i use RPHYX as a cash substitute due to its very limited duration. GNMA would be in a conservative fixed income bracket, never cash. its sensitivity to interest rates is too high to ignore. PONDX is a different animal; it's a credit play. Dan can go into different credit instruments at different times, but he has recently preferred non-agency mortgages. this fund has significant credit risk and is much different from GNMA (agencies) and RPHYX - tiny duration high yield and special situations (no interest rate risk, negligent credit risk - high yielding cash supplement). there is probably place for all 3 in one's portfolio as long as each fund's risks are clearly understood.

Thanks for this link.
I recently have been charting PONDX (any similar type fund would work) as well as any GNMA fund (VFIIX) with the rest of my portfolio of funds. One of the first things I want to point out is how these two funds fared over the last 5 years and especially how they reacted during the 2009 downturn. A GNMA funds in general fared very well during this market collapse. It also exihibits low volatility over long periods of time. In this low interest rate environment I consider these GNMA funds as a cash substitute in my portfolio. Here are the two funds charted over the last 5 years:

David S. has mentioned RPHYX as a cash vehicle in his portfolio... I like to use GNMA funds...what do you find works for your cash position?
A multisector bond fund like PONDX allows me to move some of my portfolio further out on the risk spectrum in the hope that slightly more risk will provide slightly more return compared to VFIIX. I also chart PONDX (or any other multisector fund) and VFIIX against the rest of my portfolio as indicators of risk. These two funds help me identify positive and negative momentum in comparison to the equity funds I hold or I am considering holding. Finally, they act as indicators for when I want to buy or sell shares of other funds. Below I chart VTI, as a indicator for the equity market, over the last three years against VFIIX and PONDX.
For me a series of actions (buy / sell signals) emerge. Here's how I would attempt to manage things:

a bit steep for the fund... couldn't find any special distro reference. is it indeed mark-to-market? what are the thoughts on the board?

Definitely PAUIX. I assume that Rob Arnott is always well positioned regardless of the situation (or at least that he will do a better job of positioning than I would).
RPHYX -- but I don't know if that counts. It has a very specific purpose and I will keep it as long as it continues to meet that purpose.
I also plan to keep my more conservative equity funds, ARIVX and APPIX, for a while, because I think I really need to judge how these perform over a full market cycle and not just over a bull year like 2012.

Reply to @Sven: I am about 2/3 equities in my portfolio. About half my equity position is international. I think I have pretty good exposure to risk assets. So, the change I have made above probably keeps my risk exposure relatively the same. PONDX and SUBFX have had great 2011. I am not sure if they will continue like that but I am taking a chance with them. I had moved my holdings in RPHYX into PONDX in September. I was not disappointed with that move. Given FED will continue to purchase bonds there could be more upside. A few bond experts here are also in it. If they jump, I will evaluate my situation then.

Reply to @catch22: I was hopeful that folks might wander by and learn a bit. I can spot-check tomorrow; the Analytics program allows us to see where folks are coming from. While about 100 people a month go from here to Amazon, we've rarely noted the reverse.
As to bonds, I don't know about the timing but I can't find much attraction to them, and haven't for a while. My portfolios tend toward emerging markets and global debt, including high yield global, called bonds, some floating rate stuff, rather than simple investment grade debt. In the non-retirement stuff, I've got money in Matthews Asia Strategic Income (Ms. Kong was very persuasive), RPHYX, Northern Global Tactical Asset Allocation (successor to Leuthold with 12% in a broad bond index) and T. Rowe Price Spectrum Income.
David

Reply to @ brain trust: I also agree. Rates on cash are effectively ZERO. Anything above that requires some additional risk taking. Many good alternatives have been floated on the board, such as laddering CDs, short term bond funds, or RPHYX. Not to denigrate these alternatives in any way. They may be fine alternatives. But, additional return beyond ZERO now requires some additional risk, be it credit risk, opportunity risk, or interest rate risk.
If the fund houses weren't currently subsidizing costs of running their money funds, they'd actually have negative yields and so would be withdrawing some of your $$ monthly to cover costs.
I've never held that emergency stashes require absolute "0" volatility. So would be loath to keep large chunks of $$ in cash instruments as the question implies is being done. My cash with fund companies primarily serves as "opportunity" money, allowing quick & easy entry or exit from different equity funds without getting into trouble with FTRs. (exchanges within money market funds are generally exempt from these regs) fwiw

Reply to @chip: The link goes to the recording of the RPHYX conference call (from September) instead of the RLSFX call.

454% turnover? RPHYX. When do they find time to breath or go to the bathroom?

Scout Unconstrained Bond manager interview--
Q: How much cash do you have in the fund?
A: We’re running about 30 percent net cash because of so many things we sold. We’re looking for short-term bonds and securities to purchase with one-year maturities to hold our ground against that zero cash interest rate which can eat up real returns over time. We’re looking at floating-rate securities, asset-backed securities and high-quality short-term assets. The best times are gone. Longer term, fixed income in the traditional sense is almost an uninvestable asset class and should be shunned by almost all investors.
We’re slightly short high-yield bonds, which is unusual for us. The absolute level of yield on high-yield bonds is so low now it highlights an extraordinary risk people are taking. And the reason for the runup in high yield, which is primarily because of central bank activity, makes us cautious. So we’ve exited our derivative exposure going long and now we’re in a small way buying insurance for the portfolio for what we think is likely to be a decline in the prices of high-yield securities and a rise in volatility.
We also think oddly enough the policies the U.S. Federal Reserve is pursuing in an attempt to bring volatility down are inherently destabilizing. The combination of the various quantitative easing programs they’ve undertaken are outright balance sheet expansions for the government. These expansions feel good in the short term like an injection of drugs to an addict but are destabilizing in the long term.
The Fed has absorbed the entire supply of mortgage bonds and long-term Treasuries. Central banks are monetizing everything and causing a shortage of high-quality fixed-income securities. That destroys the price mechanism because nobody knows where a BB-rated credit should be priced today in the absence of all this central bank activity to prop up the markets.
http://www.businessweek.com/news/2012-10-02/the-best-bond-fund-manager-youve-never-heard-of#p1
Confessions of a fund alarm/mfo addict--holding RNSIX, MAINX, RPHYX and probably adding this one. Now where would one get those ideas. Given this infernal fixed income
market brought about by the financial engineering activities of central banks our fixed income allocations have evolved into betting on a Snowball's chance in hell. A significant cash position when warranted along with actual shorting holds capital preservation appeal
among a mix of fixed income funds.

Dear friends,
I always hope you folks are doing well. Especially as I speak with chip about conditions in eastern New York (roads impassable because of fallen trees and lines, no utilities, even folks with generators running out of gas, two-hour lines at the few open stations - all of that for the folks fortunate enough to have escaped direct personal loss), I mean it more now than usual.
After a slight storm delay, we posted our update. There is, I think, some cool stuff there.
Scout Unconstrained Bond and Stewart Capital Mid Cap are profiled this month, and both seem to be doing freakishly well - consistently high returns, moderated risk. I might try to find a way to talk directly with the Scout manager. Up until now, he's mostly been replying to questions via email.
Because folks want to launch new funds before January 1 and the SEC imposes a 10-week registration period, October usually sees a lot of new funds. This month, with about 30 no-loads and active ETFs, was no exception. I've highlighted four that seem especially interesting.
Finally, I think I'd like to commit to a monthly conference call of the sort we ran with David Sherman from RPHYX and was hopeful that you might both think about the project and think about becoming involved in the calls. I'm imagining a system in which we do interviews with paired funds in consecutive months: two neat long/short managers in November and December, two focused managers in January and February, two emerging markets guys, two unconventional income guys, that sort of thing.
Mitch Rubin (RiverPark) and Matt Moran (River Road) have both signed on to be our first pair. If you could think about how to make for really productive conversations and how best to attract folks to the calls, I'd appreciate your reflections.
Take care, dear friends.
David

Reply to @Ted: Respectfully disagree with your characterization. I gather that the poster (OJ) is well north of the 70 year mark. At some point - depending on one's health, other assets, other income streams, etc. - capital preservation becomes paramount. The extreme cash weighting isn't what I'd recommend for the vast majority who frequent the board. However, not knowing all relevant details, I'd be loath to characterize the allocation harshly. Also, many count their emergency cash reserve as part of invested proceeds - which may skew the overall allocation in favor of cash. Also, many invested in RPHYX (as I think OJ is) count that as part of their "cash" position. The suggestion by OJ was on the heels of a Fed pronouncement that immediately jolted equities higher. I'd agree such occasions are opportune for those already considering selling. (FYI - OJ indicated some time ago he'd be traveling and not in a position to access Internet for several months.) Regards, hank

Last week Annaly Capital’s CEO Wellington Denahan-Norris (who this week replaced the late Michael Farrell who tragically passed away), said some very interesting comments to Bloomberg on the state of the risk markets. After discussing the impact of the Fed buying Agency MBS she said:
“It’s not just at the mortgage REITs where the returns in this market are being put under assault, It’s the general global landscape where you have an incredible mispricing of risk that’s being delivered at the hands of academics at the central banks of the world.”
Worst fear #1--an unforeseen sharp rise in interest rates resulting in principal losses to fixed income allocations (bond funds.)
Worst fear #2--financial repression/negative real return/negligible yield on any better credit quality/shorter duration asset continuing on and on and on for years.
Either scenario equates to a damned whether you do or don't costly outcome for those who saved instead of spent, the flip side regression to mean for fixed income funds which have enjoyed decades of gains in addition to yield.
Fidelity Floating Rate and RPHYX are held as interest rate risk hedges. A doubling of precious metals exposure from 5% to 10% (gold, silver, mining shares and funds) was done through spring and summer to hedge against the rash actions of poison Ivy League economics PhDs.
http://www.realclearmarkets.com/docs/2012/10/Population delusions 121007 great disorder.pdf
So I keep wondering to myself, do our money-printing central banks and their cheerleaders
understand the full consequences of the monetary debasement they continue to engineer?
Inflation of the CPI might be a consequence both seen and measurable. A broad inflation of
asset prices might be a consequence seen, though not measurable. But what about the
consequences that are unseen but unmeasurable – and are all the more destructive for it? I feel queasy about the enthusiasm with which our wise economists play games with
something about which we have such a poor understanding.
My point is to show that money operates in many social domains beyond the
financial, and that tying currency devaluation to social devaluation might have some merit.
-Dylan Grice/SocGen
Money doesn't talk it swears.
-a different Dylan

This is a test to see if it is possible to design a semi-automated weekly portfolio report, along the lines of Catch 22's. Our spreadsheet has been modified to collect the weekly data, and to automatically format it for posting. The report period is Monday-to-Monday, as we usually do not have computer access on Friday.. we'll see how this goes with respect to future weekly updates.
Following is the present portfolio percentage distribution, showing one-week changes (Monday-to-Monday).
Cash positions are not shown, but approximate portfolio distribution currently is:
Equity Funds: 17% / Bond Funds: 32% / Cash: 51% • (May not equal 100% due to rounding error.)

		10/1/12		
Change		AF = American Funds
% of	Since		AC = American Century
PF	9/24/12		S: = Schwab Account
ANCFX	7.1%	-0.36%		AF Fundamental Investors
SMCWX	3.8%	0%		AF Smallcap World Fund
CWGIX	2.2%	-0.14%		AF Capital World Growth & Income
ANEFX	6.9%	-0.31%		AF New Economy Fund
GABAX	2.5%	-0.76%		S: Gabelli Asset
MAPIX	0.9%	-0.43%		S: Matthews Asia Dividend
GASFX	0.9%	-0.27%		S: FBR Fund Advisors
MFLDX	2.1%	-1.52%		S: Marketfield
ABALX	16.2%	-0.29%		AF American Balanced Fund
GBLAX	0.1%	-0.46%		AF Global Balanced
TWSMX	9.1%	0.01%		AC Strategic Allocation (Moderate)
ABNDX	9.5%	0.35%		AF Bond Fund of America
AIBAX	7.5%	0.07%		AF Intermediate Bond Fund 
CWBFX	0.6%	0.23%		AF Capital World Bond Fund
AHITX	10.6%	-0.36%		AF High Income Trust
ABHIX	4.7%	-0.17%		AC High Yield Bond Fund 
BGNMX	1.1%	0.24%		AC GNMA Bond Fund
ADFIX	2.8%	0.45%		AC Diversified Bond Fund
ACITX	8.4%	0.37%		AC Inflation Adjusted Bond Fund
RPHYX	0.8%	0.05%		S: Riverpark Short Term HY
PONDX	2.2%	0.6%		S: PIMCO Income Fund (D) 
Total Weekly Portfolio Change:		0.1%		

-

Hi again scott and others on this post.
Good to see more folks adding to SFGIX. It's doing quite well this year. But Max for the life of me I will never understand why you own three similar Matthews funds and SFGIX! But, if you're happy, I'm happy.
I recently doubled-up on AQRIX selling all of RPHYX. I love the way parity handles risk and while I think David Sherman's RPHYX strategy is superb, my investment horizon is longer than appropriate for this good fund.
I also sold off two thirds of FAAFX after its recent run up, wanting to tame volatility...my horizon is longer than two months, but not ten years! I purchased more RNSIX with the proceeds. Hard to find a higher return at such low volatility than this income fund.
Current portfolio then is 60/40 slanted toward fixed income: RNSIX, AQRIX, FAAFX, WBMIX, SFGIX and DODBX. I also have small equity holding in BAC. Four of the funds I first learned about on MFO. Will be looking to cut one maybe two funds in months ahead, since I can never shake Bogle's guidance to KIS.

Reply to @claimui: For what interest it holds, following the RPHYX conference call, David expressed a desire to chat with folks about his fund. I think you'd enjoy the experience. He's both sharp and engaging.
David

RNSIX
AQRIX
FAAFX
WBMIX
SFGIX
DODBX
Highest to lowest portfolio holdings.
I tend to agree with HiYield...hard to ignore equity-like returns with bond funds right now, while it lasts.
I recently sold RPHYX, adding to AQRIX.
Never did follow-through with ARIVX, after broker delay...covered for now with FAAFX, but did I pare back on it after recent advance to reduce portfolio volatility, which is currently under 10%.
So, six sweet funds.
Would like to get down to five or less in months ahead, but we will see...some other constraints in play for me.
But Ted...hats-off to your selection. Superb.

I own the following bond funds:
RPHYX (cash alternative)
PRAIX (tips)
DBLTX
PTTRX
PIMIX
RNSIX
I also own these funds with signifcant bond holdings:
PAUIX
BERIX
VWINX
I'm thinking there is probably a lot of redundancy here and I could consolidate into fewer funds or should trade the balanced funds for stocks funds. Would appreciate any advice.

Hi Vintage.
You're right, of course.
And yet...
I think that to invest in a fund like RPHYX or PAIUX, you need to have a three month or less horizon. If so, you definitely need a "cash" fund.
But if your time line is more reasonable, like two years, then hard to reconcile not going with a solid fixed income fund, like RNSIX or PONDX or DODIX.
Through market bulls and bears, DODIX, for example, has never lost more than 3% in a single calendar year, and yet it has earned much more in any two-year period. Here's tally of annual returns since 1989:
YTD 6.2%
2011 4.8%
2010 7.2%
2009 16.1%
2008 -0.3%
2007 4.7%
2006 5.3%
2005 2.0%
2004 3.6%
2003 6.0%
2002 10.8%
2001 10.3%
2000 10.7%
1999 -0.8%
1998 8.1%
1997 10.0%
1996 3.6%
1995 20.2%
1994 -2.9%
1993 11.3%
1992 7.8%
1991 17.9%
1990 7.4%
1989 11.5%

Reply to @fundalarm: Thanks for the follow-up, fundalarm. You're right. What I should have asked is "what is known today about the type of crash we are most likely to have next... and the differences between that and 2008." I thought that would be more answerable than "when will the next crash be," - and I always assume that you and the people here I have come to trust implicity know much more than is probably possible about projecting the future.
But as you said, with such a short duration of less than 4 months on RPHYX, I do feel very comfortable using this investment for David's Roth.