Excellent article.
MFOers, what do you all think of this?
Dan Fuss is as good as they get.........I look at Dan Fuss, Jeffrey Gundlach and Bill Gross as 3 of the most and possibly the most knowledgeable bond guys out there. 3 pillars of a stool.....
They think rates are going up, bonds will take a hit, and that we should go more towards short duration and high quality, e.g, more Treasuries.......less high yield/junk
"Dan Fuss and co-managers Matt Eagan and Elaine Stokes have put 27% of the fund's $25 billion fund in assets into short-term U.S. and Canadian government issues. Fuss says that's the highest weighting the fund has ever held in such super-safe instruments."
"It's increasingly difficult to find undervalued assets in any corner of the bond market. "Valuations across the spectrum are unattractive," he says."
"Eagan and his colleagues believe the long-term bull market in bonds, which began in 1982, is over, and that Fed action, combined with an improving economy, will push rates higher"
"....junk is now one of the riskiest places in the bond market."
"...the fund has tended to hold large stakes in junk bonds and emerging markets, two categories that tend to mirror the performance of stocks"
"........the fund will suffer some if rates rise. Should they climb one percentage point, the fund's price would fall by about 4%."
"......you'd be foolish not to pay attention to the fund's dramatic portfolio shift—given Fuss's long and superior record"

FWIW, I forewent (if that's a word) the annuity and still have the TIAA real estate fund in my 403b at a prior university employer (St Louis U). Perhaps they think I'll roll over eventually into an annuity, but I didn't have that understanding. In fact, as I rolled my money out of the annuity portion of my funds, I rolled it into the real estate fund. I had left that university for the private world temporarily, so that may have allowed this maneuver. As I recall,the transfer occurred at 10%/yr, so they tried to protect their participants.
A few years back that institution negotiated a good array of funds from other fund companies generally with the lowest ER each offered. My current employer offers TIAA, but only the usual choices, and I haven't chosen to play. TIAA apparently will yield to pressure if the institution is big enough, but I have no idea how this was accomplished.
I agree with those recommending the lowest cost index funds she can find. While bond funds may make one feel a bit better in the crashes, I don't see the point at 27, regardless of experts' recommendations. Start balancing 15 years (or 10) before retirement by changing the choices in your automatic investments.

>> For what interest it holds, I held my position throughout and added monthly. Chip reports similar behavior.
It holds considerable interest, I suggest, as it sets you apart from most other investors on earth, including in this forum. 40% plunge and 5-6y back to whole? I would say your behavior is extraordinary. Adding monthly.
I would like to say I would've done the same. Certainly I have done similarly since 08 in a range of investments, buying greedily and staying in equities, but this would have been a taxing experience. A lesson here in perseverance.

Hi rjb, the only way I know how to find trailing P/E at M* is to put the fund in a Portfolio Manager watchlist and set up 'My View' to include trailing P/E; it's one of the data points on the long menu of statistics you can pick for that page. -Cheers, AJ

Very interesting AndyJ. That will come in handy. Thanks.

This may be a good companion fund to pair with MAINX for more world wide E M fixed income exposure. At present Ms. Padilla and team are nearly 85% invested in various Latin American issues with a longer average maturity .I own both.
DLENX July 31 fact sheet
http://www.doublelinefunds.com/pdf/EM_Fact_Sheet_Monthly_Update.pdf
Excerpts:
Team continues to actively manage
duration
At year end 2012, DBLEX had a duration of 4.4 years compared to the 2013
year end duration of 6.6 years. This shorter duration absorbed most of the impact from rising rates in 2013. The higher duration at the end of 2013 has contributed to out performance so far this year.
We believe 10 year UST rates should remain range bound between 2.20-2.80%
Top country allocations: Brazil, Mexico, Peru, and Guatemala all up double digits
No local currency exposure in the fund, although the team continues to monitor opportunities
DBLEX duration is 5.93 years; this is a result of positioning the portfolio
in BB rated space where new issues have appeared to be
attractively priced. These securities tend to have a shorter duration
49% of portfolio is allocated to Investment Grade bonds
Top sectors: Banking, telecommunications, consumer products, mining &
oil, all of which are strategic sectors for an EM economy
Consumer products aim to take advantage of rising income levels in EM countries

Are these people really serious?
Remind me to check in 5 years to see if either fund is still in existence.

uh and omg ... ! Click the 10y tab and see if you could've possibly hung in.
DS is being, well, generous, or something; from this graph, it looks rather more like ~6y to get back to zero. So it depends on what his 'disastrous' means.
https://www.tiaa-cref.org/public/tcfpi/Investment/Profile?symbol=41091375
Talk about investor returns and behaviors. Who would not have bailed, not knowing what the future held, only imaging the worst?
You would have had to keep in mind that this downward dive was putting you back only to where you were 05/6/7.

One of the main issues I have when I read articles that compare the S + P indexes to actively managed funds is that many managed funds have a mix of US, International, some cash and bonds and some have derivatives. So its not always comparing apples to apples. We all know that you can do very nicely just investing in a few index funds over the long haul. It seems most people that come to MFO do not invest that way. Otherwise, there would be little cause to have a forum such as this.
I have a mix of stocks, managed funds and etfs for my equity portion of my portfolio, but do not own S +P, total market, small or mid cap or international indexes. I do own etfs that help enhance my funds, more than half of which along with my managed funds ytd do exceed the basic benchmark of the S + P. Granted, some are sector or foreign, but the reason I have them is to provide balance to my core holdings so when some areas zig others will zag. They won't always exceed that benchmark, for every dog has its day. Besides, I really like studying, learning and watching the market with all its drama and gyrations. I do play with about 5% of my portfolio with more speculative stocks, but never exceed that 5%. More often than not, they do make money, but not always. I suspect many of us invest this way too.

Thank you David for speaking with Ms. Kong. A lot of valuable information there from a 45 minute interview. As a shareholder of MAINX, I feel very good about the fund and the company and people behind it.
It was enlightening to read that Ms. Kong checked out MFO before the interview. If you are reading this Teresa, thank you very much for the insights , especially on the dollar.

Catalyst Tactical Hedged Futures Strategy Fund & Catalyst/Princeton Hedged Income Fund
http://www.sec.gov/Archives/edgar/data/1355064/000116204414000987/catalyst485apos.htm

+1 ...I don't know much about the other two vendors, but the the Real Estate account is unique and makes TIAA_CREF a worthy option.

TIAA-CREF would be my recommendation. Their programs come in many flavors, not all of which offer the same combination of retirement class funds and annuities. As a general matter, they have a nice series of target-date funds that are built purely around index funds. And their Real Estate account is, literally, in a class by itself. It invests directly in real estate rather than just in real estate securities. It utterly crashed in the 2008 market crisis; that was one disastrous 24 months period sandwiched by 18 years of remarkably steady returns.
David

FYI: It's been another tough year for the average actively managed mutual fund.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTgzODA1ODg=
Enlarged Graphic: http://news.investors.com/photopopup.aspx?path=WEBact081514.gif&docId=713319&xmpSource=&width=1000&height=603&caption=&id=713318

http://www.sec.gov/Archives/edgar/data/1048702/000113743914000295/nmf497080152014.htm
497 1 nmf497080152014.htm
NATIONWIDE MUTUAL FUNDS
Nationwide Fund
Nationwide Global Equity Fund
Nationwide Growth Fund
Nationwide International Value Fund
Nationwide Small Company Growth Fund
Nationwide U.S. Small Cap Value Fund
Supplement dated August 15, 2014
to the Prospectus dated March 1, 2014 (as revised June 5, 2014)
Capitalized terms and certain other terms used in the supplement, unless otherwise defined in this supplement, have the meanings assigned to them in the Prospectus.
Nationwide International Value Fund
Effective September 5, 2014, the Nationwide International Value Fund will no longer accept purchase orders from new investors. Investors who own shares of the Fund as of the date hereof may continue to purchase shares.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

Thanks David,
Owning MAINX provides the following country exposure as of 3/31/14:

The first and last (Cayman Islands and The British Virgin Islands) seems to hold some intrigue, especially the over weighting of the Cayman Island bond Issues.
Any thoughts?
Updated per AndyJ's link:

Baird Core Plus (BCOSX) and Baird Aggregate (BAGSX), both long-established no-load, intermediate term bond funds.
Angel Oak Multi-Strategy Income (ANGLX), a three-year old multisector bond fund with a 2.25% load. The managers used to run a lot of money for Washington Mutual (WAMU!), a famous "story stock" (the Wal-Mart of banking) which became the country's largest bank failure.
Hotchkis & Wiley High Yield (HWHAX), a five-year old high yield fund with a 3.75% load. The managers are former PIMCO guys.
The smallest of them is $1.7 billion. They average about $3 billion in AUM.
I'm glad we don't rely on Morningstar's radar to safeguard us from sneak attack.
David

Dear friends,
I talked for about 45 minutes with Ms. Kong, who'd already visited the board, read and thought about your questions. Here's the short version of what I heard:

• headline risk is the least of your worries. We started with the questions around Russia and Ukraine. Her position is that the outcome there is relatively short-term and difficult to predict. At the margins, the presence of NATO sanctions is causing wealthy Russians to move their money to Asian financial centers but those flows really aren't driving markets.
  the US is being irreversibly marginalized in global financial markets which is what you should be paying attention to. She's neither bemoaning nor celebrating this observation, she's just making it. At base, a number of conditions led to the US dollar becoming the world's hegemonic currency which was reinforced by the Saudi's decision in the early 1970s to price oil only in US dollars and to US investment flows driving global liquidity. Those conditions are changing but the changes don't seem to warrant the attention of editors and headline writers because they are so slow and constant. Among the changes is the rise of the renminbi, now the world's #2 currency ahead of the euro, as a transaction currency, the creation of alternative structures to the IMF which are not dollar-linked or US driven and a frustration with the US regulatory system (highlighted by the $9B fine against BNP Paribas) that's leading international investors to create bilateral agreements that allow them to entirely skirt us. The end result is that the dollar is likely to be a major currency and perhaps even the dominant currency, but investors will increasingly have the option of working outside of the US-dominated system.
  
• the rising number of "non-rated" bonds is not a reflection on credit quality: the simple fact is that Asian corporations simply don't need American money to have their bond offerings fully covered and they certainly don't need to expense and hassle of US registration, regulation and paying for (compromised) US bond rating firms to rate them. In lieu of US bond ratings, there are Asia bond-rating firms (whose work is not reflecting in Morningstar credit reports) and Matthews does extensive internal research. The depth of the equity-side analyst corps is such that they're able "to tear apart corporate financials" in a way that few US investors can match.
  
• India is fundamentally more attractive than China, at least for a fixed-income investor. Most investors enthused about India focus on its new prime minister's reform agenda. Ms. Kong argues that, by far, the more significant player is the head of Indian's central bank, who has been in office for about a year. The governor is intent on reducing inflation and is much more willing to deploy the central bank's assets to help stabilize markets. Right now corporate bonds in India yield about 10% - not "high yield" bond but bonds from blue chip firms - which reflects a huge risk premium. If inflation expectations change downward and inflation falls rather than rises, there's a substantial interest rate gain to be harvested there. The Chinese currency, meanwhile, is apt to undergo a period of heightened volatility as it moves toward a free float; that is, an exchange rate set by markets rather than by Communist Party dictate. She believes that that volatility is not yet priced in to renminbi-denominated transactions. Her faith is such that the fund has its second greatest currency exposure to the rupee, behind only the dollar.
  
• the appointment of a new comanager is mostly a recognition of the strong contributions that person has made since joining the fund at inception. The new comanager is a credit specialist. The existing one is an interest rate specialist.
  
• two factors seem to be constraining growth of AUM: (1) there's a general withdrawal from fixed-income in reflection of interest rate anxiety and that withdrawal seems to disproportionately impact non-core categories and (2) advisors are intrigued even to invest their own money in many cases but not yet ready to invest their clients. They seem to be waiting for a three year record and "clarity" in the market.
  
• the fund's maximum drawdown continues to track the firm's expectations which is good given the number of developments which they couldn't have plausibly predicted before launch. They're sitting at a beta of about .30.

For what that's worth,
David

Also see:
FAYEZ SAROFIM & CO: Investing in Quality Companies
https://www.sarofim.com/assets/white papers/sarofim-quality-white-paper-2014.pdf
[Manager of Dreyfus Appreciation Fund]

Fayez Sarofim is a ginormous holder of Kinder Morgan shares and serves on the board. Probably having a good week.

This is the worse example of hijacking a thread I have ever seen :)

Well, maybe it's the worst, but that's a different debate.
I thought it was interesting that a manager of a particular mutual fund - whose paper was mentioned in the discussion above - is an enormously wealthy individual (http://en.wikipedia.org/wiki/Fayez_Sarofim) who is on the board of the third largest energy-related company in the United States and who owns 22,789,655 shares. Almost a billion dollars in one particular company. Wasn't aware he was a manager on a fund.
Meh. Just going to post less on here.

Thanks Ted. Enjoyed the article.
With a rollover from a 401k to an IRA, it gave me the opportunity to reconstruct my portfolio. So I've given this diversification thing a lot of thought. My conclusion was I am not diligent or knowledgeable enough to know the perfect mix of investments, nor do I want to spend the time trying to be. So, getting diversified in general terms and letting good managers do the rest seemed like the safe way to go. But as the article implies, what do you need to be diversified. I like the idea of seasoned managers/management teams with good risk adjusted returns, running focused funds with smallish AUMs making those decisions.
I decided on 3 sleeves, buckets, categories, 3 sections on a spread sheet, what ever name you give it, which felt right to me. I ended up with 14 funds in my plan. Could easily have been less, but there are so many good names to choose from. And I'll admit I was very influenced by MFO commentaries and data.
The break down being:
Allocation/balanced funds: 5 funds which I could argue was enough diversification in itself.
Equity funds: 6 funds, diversified w/ US, Int, and EM, but with a LC dividend focus.
Bond funds: 3 funds, a moderate risk multi-sector, conservative, MS, and a cash equivalent.
Low and behold, M* stats show pretty good diversification at about a 60:40 mix, which was my aim point. So, diversified I am - guess :)
And thank you David and Charles for doing much of the hard work in helping me reset my portfolio.

FYI: Berkshire Hathaway Inc. (NYSE: BRK-A) released its public equity holdings as of June 30, 2014. Warren Buffett’s different portfolio holdings have not been changing much of late, but it turns out that many of the stakes were changed – some changes were substantial. There was one issue which also stood out handily ahead of this in the quarterly filing where Warren Buffett and team counted some $116.9 billion in equity securities in the investments as of June 30, 2014. This was versus $116.16 billion as of March 31 and versus $115.46 billion as of December 31.
We had also known going into this report that approximately 58% of the total value of the Berkshire Hathaway Inc. (NYSE: BRK-B) equity holdings was concentrated in just four stocks – Wells Fargo & Company (NYSE: WFC) at $25.4 billion; International Business Machines Corporation (NYSE: IBM) at $12.7 billion; and The Coca-Cola Company (NYSE: KO) at $16.9 billion; and American Express Company (NYSE: AXP) at $14.4 billion. That concentration was 56% in the prior quarterly report
Regards,
Ted
http://247wallst.com/investing/2014/08/14/major-portfolio-changes-for-warren-buffett-and-berkshire-hathaway/print/

Good Morning! Today is August 15th and it is about 6:30 AM ESDT as I first write.
Here is a look at the futures … and, they are currently pointing upward. In addition, current news can be found by clicking on the news tab.
http://finviz.com/futures.ashx
For those that wish to follow the major indexes and the markets throughout the day I have provided a link below. During market hours the site updates data about once every minute.
http://markets.wsj.com/usoverview
In addition, after the market close today the Yield & P/E Ratios will update on the S&P 500, Nasdaq 100 & Russell 2000 Indexes.
http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=wsj_mdc_additional_ustocks
Here is one traders take on the market ...
http://www.markets.fallondpicks.com/2014/08/daily-market-commentary-rally-continues.html?
And, if you are looking for some of top performing & rated mutual funds below is one of my reference links ...
http://money.msn.com/investing/top-funds.aspx
Have a grand day … and, I wish all “Good Investing.”
Old_Skeet