FYI: Investing these days is like shopping at Neiman Marcus: Almost everything is expensive.
U.S. stocks are hitting records. So are India’s and Argentina’s. U.S. junk-bond prices are high and rising. And it isn’t just risky investments that are up: So are the prices of conservative U.S. Treasury bonds.
Regards,
Ted
https://www.google.com/search?newwindow=1&site=&source=hp&q=the+investors+dilemma+everything+is+espensive&oq=the+investors+dilemma+everything+is+espensive&gs_l=hp.3...1590.21855.0.22213.45.44.0.1.1.0.126.2026.43j1.44.0....0...1c.1.52.hp..14.31.1213.PEsUXvelbps

FYI: The U.S. Breakfast Briefing will be up around 5:30 AM CDST
Regards,
Ted
U.S. http://blogs.wsj.com/moneybeat/2014/08/25/morning-moneybeat-record-highs-are-nothing-to-fear/tab/print/
Europe: http://blogs.wsj.com/moneybeat/2014/08/25/morning-moneybeat-europe-draghi-speech-to-prompt-gains/tab/print/
Asia: http://blogs.wsj.com/moneybeat/2014/08/24/morning-moneybeat-asia-yellen-gives-the-market-little-to-trade-on/tab/print/

I owned Fuss's LSBRX 2006-2013....but I wanted my bond fund to provide ballast, to go up when my stocks when down.......
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?

@expatsp, your thinking process was very sound. When you are 85% equities and looking for ballast, you don't want a fund like Loomis Sayles, because it doesn't accomplish your stated intent. On the other hand, if you were 85% Treasuries and looking for more risk and return, Loomis Sayles would have been a great choice.
Below investment grade bonds can add diversification to a portfolio consisting primarily of investment grade bonds, like Treasuries, or the total bond market index. The same below investment grade bonds do NOT add diversification to a stock portfolio.
Take a look at bond market performance during the financial crisis, say 2008. Stocks and below investment grade bonds both did terrible and were highly correlated. Treasury bonds did great. Look at the big recovery year, 2009. Stocks and below investment grade bonds again performed in sync.
For your stated purpose, a reasonable choice would have been a Treasury bond fund. The highest quality bonds are the ones most likely to do what you stated, "to go up when my stocks when down." In a financial crisis there is a "flight to safety", and safety means Treasuries.
However, now we have an extra issue to think about: interest rate risk. If a fund has a 6 year duration, then if the interest rate on those bonds goes up 2%, the fund will lose 12% in NAV, then add back in the yield to get the total return.
But you comment is quite correct, "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"
Let's wait to you read this to see if we want to continue....

In 35y I have never had conservative well thought-out plan (maybe cuz I ever had one?) be preferable to all-in. Unless you need the money soon, forget it, just do it and don't look back. Looking back causes all the heartache.

FYI: My youngest daughter was born 21 years ago this week. At the time, I called an economist named Mark Lino from the U.S. Department of Agriculture, who told me to expect to spend as much as $300,000 to get her to age 18; toss in college costs, and it was well past $500,000 to get her to adulthood.
Regards,
Ted
http://www.marketwatch.com/story/why-its-so-difficult-to-raise-kids-and-save-for-retirement-2014-08-22/print

@PRESSmUP I've been linking Scott's article for years, he was big fan of Roy Weitz and FundAlarm. Here's what he had to say back in 2005
Regards,
Ted
http://assetbuilder.com/scott_burns/an_interview_with_mr_fund_alarm

I have two funds underwater YTD out of 28 open end funds and ETF's that are on my crowded portfolio. Bringing up the rear are RYSEX at -1.36% and PRSVX at 0.99%. My top two are BRUFX at 15.25% and PRHSX at 16.28%. All these funds I've owned for several years.
This year I started trimming some funds to keep my AA closer where I want it to be, which is 55% stock funds. I am an old guy at 64, retired, living off my investments. The trimming has been very gradual and gentle.
Best wishes,
Dave

No. Got nothing down 5%! One is down. That's QRAAX, a "commodities futures derivatives" fund as best I understand it. It's down 1% this year. It won't do well until raw materials reverse their lethargic trend. And yes, I've added to it recently, but the investment is still very small - about 5% of total. (At $2.95 you can buy a lot of shares. A bit like having a fat wallet stuffed with $1s.)

BUFOX hammered ytd...negative 13.62%! Ouch!

bee, it's ugly, but not as bad as the 13.62% figure, at least according to M*

Hi VintageFreak,
I am thinking you are talking ytd on losing five percent or better. I have none that are ytd losers. My three best are TOLLX (+16.63%) ... THOAX (+13.705) & SVAAX (+10.29%). My three worst are LALDX (+1.97%) ... LPEFX (+2.35%) & ANWPX (+3.35%). Even my small cap funds have done reasonably well IIVAX (+4.24%) ... PCVAX (5.64%) & PMDAX (+7.54%).
Old_Skeet

No I meant I'm looking for funds doing badly, worse than 5% loss YTD. I mean if we have any funds losing 10% YTD but which are still "good" funds I would be interested in knowing as well. I used 5% just as way to start conversation. I want to allow for poor small cap performance this year so chose -5%.
My HSGFX is down 3.4% I think. If he cannot hedge I'm going to tell and buy inverse S&P 500 fund. I don't have problem with his economics which is why I have persisted with him. What I can't understand is WTF he cannot hedge. Now, I'm straying off topic.
So far then ARTSX is the only fund down more than 5% that Observers are holding?

Nothing here is down ytd by -5% or greater. I hold some of the same funds that I see David is holding. TRAMX is the best performer. Worst is PRESX TRP Europe, down -1.54% ytd.

Hi Ted,
The fund that you mentioned (SHRAX) likely never made it to my candidates list way back in the early 1990s. I avoided front-end loaded mutual funds like the plaque that they are. I was reading John Bogle’s “Common Sense on Mutual Funds” in those days, and indeed agreed that costs mattered greatly.
The front-loaded funds were immediately discarded by me from further consideration. I probably interviewed a half dozen financial advisors during that period, and every single one of them recommended portfolios populated only by these costly products.
Our potential retirement war-chest was modest, and I was sickened at the prospects of reducing it immediately by a composite 5% to 6%. It would take years of positive outcomes to replace those unnecessary highway robbery charges. I still feel that way, but less so as my wealth substantially increased. Even then, I believe that I recognized that I was summarily tossing away some excellent fund managers.
I do like Ricky Freeman’s record and his tenure. It is outstanding. He definitely is a talented and skilled stock picker. I am especially impressed by his low portfolio turnover numbers. The man makes his choices, and he stays the course with them. He sticks to his guns. Good for him, and the record shows that it is good for his investors too.
Automatically discarding front loaded funds will eliminate some superior active fund managers. However, I suspect that from an overarching portfolio strategy, it probably does more good than harm.
That’s more than a naked opinion since the cumulative fund management data consistently demonstrates that, on an annual basis, only 20% to 40% of active mangers outdistance passive Index management. Integrated over time, those numbers deteriorate even more, not including the upfront fee. It’s a hard uphill road to overcome fees, and the odds do not favor the individual investor.
Thanks for your input.
Best Wishes.

My weakest funds are small value (Artisan SCV, Wasatch MCV) and my automatic investment in them remains unchanged, but no one meets the (5%) threshold.
My strongest funds come in various flavors, led by emerging markets (TRP Africa & Middle East up 19%, plus Grandeur Peak EO, MACSX and Seafarer) but there's an inexplicable potpourri of others as well - real assets, global growth, midcap value. As with the losers, it's on auto.
David

@MJG:How about Richy Freeman, SHRAX, 30 years !
Regards,
Ted
Without Sales Charge 12.58%
With Sales Charge 12.36%
(Fund inception 10/24/83)

Hi VintageFreak,
I am thinking you are talking ytd on losing five percent or better. I have none that are ytd losers. My three best are TOLLX (+16.63%) ... THOAX (+13.70) & SVAAX (+10.29%). My three worst are LALDX (+1.97%) ... LPEFX (+2.35%) & ANWPX (+3.35%). Even my small cap funds have done reasonably well IIVAX (+4.24%) ... PCVAX (+5.64%) & PMDAX (+7.54%).
Old_Skeet

Hi Bitzer,
Thank you for reading my post and for your question.
I’m sure you realize that, as a matter of personal policy, I resist divulging my specific fund positions. I believe it can do more harm than good because we all have different time horizons, life experiences, anxiety levels, investment proclivities, goals, family commitments, ages, and overall wealth. But since I introduced the fact that I’ll be scaling down my actively managed fund holdings, I feel the need to make an exception to that policy. So here goes.
Before I describe the short actively managed fund list, allow me to define the criteria that dominated my selection process. It was not a broad diversification goal or by sector selection. My primary selection criteria were to reward active managers who generated Excess Returns over a substantial timeframe. So Excess Returns and performance time were the key dimensions to shorten the field.
The Excess Returns were measured against the S&P 500 Index standard. The timeframe was the most recent 20-year period because I have owned the final candidates for from 17 to 22 years. I used the Portfolio Visualizer website as my data source.
My Final Five are provisional depending on the continuing tenure of the fund managers. Here are my Final Five with the mangers indicated:
FCNTX William Danoff since 1990
FLPSX Joel Tillinghast since 1969
VWELX Team Wellington since fund inception
VGHCX Edward Owens, Jean Hynes since 1984 and ????
DODBX Dodge and Cox Team with John Gunn leader since 1977
This is not a fully diversified portfolio. The missing pieces will be filled with passively managed Index products. The ordering is important since successful active fund managers are hard to find.
These mangers were chosen because they delivered annualized Excess Returns over the S&P 500 benchmark for the 20-year test period. They delivered these Excess Return outcomes with lower volatility as measured by each funds Standard Deviation. The correlation coefficients were not overly impressive, but they helped just a little to dampen total portfolio volatility. These managers have demonstrated more skill than luck over a very daunting investment cycle.
Earlier, I noted that this list is provisional. Several issues need further resolution. Ed Owens is mostly retired, so I’m closely monitoring Jean Hynes’ performance. She did assist Owens for 20 years or so, but it’s a different ballgame when you graduate from a secondary position to the top-dog managerial slot.
Also, the 20-year records of the balanced funds, VWELX and DODBX, are very similar. In a sense, they are on my bubble. At this juncture, eliminating one or the other is a vexing choice since both funds have served me well for 20 years. During that extended period they outdistanced the all stock S&P 500 Index with lower volatility. That’s a noteworthy accomplishment.
I recognize that these are pedestrian selections, but I’m a pedestrian sort of investor. I like plain vanilla ice crème. I get my excitement when visiting Las Vegas. Keeping things simple works best for me.
Of course, I reserve the right to be flexible as the opportunities develop over time. In the investment world, nothing is forever.
Best Wishes.

How many funds do you have which have lost more than 5% but which you will hold/add to? I have one - ARTSX. Just trying to get ideas for high conviction funds on the board.

Bonds are definitely a mystery for most investors. For years I concentrated on stock funds. When I turned 45 I started to think about bonds and decided to $cost avg into them. At that time I was listening to Bob Brinker on the weekends and he was all for Ginnie Mae's so I bought BGNMX which was the Benham Ginnie Mae fund. Benham was a well run firm and later American Century took them over. Those funds had excellent returns during the 90's and beyond 2000. I would use that fund as a sweep account when I swept profits from gold funds and other investments I was planning on using it as my core bond holding until the fiscal crisis hit. Everything changed.
I still track BGNMX and it seems to hold its own. But if and when rates do rise those funds do very poorly from what I hear and read.
Nothing is sure but at least we can try to minimize damage to our portfolios. If stocks drop 30% and bonds drop 10-15% then that is a success in relative terms.

Hi John and others,
Here is what I have done to help manage an anticipated rising interest rate environment within the income area of my portfolio. I have two investment sleeves within this area … an income sleeve and a hybrid income sleeve. The income sleeve consist of the more traditional fixed income funds while the hybrid income sleeve consist of funds with a broader spectrum of assets whose focus is to generate income.
In the income sleeve I have selected good fund managers that I believe have the experience to effectively manage changing market conditions along with looking for funds that have short durations and are commonly known as short term bond funds. The funds that I own in this sleeve are EVBAX, LALDX, LBNDX, NEFZX, THIFX & TSIAX. Combined their duration is 3.5 years while their combined yield is about 3.7%. I feel, if these fund manages can not effectively manage interest rate and other risk associated with fixed income investing risk … well it probably just can’t be done.
In my hybrid income sleeve I feel I have selected good fund mangers that I believe again have the experience to use an even broader spectrum of assets to generate income along with using non traditional tools and means that aid them in the management of associated investment risk. Funds that I own in this sleeve are AZNAX, CAPAX, FKINX, ISFAX, PASAX & PGBAX.
My thoughts are that diverfication in of itself provides a certain amount of risk protection. To substantiate this thinking I am linking a recent Morningstar article that addresses this in more detail.
http://news.morningstar.com/articlenet/article.aspx?id=661823
In closing … and in short words … Rather than trying to do this through my own talent window I have chosen to seek out others to manage this for me.
I wish all … “Good Investing.”
Old_Skeet

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?