Edit: Still think the junk corporates may surprise in 2016. Albeit I don't trade on what I think, just what I see.

Also, keep an eye on Emerging Markets High Yield Bonds -Premx - the strength in the $ could provide a good dividend yield and cap gains.

To willmatt's original question, which seems like a good discussion topic, here's ~ 2.03 inflation-adjusted cents' worth from this house.
For now, sticking with moderately significant changes made in mid-2015, which consisted of (1) reducing equity by quite a bit, concentrating it mainly in lower volatility funds with a strong tilt toward hedging foreign currency; (2) building up to about a quarter of the port in FI cef's, in munis, preferreds, and non-agency mortgages; (3) weeding out as much in hy corporates and commodity energy equity as possible; and (4) building up BBB/BB-ish muni oef's.
What are others doing?
Cheers, AJ

One area that seems duplicative is my accumulation of balanced funds. Currently, I own VWENX, JABAX and VTMFX. Two out of the three seems adequate to me. I really like VTMFX and its muni bond holdings, which I hold in a taxable account. So, its come down to a decision between VWENX and JABAX. I bought VWENX in a taxable account many years ago and its ballooned to my largest holding. I have a rather large capital gain with it, so its tough to sell without incurring the big cap gain. JABAX is held in a Roth IRA, so no tax issues with it.

The Capital Spectator By James Picerno | Jan 4, 2016 at 06:34 am EST
It’s official—2015 was a rotten year for the major asset classes. Other than a measly 2.5% total return in US real estate investment trusts (REITs) and fractional gains in US stocks and investment-grade bonds, the year just passed delivered black eyes to most of the broadly defined slices of the global asset pie. If you don’t mind a round of statistical abuse, let’s review the numbers.
Will the year ahead deliver something better? For the moment, Mr. Market’s ex ante clues don’t look especially encouraging. But expected returns–and risk–vary through time, which is a reminder that a robust system for risk-management and analysis will probably be especially valuable in the year to come.
http://www.capitalspectator.com/major-asset-classes-december-2015-performance-review/
@Junkster
S&P Municipal Bond High Yield Index 1 YR
LAUNCH DATE: DEC 31, 2000
246.90 2.84 %▲
S&P Municipal Bond High Yield Index 5 YR
LAUNCH DATE: DEC 31, 2000
246.90 8.06 %▲
http://us.spindices.com/indices/fixed-income/sp-municipal-bond-high-yield-index
https://www.spdrs.com/product/fund.seam?ticker=HYMB
C E F Invesco Municipal Income Opp Trust (NYSE:OIA
https://www.google.com/finance?q=NYSE:OIA&ei=tYSKVuLHMZbVjAHQvouoAw

The elevator discussion in David's Jan. commentary caught my attention. If I understand it correctly, the strategy of SDRIX is to stay fully invested at all times in a generally large cap value manner while hedging against a bear market using puts that only come into the money when the market is down 10%. Unlike most long-short strategies, it's not hedging against individual securities nor is it trying to time moves in and out of the market (as does Hussman, I believe?). So the fund can have good success either in a big up year or in a big down year. Its worst case scenario seems to be a year with the market down 9% (so the hedge isn't quite triggered) while the market is led by growth stocks (so the value tilt causes under-performance). This year, a flat market led overwhelmingly by a couple of big growth stocks, SDRIX was down less than 5%, so I'm guessing that down 15% really would be a rock-bottom scenario for it. It's a nice thought that your fund would do okay in a roaring bull market while thriving in a devastating bear.
FWIW, this is the first vehicle I've seen that pretty much implements the investing ideas that Mark Spitznagel puts forth in his very interesting book, The Dao of Capital. The main difference so far as I can recall is that Spitznagel suggests a breakpoint of 20% or 30% for your hedge instead of 10%, I presume because of cost.
Any comments?

Hi, David.
Almost all of the winners in my retirement portfolio were Fidelity large growth funds (and Fido Japan Smaller Companies, bought some while ago at Ed's recommendation).
In Mr. Danoff's case, his major winners were Facebook (up 34%), Amazon (up 120%), various flavors of Google (up about 45% depending a bit on share class), and Netflix (up 135%). Decent gains on smaller positions in Visa and MasterCard, services important to your use of all of the above.
Berkshire Hathaway and Apple were negative and Chipotle was negative in oh so many ways.
For what that's worth,
David

Towards the end of this article is:
Nuveen Quality Preferred Income 2 (JPS) has most its exposure to preferred stock issued by large banks and insurance companies, such as Bank of America and MetLife. Most preferred is perpetual, giving it a lot of rate risk, but credit quality is improving as banks and insurers build capital cushions.[my emphasis]
Why is so much MSM finance reportage persisting with this mantra? I don't get it; last time I looked, the rating agencies were giving yet another credit downgrade to many of the 10 largest banking institutions. Excluding Wells Fargo, aren't many now about one step from BBB? That's terrible! And most MFs that focus on preferreds have a boat-load of Big Bank preferreds. Perpetual pfds. No thank you. Put leverage into the mix? No thank you very much.
@Ted I know it increases concentration risk, and there may be some call risk in certain issues, but I just think it's be better to follow your route--- be patient, identify pfd targets, and when they hit a sensible buy price then go for it and build your own "Benz bucket," one by one, in a measured way. In this asset class, how else can one stay away from the banksters, and the illusion of their stability?

Nice metaphor extension from a fellow named Mark Yusko of Morgan Creek Capital Management: "Trying to catch falling knives always results in lost fingers… Better to let the knife hit the floor, bounce around a little, and when it stops moving, go pick it up."
I wonder if David's planning to flesh out his comment about this being a senseless market.

My mind is reeling with respect to how Scottrade handled the year end distribution from GPROX and I'm wondering if any of you readers have a similar experience with either your brokerage firm of choice or even with Grandeur Peak proper. Forgetting for now that none of their math computes, or my two calculators are wrong, I am curious as to how they decide to calculate the various classes of distribution income (dividends, long-term and short-term capital gains) on differing numbers of shares.
To wit: Scottrade starts with the number of shares that I held in my account on the day the distributions were paid. They multiply the dividend and the 'short' term capital gain distribution by that number of shares. They then add the number of shares that I receive from the STCG calculation to my original number of shares to compute the number of shares by which to multiply the 'long' term capital gain distribution amount. Huh? And why wouldn't you also add in the shares one receives from the dividend calculation? Or just use the original number of shares? I'm confused or just stupid, take your pick.
Anyway I'm seeking enlightenment. Happy New Year. I can wait.

FYI: Bruce Berkowitz, the largest outside shareholder at Sears Holdings Corp., plans to make himself heard.
As chief investment officer of Miami-based Fairholme Capital Management, Berkowitz has been a staunch supporter of Edward Lampert, the hedge fund manager who runs Sears and controls about half of the retailer’s shares. But Fairholme signaled a shift in its role at Sears in a Dec. 18 filing with the U.S. Securities and Exchange Commission.
Regards,
Ted
http://www.bloomberg.com/news/articles/2015-12-30/berkowitz-s-fairholme-increases-sears-stake-signals-active-role

This does describe what I'm seeing - that an extra "income" dividend is paid at the end of the year, and that it doesn't vary by share class (since all the expenses have been paid already out of the usual monthly dividends).
What puzzles me about that M* statement (which likely reflects reality, at least in part), is that I don't see anything in the prospectus about the fund being an ersatz managed payout fund and that I can't get the financials to match.
Specifically, the fund's net investment income per share comes out to less than the total monthly income dividends (per share) paid out, let alone the total income dividends (including the year end "bonus"). How does it do this without return of capital?
This is based on the prospectus' Financial Highlights. (That's a 38MB file; just in case you've got thoughts of actually checking up on me :-) ) Wait for it to load so that it jumps to Financial Highlights, then scroll a few pages, past prospectus p. 87, to p. 89 where you'll find the data for PIMCO Income Fund.
It shows for the year ending 3/31/15 that the fund distributed 74c as income (for PONDX, i.e. Class D). This matches the sum of the monthly income dividends between April 2014 and March 2015 plus the bonus dividend on 12/29/14 of 10.6c, give or take rounding to the nearest penny.
But that same line in the prospectus says that the net income per share for the same period was only 49c. Where did that other 25c/share come from? The prospectus says there was no return of capital.
I honestly don't have a clue; I don't usually try to dissect financials this finely. There's more going on; can't really comment more on it without understanding it better. Homework for another day, perhaps.

@PRESSmUP - not unique, but not a routine occurrence (unlike monthly income divs and annual cap gains distributions).
The monthly income dividend comes on the last day of the month. For December, it came on the 31st in 2014, 2013, 2012, and 2010. In 2011 it was Dec 30th (Friday). The annual cap gains dividend comes each year in the middle of December.
In some years (2014, 2012, 2011) there was an extra distribution a couple of days before the end of the year. In other years (2013, 2010) there was not. When there was an extra distribution, it was 1x to 2x the mid December regular cap gains distribution (which IMHO looks bad enough - they should not be that bad at calculating the cap gains, absent a late sale). This year it was 25x (25c vs. 1c).
See historical div distributions at Yahoo Finance.
Morningstar is reporting the 24.75c/share div as an income dividend, but that's just repeating what PIMCO's supplemental dividend page said. How could a monthly income dividend of 5c/month transform into 25c for the month of December (in addition to the 5c dividend I expect to show up tomorrow)?
Unless PIMCO has been holding back on paying out the full amount of income on a monthly basis (contradicting its prospectus), or unless it is lying about the nature of the dividend? Any other suggested explanation of where an extra 5x monthly income div comes from?

@ducrow: Based on it's 1-mo.-5 yr. 86/85 percentile performance I'd sell
Regards,
Ted
M*: ICMBX Performance
http://performance.morningstar.com/fund/performance-return.action?t=ICMBX&region=usa&culture=en_US
ICMBX Is Ranked #59 In The (MA) Fund Category By U.S. News & World Report:
http://money.usnews.com/funds/mutual-funds/moderate-allocation/intrepid-capital-fund/icmbx

Something that seemed curious to me is that while PIMCO's link to the file is named is roughly what I stated above (quarterly/annual/supplemental), the file itself says only quarterly dividends. It looks like PIMCO may have grafted onto its quarterly income distributions a CG distribution (due to a last minute sale?).
Further evidence:
- The amount column is labeled Income Dividend Rate (as opposed to the Cap Cains Dividend Rate label that appears in its 12/15 distribution page)
- The distribution amounts are the same for all share classes; that happens for cap gains, not for income dividends (expenses are subtracted from income first, so share classes with different expenses have different net income distributions)
Put these two details together and it suggests a last minute change with incomplete editing, because you've got CGs listed in a file clearly labeled only for income distributions.

FYI: In the past month — which is about how long it's been since Columbia Threadneedle dropped Marsico Capital Management (MCM) as subadvisor on Focused Equities and six additional funds — the fund now known as Columbia Large Cap Growth III has topped 75% of its large-cap growth rivals tracked by Morningstar Inc. by losing less than the bulk of them.
That's better than it did over the past 12 months, when it beat just 39% of its peers.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MjEyMTYyODI=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=WebMFprof123015_1K.jpg&docId=787288&xmpSource=&width=1000&height=1205&caption=&id=787287
M* Snapshot NFEAX: http://www.morningstar.com/funds/xnas/nfeax/quote.html

Is it some kind of distribution? On 12/16/15 we had already capital gains distribution.

@DavidV:
No, no, leave well enough alone, unless you have huge gains and really need to reduce them to reduce taxes.

Depends on the size of the losses, value of those losses, opportunity costs.
Do you want to be out of the market for a month? Or if you move that money to other funds for just a month, what are you hoping for?
If you're hoping for a gain, then when you sell (to move the money back to your original funds) you'll have short term gains that will be taxed at ordinary income tax (not cap gains) rates, which somewhat defeats the purpose of the move. If you're hoping for the fund not to go up, then what's the point? (Though you would be able to claim any loss.)
If (in the case of PONDX) you're just looking for income (i.e. monthly dividend, not appreciation), how much do you expect to get in a month vs. getting 1% in a bank account? That difference is approximately your opportunity cost, give or take the risk of PONDX or your replacement fund changing in value over the next month.
It may be better to think of moving the money to other funds for a year (to avoid the short term gain problems). If the market goes up in 2016 you'll still wind up recognizing gains, but at least they'll be long term. You have to weigh that tax cost against the losses you'll recognize now.
Looking at PRWCX, the shares that lost ~10% might be worth selling; I'm not sure I'd sell shares bought at the beginning of this year (~4% loss) - a lot of risk (in moving money around, possible short term taxes, etc.) for a small write off. So if you do a partial sale, these are the shares I'd keep (more below).
PONDX is different for a couple of reasons. One is that the monthly div reinvestments this year have had small losses (2-3%). So you may be looking at smaller losses per share. On the other hand, moving money to a different bond fund and back may be "cheaper" - as I described above, you generally don't expect much appreciation from bond funds.
Still, it's a volatile fund in a volatile category - a similar replacement fund could go up or down a percent in a month. If it goes up, that's better than keeping the money in cash. If it goes down (and tracks PONDX) then you would have lost the money anyway, and meanwhile you realize the loss for 2016 instead of later. Not that much volatility for bond funds, even funds like this, so the risks are less in moving money around.
If you're going to do a partial sale (as with PRWCX), then I'd suggest telling your broker (or TRP if you're invested directly) that you want the cost basis to be actual cost (specific shares), with the default method specific shares and the secondary method being highest first or tax utilization. You need to do that a day or two before the sale - the brokers I've been dealing with won't switch from average cost to actual cost (any other method) in less than a day.
This is important because you want to maximize the losses you're recognizing. If you use average cost, then all the shares you sell will be treated as having the same cost - which means you'll be averaging in the cost of even those shares that went up in value. On the other hand, if you use an actual cost method, then the cost of the shares sold will be the real costs, which for many shares will be above the average.
You notify the broker, and then when you sell the shares (or the next day) you notify the broker which shares you sold. It's easiest doing it online at the time of the sale. The system will let you pick the shares you're selling, and you just check off the most expensive ones until you've picked enough shares. Or if you told the broker to sell highest first, this will happen automatically for you. That will maximize the loss you recognize.
One other point: reinvested dividends will create wash sales if you don't sell your full holding. That means that some of the losses won't be counted now. You don't lose them, you just defer them. It's not terrible, and these days, the broker will do the calculation for you. If you purchased 10 shares this month (through reinvestment or separate purchase), then the losses on the oldest 10 shares will be deferred (not counted now).
The bottom line is: is taking this loss now of enough benefit to be worth these maneuvers? Taking the losses now and buying back means that you'll have bigger gains to pay later (since you're resetting the cost at a lower price).
I took a fair number of losses this year, but most years I don't even though they're available to me. And I did it with funds that were easy to replace or ones that I wanted to get out of. Swapping back into equity (or volatile bond) funds entails risk and possible tax costs. It's an easier decision when one has a long term replacement fund in mind.

Thank you all for your answers. I still have some doubts selling funds to recognize loses.
My specific situation is following:
I started MF investing only1-2 years ago and practically all my MF purchased this year experienced loses after dividend payments and year end capital gain distributions. To recognize the loses I would need to close almost all my positions. Is it really a good idea?
For examples my 2 best funds PRWCX and PONDX. Their prices now are the lowest in 2 years. That means all my contributions (including reinvestments from capital gains and dividends) to these funds during that time have loses. Do you recommend to sell them now with intension to purchase again in a month? (For closed to new investors PRWCX that probably means selling not 100%).

Mutual funds that might be useful in replicating - to some degree - the soon-to-vanish SPHQ (an E.T.F. that currently follows the S&P High Quality Rankings Index) would seem to include the following:
DRIPX: The MP 63 Fund http://portfolios.morningstar.com/fund/summary?t=DRIPX
MPGFX: Mairs & Power Growth Fund http://portfolios.morningstar.com/fund/summary?t=MPGFX
VDIGX: Vanguard Dividend Growth Fund http://portfolios.morningstar.com/fund/summary?t=VDIGX
The first fund [DRIPX] is obscure but available at TDAmeritrade.
ETFs that could be used to construct similar exposure include:
FTCS: First Trust Capital Strength http://portfolios.morningstar.com/fund/summary?t=FTCS
NOBL: ProShares S&P Dividend Aristocrats http://portfolios.morningstar.com/fund/summary?t=NOBL
SPLV: Powershares S&P500 Low Volatility http://portfolios.morningstar.com/fund/summary?t=SPLV
VIG: Vanguard Dividend Appreciation http://portfolios.morningstar.com/fund/summary?t=VIG
XRLV: Powershares S&P500 Ex Rate Sensi L V http://portfolios.morningstar.com/fund/summary?t=XRLV
However, I have mixed feelings about the third and fifth ETFs [SPLV & XRLV], since they are offered by Invesco Powershares, the same folks that are in the process of monkeying with (i.e., IMHO destroying) SPHQ by switching its index to one that has a very different exposure - in terms of sectors and industries - than that (currently) used by SPHQ when it was posting it's admirable record over the last 5 years or so.
Keeping it 'simple' (HAH!), a 50/50 blend of MPGFX and SPLV appears to have very similar exposures and performance, based on historical performance (and for 2009 - 2011, when SPLV did not exist for full year,using SPLV Index returns from S&P website less SPLV tracking error of 26 bps from E T F.com).
Looking at individual holdings of each...

MPGFX owns 50 stocks
SPLV owns 100 stocks
SPHQ owns 132 stocks (current index, until March 2016)
The 50/50 blend of MPGFX & SPLV has 139 stocks. There are 11 stocks shared between MPGFX & SPLV, representing about 19% of the balance of the blended 50/50 portfolio.
Comparing the "BLEND" (MPGFX+SPLV; 50/50) with SPHQ, there is an overlap of 61 stocks. This represents, by dollar balance, 45% of BLEND and 49% of SPHQ.
Of course, most of the "heavy lifting" is being done by SPLV, since both it and SPHQ are subsets of S&P 500. Comparing SPLV only with SPHQ, 51 stocks are shared between these two ETFs. They represent, by balance, 51% of SPLV and 39% of SPHQ.
Again, let me know - via a post here - if you folks come up with other potential 'substitutes'. Thanks.

Always, ALWAYS book taxable losses.

As I tried to describe above, I don't agree with this, except as a simple rule of thumb if you don't want to get into more detailed calculations.
For example, suppose you are married. The 15% bracket goes up to $74,900. Suppose your taxable income (Form 1040 line 43, notordinary income) typically runs about $76K, including $2K of recognized cap gains.
Let's suppose you've got a loss of $2K that you are debating about taking (for tax purposes).
By assumption, you've got $74K of ordinary income, and $2K of cap gains. The first $900 of those cap gains are taxed at 0% (because $74K of ordinary income, plus $900 of cap gains is still below the 15% bracket limit of $74,900).
The other $1100 of cap gains is getting taxed at 15%.
If you recognize a loss of $1100, you get to save that 15% on the last $1100 of gain. Relatively speaking, a nobrainer. But if you choose to recognize your whole potential loss of $2000, the extra $900 in losses is wasted. It reduces your cap gains to $0, but the last $900 weren't getting taxed anyway, so what's the point?
Instead of having $900 worth of losses "in the bank" that you could recognize January 2, for 2016 taxes, you've squandered the opportunity by using those losses to reduce a gain that wasn't being taxed.
Similar reasoning applies at the 39.6% bracket, where cap gains rates transition again - here from 18.3% to 22.3%. You may be better off deferring the loss if it takes you below $464,850 in taxable income. A problem we should all have. I mention it simply to illustrate that it is not the 0% tax on cap gains that creates this situation, but any transition in tax rates.
There are other situations where recognizing losses may be suboptimal. The ones I'm familiar with follow this general pattern of crossing a threshold amount (often some form of MAGI).