me hasn’t joined your diatribe just yet. But I’m patient (that’s a characteristic of old age); that too is likely to happen. On the happenstance that you don’t recall, Mini-Me is a comic nemesis to Austin Powers in the movies of the same name. Here is a short clip:
http://www.google.com/search?q=mini-me+austen+powers+movies+videos&hl=en&gbv=2&oq=mini-me+austen+powers+movies+videos&gs_l=heirloom-serp.3..30i10.25394.28156.0.31414.7.7.0.0.0.0.379.1102.0j6j0j1.7.0.msedr...0...1ac.1.34.heirloom-serp..0.7.1098.CVtdvDNOrfo
It surely is a “hard knock life” if you choose to make it so. I don’t.
I fully understand that Monte Carlo simulations are not everyone’s cup of tea. I merely offer it as one candidate financial planning tool. If it is not attractive from your perspective, the functional solution is simple: just ignore it. I really don’t care if you do or you don’t. You’re always free to choose.
Twenty years ago I developed my own retirement Monte Carlo code because none existed at that time. In that same timeframe, Bill Sharpe was developing his version. It’s now accessible on his Financial Engines website. I called Professor Sharpe to help in a few tricky programming places. He graciously provided guidance. I recognize that you have little interest, but other MFOers might, so I’ll link to his Financial Engines website now:
http://corp.financialengines.com/
Sharpe also offers a Social Security planner on his site. I have not used it.
You do yourself a disservice with your insipid submittal. I’m baffled by the animosity displayed by a few MFO members. Question the message, but don’t disparage the messenger based on pure personality conjecture.
Regardless, I do extend you Best Wishes for a long, a happy, and a prosperous life.
Quick Edit: It happened as anticipated!

I suggest we just move-on.

We are thinking the same thing (sarcasm for those who get it)
Anyway, I have to admit I agree with his "take the money and run" Regardless, I also agree there is no right or wrong answer. However, one tenet I absolutely don't buy is the health issue. Meaning, if you are in excellent or even reasonably good health you should wait. I think that is absurd, as in any age, but most especially old age (62+) your health can turn on a dime. That is most especially true if you are a male. I have a neighborhood full of 75+ year old widows but only one 75+ year old widower.
Edit: But I will give him credit. He has made it to over 80! Maybe being haughty and verbose are markers for an extended lifespan. I would like to think it's being a Roman Catholic, about the only trait we share.
Edit #2: Heavens forbid if it is an understanding or even appreciation of that Monte Carlo mumbo jumbo. Because if it is, I will probably die in my sleep this evening. So I better enjoy my last hike this afternoon.

Hi Guys,
Wow! The Social Security (SS) drawdown decision is a MFO subject that just keeps on giving.
I suppose that’s because it’s a complex decision for most upcoming retirees. It includes both factual and feelings elements that interact in a non-predictable manner for each person or couple. That observation has been bolstered by the variety of opinions and approaches that have been recorded on this continuing exchange.
There is a mountain of opinions and studies that are accessible on the Internet. Here is a Link to a 2013 Merrill Edge paper that addresses many pertinent issues in that decision process:
https://www.merrilledge.com/publish/content/application/pdf/gwmol/me_timeismoney_topic_paper.pdf
I selected this paper because it summarizes the conventional wisdom: “If you or your spouse are in reasonably good health and you can afford to, wait to collect your payments for as long as you can. Yet three quarters of Americans do the very opposite….”.
It certainly is a “no-brainer” that if a candidate retiree can’t afford to wait, he simply will not wait. The operational controversy about initiating SS drawdown only applies to those fortunate folks who don’t need SS benefits for a comfortable retirement, but are eligible. Now a timing issue enters the equation. When?
The Merrill paper advices delay because of the benefits increase it shows as a function of age. Merrill quotes an annual $18000. benefit at age 62 that increases to a $ 31680. annual award at age 70. Merrill concludes that: “Being an early bird usually doesn’t pay”. That’s a standard viewpoint.
I’m not convinced that that advice universally applies to those wealthy enough to wisely invest the smaller, but longer duration SS income. As in many investment scenarios, time is an ally.
Investment outcomes are notoriously uncertain which further confuses any decision. Given these uncertain outcomes, I default to Monte Carlo analyses. In this instance, I used the Monte Carlo simulator available on the Portfolio Vizualizer website. Here is a Link to that excellent resource:
https://www.portfoliovisualizer.com/
That website offers many fine investment tools. I ran its Monte Carlo code for a reasonable approximation of what might happen if a retiree had the resources to invest his entire SS benefits in a respectable portfolio.
My postulated portfolio included US stocks, International stocks, Core Bonds, and Short Term Corporate Bonds (STCB) in a 40/20/30/10 mix, respectively. I used the STCB as a cash equivalent. For money inflow, I used the age dependent Table recommended by Merrill. I coupled those cash inflows to early, nominal, and late SS drawdown timeframes.
Time was the central influence in this analysis. The early (age 62) withdrawal initiation ended with the highest median portfolio end wealth. The results ordered nicely according to time in market. Even the lowest 25th percentile and the highest 75th percentile ordered the same way; early withdrawal was best while late withdrawal yielded the smallest end portfolio.
The simplest conclusion from this very incomplete analysis is to “take the money and run” with it to assemble a diversified portfolio. My analysis produced results that are counter to the Merrill paper.
Yes, there are risks since the government payday is guaranteed and investing is not. But for those who are strong of heart, and have the financial resources to do so, taking the early SS payout seems like a positive in the risk/reward tradeoff.
I hope this is helpful.
Best Regards.

I came across what looks like an interesting collection of information.
This is M* Mutual fund family link which I believe Catch22 introduce me to.
quicktake.morningstar.com/fundfamily
From this page I selected a fund family I admire (TRP, Wasatch, Fidelity etc.). The first page that loads is the "Mutual Fund Family Data Page" which is a composite data of all the funds in the family. I believe the chart represents "equal ownership" of all the funds in the family and how this "collection of funds" fares against the "collective category averages" of all mutual funds.
Also, the stock list reflects the top 20 stocks owned throughout all of their funds. Kinda cool to see what stocks are being increased by the (+) symbol and what stock are being decreased by the (-) symbols next to each stock though the data might be a little stale.
I like this source of information and thought others would too.
This page also has a link to a list of all the fund in the family. Just look for this option on the right side of the data page:

FYI: Equity-income mutual funds, which aim to produce dividend income along with capital appreciation, have two factors potentially in their favor: 1) They invest in companies that have sufficient quality to produce steady income, perhaps even rising income and 2) their holdings' dividend payouts act as a cushion on price decline in bear markets.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTkzMzAxODM=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=webLV051215.jpg&docId=752125&xmpSource=&width=1000&height=1063&caption=&id=752113