Real nice bounce back in Europe today. EWI I bought last week in the play portfolio, when EWG got stopped out with nothing to show for it, had a 2.81% pop.
A well diversified global portfolio did very well today, a departure from the situation for the last 15 months when US equities ruled.
It was actually a risk off in US markets with mostly stocks in major indices gaining. Suspect this is from inflow into US broad index ETFs from money being pulled out of EM indices.
This would be a good time to balance globally in DM allocation if one has become too lopsided with gains in US markets.
EM is still shaky.

From the interview: "High-quality stocks in the U.S. are not nearly as bad as the rest of the market. "
I'd agree with this - I look at a lot of large cap names that, while not cheap either in many cases, are trading at more reasonable valuations than the smaller and/or 'sexier' names. People seem desperate for what they perceive as growthy that boring/consistent have not gotten as much attention.
This, to me, is enormously concerning and I agree big time with Grantham:
"I worry about food, and I worry about Africa. The global economy has really two civilizations, or two systems. One is everything outside of Africa, where Taiwan, Thailand, Canada, Mexico, and other countries are all one big system moving together—trading oil and everything else. And then there is Africa, which, with the possible exception of South Africa, is its own little world. But it's the only part of the world where the population, on a broad basis, still is growing rapidly. It probably will decline, but these countries can't produce enough food, unless they get good advice and capital and fertilizer—or they become really clever farmers, and get a lot of help and sensible governments.
The countries I worry about most immediately are in North Africa, curling all the way into Syria, because they eat wheat. The price of wheat is two, three times what it used to be, and the price of energy is four times what it used to be. These are not rich people, so they have been desperately squeezed, and the weather is bearing down on agricultural production. The most dependable aspect of climate change is more droughts and more floods.
All of this has many implications, from countries like Egypt being able to feed its population to immigration policy in Europe to the impact on high-grade, low-cost phosphate, a big chunk of which comes from Morocco. Phosphorus is crucial for farming. The much higher prices of wheat, oil and, to some extent, fertilizers have helped destabilize various societies in this region. I worry about what happens if the deterioration spreads to Morocco."
Agriculture stocks did not do well last year and I think anyone who agrees to some degree with the above may view that as a long-term opportunity. Some related farming stocks (irrigation, industrial farming etc) have not done well, either.
Personally, I sleep well at night owning agricultural names - people have to eat and I remain concerned long-term not that there won't be food but it becomes, "food at what price?" I think that question will result in definite instability in many parts of the world. Water is another concern - water funds have done reasonably well lately, but I think they're worth considering with a long-term view.

Congrats on your accomplishment. I'm 15+ in retirement and have run a very conservative mix for many years - (with only a fraction of your wealth:-)
But, doubt I would change much if it were a larger sum. Like you, I want mainly capital preservation while earning a few % better than money markets or short term bonds would offer. We may both live a lot longer than we anticipate; so you don't want to remove risk (and potential growth) completely from the mix.
Edit (@ 3:54)I should have also mentioned inflation as the other big "?".
Lots of great suggestions from the others. Couldn't resist dropping by. Regards

@willmatt72
First, it has been stated here at MFO that this type of interchange is dangerous among strangers, especially on the internet. So, I'll pretend we're, face to face, at the Mutual Fund Bar and Grill just down the street, having a casual chat; and we're playing "Devil's Advocate" with our portfolios.
You noted:
1. "I'm just curious about your thoughts about what kind of risk is acceptable for a 49-year old about 15 years from retirement with a $1.1 million portfolio.
2. I have very little debt (owe $120,000 on a mortgage on a $425,000 condo near Boston).
3. Personally, I don't believe it makes sense to take any unnecessary risk so I've been about 40% bond funds, 35% equity funds, 25% cash.
4. One of my goals has been to generate some income to help pay bills, etc.
5. But I'm equally focused on capital preservation. Losing 25% of principle in one year is not acceptable to me at this point."
>>>1. Our house is retired, so without prospect of inbound cash flow (no input to previous 401k, 403b, or Roth IRA) from active employment. Your house still has active cash flow from employment. This may help support your thoughts toward a moderate allocation mix for your investments; as that if the equity markets did slip too much for your comfort zone, you have the choice of either reducing these holdings or adding to the holdings via a dollar cost averaging (assuming you are doing this with retirement accts on a monthly basis.
>>>2. We're both in the same place with this aspect of running a controlled budget with our households. We have a good grasp of understanding between the wants and needs for our budgets.
>>>3. As you voice your portfolio mix, I eventually reply that your current allocation is very conservative. Of special note is the large cash position; which is effectly dead money if in money market or CD holdings. The money is not keeping up with inflation and future taxation. $275,000 of your portfolio is too much to have asleep at the investing wheel, IMO.
>>>4. Income generation goals. I mention that in this equity-centric investment world; most folks think about bonds or related (dividends) as income producing. This is likely true from a yield viewpoint; but not so if the bond/asset value is declining. Then the "income" could be moving backwards. I explain that our house views income from whatever method as the positive return on the invested monies, period. We care not whether the income is from a yield/dividend or the appreciation of the underlying value of the investment. Tis all positive cash flow to the accounts. An offered example was our investments into the high yield bond sector in early 2009. Wow!; look at those yields in the upper teens.....well, those yields faded really fast as money flowed back into the HY bond sectors. We didn't care about that, as the underlying values of the bonds was moving upward at a fast pace. Technically, we gained "income" from both ends of the investment.
>>>5. Capital preservation. Yes ! Not just for the older folks; but perhaps of more consideration for the older folks. 'Course the critical point here is whether one sells at the wrong time during a period of fear. Making up the value of losses in such a period is a problem for the young investor, too; as that money is now missing. The money will never be in the account again to live the happy life of ongoing compounding, a most profound grower of money. Yes, a young investor can replace the money with new money from their active employment; but this is not a plan that could be repeated many times without permanent damage to one's investment portfolio into the retirement years.
cman asked a critical question, too. Is this money in tax sheltered accounts? IMO, this would likely have some impact upon where your monies are invested and/or restrict money movements for reasons of current taxation. I am not qualified to comment about this area of investing; as our retirement portfolio is all tax sheltered at this time, so investment moves at our house do not consider current taxes. The cost basis going forward when the IRS requires beginning withdrawals will be what it becomes.
How active do you choose to be in monitoring your portfolio? Would you prefer the active managers in the balanced or moderate allocation funds area? Members here noted a few to review. Or perhaps a few etf's for your own mix?
cman, as well as others here have noted that asset allocation is pretty much impossible to determine for another. I will agree. You have already established a "comfort zone".
A kinda summary: If one invested 50/50, 10 years ago today, in VTI and AGG (not my favorite bond choice, but...) the combined annualized return would be 8%. 'Course one may have encountered what I call the "twitches"; as VTI traveled downward about -55% from October of 2007 through March of 2009. We're not a trading house; but do average about 1/3 of our portfolio moving around in any 12 month period.
We don't hold any "cash". In this equity-centric marketed investment world; our cash is always in a bond fund of some flavor. We view this "cash" placement in this light......If we were to park 25% of our portfolio in cash (I will presume money markets or CD's or other low yield/safe areas) for 12 months, we would calculate a forward loss of -3% for the period from a nominal inflation rate eating away at the value of that cash. We prefer to use a "calculated" risk of investing into a bond fund, index or etf and "take the chance" that the fund will not lose more than 3% in the same time frame. If this would happen, we are no worse off than the cash position would have returned. A large "cash" position for our house currently is PIMIX. A very narrowly focused bond sector at this time and the fund uses all of the tools available in the goody bag for results. But, we place the manager high upon our list of knowing what he is doing. A slow investment train to view passing by, without a doubt. But, this train just keeps traveling along; slowly and consistent (at this time), not stopping at the switching yards and lossing time (money).
Our house follows our holdings daily with a week ending review. This does not cause us to make quick changes to the portfolio; but does create, at least for us, an intuition as to trends. When we mix this review with what we consider in all other areas globally, this allows us to make determinations about any needed changes. Six weeks ago we were 40% equities; today that number is 15%. Our largest equity holdings are PRHSX and VSCPX. Other equities exist within LSBDX and FAGIX. The equity sales monies moved into TIP and other TIPs related funds available in other accounts. We felt that TIPs were oversold in 2013 and are still needed by pension and related groups. Even the lonely TIPs have a long term average return around 5%. 'Course, these may get further bumps upward depending on how silly events turn with Crimea, especially beginning again, this Sunday.
Our house's opinion is that the 30 year bond market rally still is not dead. Too many overhangs and deflationary pressures exist. But, we will carefully monitor this area, too. As you know; not unlike the equity markets, there are many flavors of bonds, many times moving in different directions.
Now, if only those I know and who ask; "How is the stock market doing...?" would recall that I always correct them to the fact that bonds do exist, too. Without the (larger dollar value) global bond market offerings, few equity companies would be able to do business or exist at all. Be assured that bond areas investors do well, too; over time.
NOTE: I began writing this prior to MikeM and msf replying, and your most recent post regarding your holdings.
Regards,
Catch

I do play with a very small portion of my portfolio on what I feel are potential game changers or innovators, but leave most of that to WAGTX, which I have been very pleased with. Recently I started buying PLUG at $2.60, and stopped when my average cost was $3. Put a stop loss in and it sold at $8.42. What a heart pounded experience that was, but like I said, gambled with less than 1% of my total. Am about to sell my Gilead since I think most of my biggest gains have been made, but will still hold FBTIX and PHSZX as I think biotech and healthcare will be strong performers in coming yrs. My stock portfolio is to add alpha, but my mutual funds and etfs are still the majority of holdings. Latest additions are ARII and WWAV .

Capital Preservation with an eye on mispriced opportunities might be one approach. You have an opportunity to be patient while attempting to identify market mispricing. For capital perservation determine your downside risk tolerance and hold funds that prove their relative strength.
Link related to your request,
The No-Frills Investment Strategy:
ftpress.com/articles/article.aspx?p=374500
A Quick Review of Relative Strength Investing
Here is the three-step procedure for managing your mutual fund portfolio:
Step 1: Secure access to data sources that will provide you with at least quarterly price data and volatility ratings of a universe of at least 500 (preferably somewhat more) mutual funds. (Suggestions have been provided.)
Step 2: Open an investment account with a diversified portfolio of mutual funds whose performance the previous quarter lay in the top 10% of the mutual funds in your trading universe and whose volatility is equal to or less than the Standard & Poor's 500 Index, or, at the most, no greater than the average fund in your total universe.
Step 3: At the start of each new quarter, eliminate those funds in your portfolio that have fallen from the first performance decile, replacing them with funds that are currently in the top performance decile.

I'm just curious about your thoughts about what kind of risk is acceptable for a 49-year old about 15 years from retirement with a $1.1 million portfolio. I have very little debt (owe $120,000 on a mortgage on a $425,000 condo near Boston). Personally, I don't believe it makes sense to take any unnecessary risk so I've been about 40% bond funds, 35% equity funds, 25% cash. One of my goals has been to generate some income to help pay bills, etc. But I'm equally focused on capital preservation. Losing 25% of principle in one year is not acceptable to me at this point. If you are in a similar situation or feel comfortable providing input, it would be much appreciated. Thank you.

Hi Guys,
David Swensen is a hero among the elite institutional class of investors. His record is outstanding.
I read his “Unconventional Success” book in 2005. In its introduction, Swensen admits that he made a major revision to the book’s planned outline soon after he started the project.
His investment success had indeed come from an unconventional approach. At Yale, he eschewed the common 60/40 mix of equities and fixed income investments in favor of more exotic and illiquid private placements, venture capital, real estate, timber, and hedge fund alternatives. This approach took very specialized experts and extensive research typically not accessible to the individual investor.
So, what worked for Yale was simply not likely to work for his prospective readership. Swensen revised the thrust of his book to accommodate these differences in capability and the result was a hugely successful book that the average individual investor could easily execute.
Swensen is obstinately opposed to active investing by amateur investors. Swensen observes that only a handful of super professionals can clear the hurdle of common benchmarks. This small group does it with esoteric, often costly, and historically ephemeral techniques. It’s a tough nut even for this exceptionally talented cohort.
In the end, he strongly endorses passive Index investing for individual investors.
Here is a Link to an 11 minute NPR interview conducted by Motley Fool Profiles with him soon after his book’s release:
http://www.npr.org/templates/story/story.php?storyId=4965681
In the interview, Swensen disagrees with the Peter Lynch position that private investors hold an edge over professionals. He concludes that the necessary research is just too demanding for the individual. I propose that Lynch’s most prescient decision was to retire when he did. His edge disappeared as the size of his fund grew to an unmanageable magnitude; his latter year returns were not especially impressive.
After Swensen’s name and fame surfaced in recent MFO discussions, I retrieved my copy of his book. I usually make a few notes during the reading and I found a few scribbles that I made at the time. I reproduce some of these notes here. I hope they’re accurate; my handwriting is only semi-legible at best.
“Regression to the mean, one of the most powerful influences in the world of finance, explains the tendency for reversal of fortune.”
“Thousands upon thousands of professionally managed funds routinely fall short of producing even market-matching results.”
“Individuals who attempt to compete with resource-rich money management organizations simply provide fodder for large institutional cannon.”
“Poor asset allocation, ill-considered active management, and perverse market timing lead the list of errors made by individual investors.”
“Overconfidence contributes to a litany of investor errors, including inadequate diversification, overzealous security selection, and counterproductive market timing.”
“Instead of concentrating on the central issue of creating sensible long-term asset-allocation targets, investors too frequently focus on the unproductive diversions of security selection and market timing.”
“As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run.”
“Buying yesterday’s winners and selling yesterday’s losers inevitably hurts tomorrow’s performance.”
“Unfortunately, as asset size increases, active portfolio management becomes increasingly difficult.”
“Sensible investors prepare for a future that differs from the past, with diversification representing the most powerful protection against errors in forecasts of expected asset-class attributes.”
“Well-informed investors avoid lining brokers’ pockets with unproductive fees and enjoy higher expected returns from buying no-load funds.”
“Sensible investors avoid speculating on currencies.”
“Sensible investors avoid non-core asset classes.”
However,
“A modest allocation to emerging markets stocks contains the potential to enhance the risk and return characteristics of most investment portfolios.”
“With its inflation-sensitive nature, real estate provides powerful diversification to investor portfolios.”
And finally,
“Ultimately, a passive index fund managed by a not-for-profit investment management organization represents the combination most likely to satisfy investor aspirations.”
“Sensible taxable investors reach an obvious conclusion: invest in low-turnover, passively managed index funds.”
These sayings are not especially groundbreaking. Many of them had been expressed earlier by the likes of Ellis, Bogle, Malkiel, and many others.
I guess I owe a belated acknowledgement to Swensen. I was at least partially informed and guided by Swensen on many of the positions that I now advocate within the MFO exchanges. After reviewing my notes, I realize that Swensen served as one of my book mentors.
I hope you enjoyed the brief listing of Swensen quotes.
Best Regards.

Reply to scott
From conference call Hercules Technology Growth Capital's CEO Discusses Q4 2013 Results - Earnings Call Transcript
Feb. 27, 2014
Question from Jon Bock - Wells Fargo
...where are you starting to see on a venture stage the most valuation bubble or shall we say the least compelling valuations in your view?
Response from Manuel Henriquez - Co-Founder, Chairman and CEO Hercules Tech.Growth Capital NYSE:HTGC
It's really the equity guys chasing these valuations. Now that said, you're seeing still a fairly robust increase in valuation in technology companies and early-stage social media companies and SaaS-type companies. We are purposely – we are the most under invested in technology that we've been in the history of Hercules.(10 years) However, I believe that that tide will change in the second half of 2014 as all these companies finally get acquired, you'll start seeing a whole new birth of new technology companies being started that have new business models and a much more attractive valuation to be in. At which point, we will wade back in with some new product offerings that we will have to offer new plans of services to earlier stage companies that we don't have today, to really start grabbing some of that market share and some of that void in our portfolio today. So, technology is something where we purposely are under investing today. It is the easiest transaction to originate to. It doesn't require a lot of sophistication when you're first doing early stage deals compared to the expertise needed in energy technology or life sciences investing, for example.
Edit 03/14/2014
SAN FRANCISCO (MarketWatch) — Castlight Health Inc. shares soared almost 150% Friday on a strong reaction to the public debut of the cloud-based health care software company.
Castlight CSLT ended the day up by $23.80 at $39.80 after the company went public by selling 11.1 million shares of stock at $16 each. Castlight had originally priced its IPO in a range of between $9 and $11 a share.
The company’s software is used by businesses to improve their spending on health care and reduce waste in what Chief Executive Giovanni Colella called “the only industry in America that’s been failed by capitalism.”
By Brian Gormley ‘Next Big Thing’ Castlight Health Scores Giant Win for VCs
Latest Headlines is home to all the latest, up to the minute news headlines from The Wall Street Journal in a streaming continuous headline experience. 03/14/2014 Evening
Castlight Health Inc.‘s initial public offering is a giant win for Venrock and other venture capitalists who pumped $181 million into the San Francisco health enterprise-software company.
Venrock owned 20.6% of Castlight before the offering and 18% after, according to a regulatory filing. Based on Castlight’s market capitalization of $3.45 billion, Venrock’s stake now figures to be worth about $620 million.
Castlight’s shares debuted at $37.50, 134% above the expected offering price of $16, and closed at $39.85 Friday.
Castlight’s other venture backers included Oak Investment Partners, which holds 13.8% of the company’s stock following the IPO; Maverick Capital, which has 8.9%; Fidelity Investments, holding 8.6%; and Wellcome Trust, owning 7.6%, according to the filing. All major investors held onto their shares in the offering.
The IPO represents an eye-popping public debut for the company, but its large market opportunity and the track record of its investors and management made it a company to watch well before its IPO.
Among its board members are Facebook CFO David Ebersman, Venrock partner Robert Kocher, who served in the Obama Administration as special assistant to the President for health care and economic policy, and Venrock Partner Bryan Roberts, a prominent health-care investor who co-founded Castlight in 2008.
The other co-founders were RelayHealth founder and Castlight CEO Giovanni Colella, and Todd Park, who is now U.S. chief technology officer.
The Wall Street Journal named Castlight the “Next Big Thing” in a 2011 feature that ranked the most promising up-and-coming venture-backed companies.
Castlight helps self-insured employers control costs by making health-care cost and quality data accessible. The model appeals to many investors given the struggle companies have had with rising health expenses. The company secured its valuation despite drawing only $13 million in revenue last year.
Venrock previously backed Athenahealth Inc., a provider of cloud-based services to physician practices that formed in 1997. Athenahealth went public in 2007 and is now valued at $6.5 billion.
Castlight’s offering follows a successful IPO from medical-software concern Veeva Systems Inc., which went public in October and is now valued at $3.9 billion. Another, employee-benefits software vendor Benefitfocus Inc., went public in September. Its market capitalization is $1.3 billion.
These trends have caused venture capital investment in health-care information technology to soar to heights not seen since 2000, prompting some to warn of a bubble forming. Venture firms sunk $947 million into medical software and information services last year, the most since 2000, when they invested $2.3 billion, according to Dow Jones VentureSource.
Health IT last commanded this much interest around 2000, when “e-health” startups like Drkoop.com Inc. went public despite untested business strategies. Drkoop.com, which provided health information online, folded in 2001 after finding it couldn’t survive on a business model that included selling advertising and enabling e-commerce transactions.
Amid the new investment surge, some venture capitalists see another crash in the making, with a crop of startups launching with products but no real business models. But many longtime health-IT investors say there’s also an emerging class of companies poised to pull health care into the digital age and lower costs for hospitals, employers and consumers.
“There are high valuations out there today, but there’s so much more room to run in the digital transformation,” Stephen Kraus, a partner with Bessemer Venture Partners, said.
Rising medical expenses are pushing employers and their employees to examine costs, a trend that led Venrock, Castlight’s earliest investor, to back the company at its founding in 2008. Castlight says it has signed up more 100 customers as of the end of last year.

What proportion do you think is not representative of performance-chasing ?

Problem is that the methodology used has zero information about the reasons for and distribution of the flows between different reasons for the flows in or out. It is a net composite of ALL monthly flows in and out. This will vary from fund to fund and won't repeat the same way in any time period. So there is no way to compute how much of that computation is attributable to performance chasing which will vary from month to month. For example, a huge inflow may just be due to the fund being newly included in a 401k plan or getting included in an advisor platform or any number of reasons.
The reason no one will realize those returns is because no one trades like the composite each month.
The problem with using the composite is easy to illustrate with a small boundary case example.
Consider a hypothetical fund with just two investors in it. One DCAs in $X every month and the other withdraws $X every month. The M* computation would see no net flow in or out and say the average investor realizes the full returns of the fund because the average investor is a buy and hold investor.
But neither of those two investors fit that composite and both realize different gains depending on how the fund returns were distributed through the year. Either could have a better return than the other depending on the market behavior (for example most of the gains at the beginning of the year vs most gains at the end of the year).
This is a similar problem as the fallacy of averages. The average of expected value computations on a sequence of inputs is not equal to the expected value computation of the average of the inputs.
M* is good at collecting and tabulating data, terrible at computation and even worse in interpretation.

What difference does that make for a mutual fund?

The dividend will cause the price to drop. Hopefully some of that dividend is qualified.
If you've held the shares for less than a year, selling after the dividend will increase a short term loss in exchange for a qualified dividend (taxed the same as a long term gain).
A hypothetical might help:
Suppose you purchased on Aug 29th, at $15.14/share. (Current price is $15.10). Assume the price doesn't change between now and 3/20. If you sell before the dividend, you've got a 4c loss/share.
If the fund distributes 2c/share, the price will drop to $15.08. You'll have a 6c short term loss, and a 2c dividend (hopefully qualified). Thus you've increased your short term loss by 2c in exchange for a 2c extra dividend. The dividend may be taxed at a lower rate than the tax rate on your short term loss.
This comes with many qualifications - it only works on short term shares; it only works if the dividend is at least partially qualified; the IRS might disallow this tax arbitrage.
On that last point - if the dividend is long term cap gains, the IRS requires you to hold the shares for at least six months to play this game. See Fairmark. I haven't found a similar rule for qualified dividends, but I haven't really looked that hard, either.
Are these games worth playing? If you're scratching your head over what I wrote above, the answer is no. You only "win" if you've got short term gains to balance out, and I suspect the amount of the "win" is pretty small in any case. But small opportunities are sometimes there.

GSV Capital (GSVC) is a mostly private equity tech fund that has a lot of the big names (Spotify, Dropbox, etc). Hercules Tech Growth Capital (HTGC) is another option.
Qualcomm (QCOM) and Google (GOOG) have significant venture capital arms, but they certainly aren't a giant part of either.
If you want private equity tech, GSVC is really a main option. There have been discussions of its issues (I believe it has a hedge fund-like 2/20 fee) before on here a while back and on seekingalpha, but that's a lot of the big names in one place.
Personally, I like tech to a reasonable degree (I own a handful of tech-related co's), but I'd devote focus on things like healthcare and be selective (if I have to ask if it's going to be popular in a year or three, I don't want anything to do with it) with tech.

FYI: Highlight Copy & Paste 3/11/14: WSJ Matt Wirz: The graphic is missing from link
Regards,
Ted
Investors who put cash into municipal bonds—a widely popular strategy for those seeking safe, tax-free bets—are paying about twice as much in trading commissions as they would for corporate bonds, according to a study for The Wall Street Journal.
Regulators largely bypassed municipal debt as they transformed much of Wall Street over the past 20 years, but are studying it more closely now.
Individuals are the biggest participants in the $3.7 trillion industry, which provides funding for states, cities, hospitals and school districts across the country.
A study of 53,000 municipal and corporate bonds by S&P Dow Jones Indices for The Journal shows how much more investors are trading for the municipal assets.
Individual investors trading $100,000 in bonds of a municipality, such as Washington state, in December paid brokers an average "spread" of 1.73%, or $1,730. That compares with 0.87%, or $870, paid on a comparable corporate bond, such as one issued by General Electric Capital Corp., the data show.
Brokers of stocks and corporate bonds must disclose market pricing and give individuals "best execution" on trades, ensuring they receive the best prices possible. In the municipal-bond industry, those protections are absent, allowing brokers to pocket higher spreads by buying the bonds low and selling them high.
Individual investors, especially retirees, have long been attracted to municipal debt as a relatively safe investment whose interest payments aren't taxed. They own 45% of all municipal bonds directly and another 28% through mutual funds, amounting to a combined $2.7 trillion, according to data from the Federal Reserve.
The market is supervised by several regulators and structured differently than the stock and corporate-debt markets, and regulation of muni-bond trading has been slow to evolve.
"I think we can do more here for retail investors," said Michael Piwowar, one of five commissioners on the Securities and Exchange Commission, in an interview. "We spend an awful lot of time on the equities side of the market where spreads are counted in pennies—and in the 'muni' market, spreads are counted in dollars."
Brokerages say that municipal bonds cost more to trade because they change hands far less frequently and in smaller amounts than do other securities. They have warned that regulatory changes could hurt activity in the municipal market.
The SEC held hearings on the issue in 2010 and 2011 and proposed changes in a 2012 report, but they haven't been implemented.
Investors bought and sold $183 billion of municipal bonds last year in trades of $100,000 or less, in line with recent years, according to data from the Municipal Securities Rulemaking Board.
One of those investors was Jack Leonard, a 67-year-old resident of Ipswich, Mass., who on July 23 sold bonds promising a 5% annual interest payment from his home state in two lots of $100,000 each.
The broker buying the bonds told Mr. Leonard the best price he could get was about $1,030 per bond, or $206,000.
The following day, a broker sold the same amount of 5% bonds to investors for $1,060 a bond, or $212,000, according to an online history of trading prices maintained by the MSRB. The difference of $6,000 in the two transactions is equal to 3% of the bonds' value.
It wasn't possible to verify that both trades involved Mr. Leonard's bonds from the MSRB database, which doesn't identify trade participants. But in July, MSRB records show brokers collectively sold $1 million in Massachusetts bonds to investors at a 3% average markup from the prices they paid for them, amounting to $30,000 in profits.
"That's a lot of money, and the real question is: Why are they allowed to do it?" said Mr. Leonar
Mike Becker, a retired options trader in Boca Raton, Fla., said he has grown frustrated trying to get his broker at the Merrill Lynch unit of Bank of America to tell him the best bid being offered for the Florida state bonds he wants to sell and has petitioned the SEC to pass rules giving "the public a fairer shake." Josh Ritchie for The Wall Street Journal
The SEC oversees the MSRB, which sets rules for the industry, and the Financial Industry Regulatory Authority, which enforces them. Oversight coordination has been poor at times because the market is supervised by three regulators rather than one and the issue has had a low priority in Washington, said Hester Peirce, a former SEC staff attorney who is now a research fellow at George Mason University in Arlington, Va. "I think it's going to be under more scrutiny" going forward, she said, referring to Mr. Piwowar's push and recent proposals by the MSRB.
MSRB Executive Director Lynnette Kelly said the board "is working closely with the SEC to address market structure issues in a realistic time frame." John Nester, a spokesman for the SEC, said his group and others "work cooperatively on issues affecting the municipal securities market." Staff from Finra and the MSRB meet frequently "to ensure and sustain this collaborative approach," a Finra spokesman said.
Proposed changes face opposition from brokers, which fund both the MSRB and Finra. Firms such as Charles Schwab & Co. and Wells Fargo Advisors LLC have lobbied against some changes.
"The devil is always in the details when it comes to new regulations, but we commend the MSRB for bringing this issue forward and urge them to continue this important effort," said Jeff Brown, senior vice president of legislative and regulatory affairs at Schwab. Wells Fargo declined to comment.
Meanwhile, the lack of pricing information gives mom-and-pop investors little leverage to negotiate.
"I don't know what the market is, because they won't show me," said Mike Becker, a retired options trader. The 70-year-old Boca Raton, Fla., resident said he has grown frustrated trying to get his broker at the Merrill Lynch unit of Bank of America Corp. to tell him the best bid being offered for the Florida state bonds he wants to sell and has petitioned the SEC to pass rules giving "the public a fairer shake."
"We have policies and procedures in place that adhere to MSRB guidelines as they pertain to fair pricing," a Merrill spokeswoman said.
The MSRB proposed a municipal-bond best-execution rule last week that it hopes to enact this year or next and is working on a digital pricing platform, a person familiar with the matter said.
MSRB Chairman Dan Heimowitz, a banker at RBC Capital Markets Corp., said he is working to balance necessary changes against the risk that a rushed overhaul could spur brokers to quit the market, making it harder for individuals to trade. "That is why we go slowly and methodically, but we haven't given up on this by any means," he said.
Mr. Piwowar, a former economist who studied trading costs in corporate and municipal bonds, is pushing for fixes he hopes the SEC can enact this year, like requiring brokers to give clients more price information ahead of potential trades. He said stock and corporate-bond brokers also complained that similar reforms would stifle trading when it was imposed on their markets, "but in fact, all the evidence suggests the opposite."
Peter Coffin, a municipal-bond manager for wealthy individuals at Boston-based Breckenridge Capital Advisors, said it is about time the muni market got an overhaul. "You think of how the retail industry has gone from the local grocery store to Wal-Mart to Amazon," he said. By contrast, he said, "In municipal bonds, we're still shopping at the local grocery store."

Yes, suggest you look at short term high yield funds (highlighted at this site for their mis-classified M* ratings) or high yield munis which are doing well with improving economy (HYD) as part of a diversified fixed income portfolio or go with a multi-sector fund as suggested above.
You cannot get any dividend worth the effort without risking capital loss though.

Hi Everyone,
I'm trying to figure out the fixed income part of some cash that's been "under the mattress" for a while.Ideally it would generate some income or dividends not just capital appreciation. I'm open to mutual fund ideas, ETFs,municipal bonds, and maybe closed end funds, but the fees on CEF's seem hidden and complicated. So far my reading suggest:
shorten up on duration to avoid interest hike risk!
watch out for credit risk!
currency hedged international bonds
multi-sector bonds
municipal bonds
I'm open to any ideas that are lower risk, capital preservation based.
Thanks for your advice,
Gingersnap

Unfortunately, people always make decisions based on recent past than on future.
In an unprecedented time when capital has trounced labor in returns, tax treatment and political clout and likely to continue for at least another 4-5 years before there is a serious backlash, millenials are better off choosing the best path to accumulation of capital and growing it now in the favorable environment than hoping for average salaried labor to make their retirement.
This means taking jobs in tech or finance that have outsized salaries with risk but a potential for making enough for a lifetime in a few years and doing this when they are still young and THEN having the option to do whatever they want later in life when the money they have accumulated is working for them without having to do much.
Traditional approach has been to do the opposite and will lead to a very difficult retirement and a lifelong struggle for most.
I am not saying this is the way it should be because it is a distortion of life but it is exploiting the current situation so they can do much good later on when they are financially secure.
Most millenials seem to be doing the opposite.

While this number is a good promo for the Walk Street Casino as the lottery blurb "see what a dollar can get you" is to appeal to greed and wishful thinking, what is more relevant to an average investor with various strategies and risk tolerance is how is your portfolio doing since the top of 2007 (edited to correct)?
Total stock market with dividends is up about 47% and total bond market about 14%, so a 60/40 split should have gained about 34% total for about 6.5 years of investing. That is real life. (And this is without counting new capital put in unlike what Fidelity does to publish their misleading 401k aggregate increases)
Strategies that limited downside may have done as well or better as those that stayed in all the way through. People who panicked or didn't have a plan likely did much worse.

According to Morningstar, the reason for the large distribution was because of massive redemptions.
"The fund had $6.6 billion in outflows in 2013, losing nearly 40% of its asset base entering the year.
Such massive outflows indirectly punctured the fund's reputation for tax efficiency too. Typically, manager Michael Cuggino's low-turnover approach has kept annual distributions small. But, 2013's redemptions forced him to sell positions with sizable embedded gains, leading to the biggest capital gains distribution since he took over the fund in 2003."
The link to the article may not work for those without M* subscription. But here it is:
http://analysisreport.morningstar.com/fund/research?t=PRPFX&region=usa&referid=A3225&productcode=PREMIUM

What may help is that in taxable accounts with large companies index funds are almoat surely best because they have low turnover that does not generate capital gains distributions. I agree with the criteria discussed by Mr.DArcy(a nice post) but argue that in the case ofa taxable account the index case is even stronger.One argument in favor of index funds is that its very hard to pick managers that will outperform particularly because good funds get big.
Morningstar helps make a selection by comparing after tax returns with pre tax returns.Finally its really hard to tell that the current market (ora future one) will favor large value. There is apparently a bias infavor of smallcap value overa long period of time though I suspect that conclusion is strongly influenced by extreme out performance in the 21st century especially 2000-2007

Short answer.
The value of assets appreciated over time and thus the principal grew with capital value increase. In addition, many of the investments kick off a good income stream that was mine if I chose to take or could be used to purchase additional securities.