Reply to @Daves:
I'll give this a try:
5 year gains = Your average return over a 5 year period (June 2008 - June 2013)
5 year standard deviation = The maximum dispersion away from that average return over a 5 year time frame.
"The road to (average return) is full of ups and downs (standard devaition)"

Ted,
I don't understand the difference between 5 year (gains) and 5 year standard variation.

Thanks as well David, excellent piece. And Bee is spot on with the small investor having limited options.
There is one, worthy investment option, not often discussed here, which does avail itself to many individual, Mom and Pop investors.
The option is to hire a financial services firm, Not a Stock Broker, to serve as your personal investment manager. Fees run about 1% to 1.45%.
Repeat Not A Stock Broker. (I've fired way too many brokers, to me they're generally all the same).
I became frustrated with my own stock and mutual fund selections, as well as my risk adjusted gains as the market rotated away from bonds to mid caps, small caps, market neutrals, perferred, convertibles etc. Then trying to control my own emotions, and foresee future market rotations requires skills I don't have. I've had a little success over the last 40 years, but the enviroment is changing.
Being retired I couldn't afford a major blunder or being wrong every five to seven years
as David points out. I got tired of not sleeping at night, because the ground is shifting.
My Fidelity advisor and I were discussing this fact, and he made a suggestion that I'd never considered. Apparently Fidelity realized there were many of us thinking the same way.
My advisor in Tampa, through a Fidelity screening and interview process, suggested a four major investment firms that operate according to a strict Fidelity standards of practice arrangement.
In my case, four firms that met my guidelines were recommended from around the country. I spent a month interviewing them, and landed on one firm outside my state, but I'll cut that story short. Eye opening to say the least.
In my case the chosen firm manages assets of $40 Billion. The firm and I, after extensive conversations, set up various portfolios for me which are modeled to meet my goals with various timelines, and cash flow models. Highly sophisticated. Highly sophisticated indeed.
They don't use mutual funds.
These firms operate through internal investment committees. They have as many as 60 Certified financil analysists choosing the investments. They don't want my opinion or my emotions or my input. But my client relations advisor there is a CFP.
The firm often will make a change or move every few days. Very transparent and I view all the allocation adjustments on my Fido site. They prove you don't have to take excessive
risk to make money.
Lastly, some of the stocks I owned previously were retained. But the firms buy and sell models are based on analytical formula's.
The firm may like a stock, but it may like it's preferred stock better, or it's convertible better or they may buy puts or calls instead of the individual stock. Few of these strategies I'd ever feel comfortable using on my own, with limited information. But the way they do it, is most interesting. It's active management but not too churning.
Lastly there are a number of these firms who you'd never know even exist, but to whom great fortunes are entrusted.
Good Investing,
Steve

Oakseed's inaugural shareholder letter is nicely written and contains a fair amount of personal history for Mr. Park and Mr. Jackson.
Highlights:
As we began putting pen to paper late last year, we thought long and hard about the kind of firm
and fund we wanted to have, keeping a few key objectives in mind:
1. A “go anywhere” investment mandate.
2. No investment committees, minimal meetings, and low administrative demands.
3. Alignment of interest with our investors.
---------
A bit more on that last point: we believe having common ownership of the Fund between its managers and other shareholders strongly aligns goals. As co-portfolio managers we are committed to managing our personal capital alongside yours. Our current combined Fund investment stands at approximately $10 million with the objective to become the largest shareholders over time (and we do not allow individual stock purchases for personal accounts at our firm). We look for personal “skin in the game” in our companies’ executive ownership of their stock; how could our own shareholders possibly expect any less from us?
--------
[T]here are several common threads that run through the Fund highlighting our investment approach. First, in each
instance we believe the company’s returns on equity or returns on invested capital are improving, if they are not already higher than average. . . Second, we believe that the valuation does not reflect our assessment that returns are high or improving. This is most likely due to what we believe are short-term problems, either with the business itself, the industry, or perhaps an overall stock market decline. Our investments are usually “contrarian,” meaning the expectations of other investors are lower than what we think they should be, so we are willing to bet the other way for the potential to earn a higher rate of return. Finally, most of our stocks need time before the rest of the market sees what we see. Although it is easy to understand why instant gratification is more appealing than waiting around, we think it is far easier to buy an undervalued stock if most people are not factoring in events three to five years away that could add a lot of value to the company. Unfortunately, events three to five months away are more often than not already incorporated into today’s stock price and it is very difficult to gain an edge trading that way.
----------------
In a bit of Murphy’s Law, the Fund missed out on January 2, the first trading day of 2013, when most major market indices were up 2% to 3% since all trades are booked the following day and therefore the Fund’s NAV was unchanged. As a result, with the S&P 500 up 2.54% that first day the Fund began the year behind its benchmark the same amount.
For what it's worth,
David

Reply to @golub1: You've given a good argument for legacy funds - if they are decent funds, and you have substantial gains that you expect to get wiped out (eventually) upon your demise, let it ride.
But there are still things you can do. You can (somewhat) reduce the holdings by selling specific shares - shares that were purchased at a higher (or at least not much lower) price than the current market price. Be careful if you've already used average cost basis though - the cost of those specific shares may not be what you think.
Another thing you can do is stop reinvesting dividends. Take those dividends and invest them in the funds you really want to grow. This usually doesn't stop the growth of the legacy fund, but it does slow it down, sometimes substantially.
If you're donating to charities during your lifetime (as opposed to through your will), donate the most appreciated shares (or complete positions). You'll be able to write off the current value while never recognizing the gain.

Reply to @golub1: Could you dollar cost average out of the funds versus a one time withdrawal/exchange? In a similar situation, I was fortunate enough to get out of funds with gains in years I had losses so they cancelled each other. I may be wrong so a tax preparer or an accountant friend might be worth a visit if these gains are substantial.

Very interesting comments: I will simplify. I'm convinced that for me consolidation is in order. Now the hardest issue will be and if and how to consolidate funds with big gains in taxable accounts. If they are passed on upon death to my children they get a stepped basis. That's an important benefit, but it complicates the consolidation/ simplification procedure? I can only imagine the multiplicity of factors that need to be taken into account. The most important for someone my age in my 70s has to be life expectancy. Anyone know or have a model for dealing with taxable holdings?

Bitzer:
I do not know where you got the impression that Yacktman's funds were defensive. Both YACKX and YAFFX suffered horrific drawdown in the last bear market, shedding over 50% of their NAV from 2007 through 2008. In fact, I believe they lost more than SPY (the S&P 500 index fund).
There are numerous defensive mutual funds that lost less than SPY during the 2007 - 2008 bear market but you have to be willing to accept subpar performance on the way up. Funds that immediately come to mind which are defensive yet still give decent performance on the upside are (both balanced funds and pure equity MFs):
QRSVX: Queens Road Small Cap Value. That said, NO SC fund is truly defensive.
PVFIX:Pinnacle Value
FPACX:F P A Crescent
ICMBX:Intrepid Capital
FOBAX:Tributary Balanced
APPLX:Appleseed
XLP: SPDR Consumer Staples ETF
XLV: SPDR Health Care ETF
Finally, I strongly suspect that the new Oakseed Fund SEEDX that David Snowball has introduced to this website will also prove to be defensive in a bear market. I base this guess on their Top 25 holdings and their performance in the last 6-7% swoon.
DlphcOracl

S&P gained 13% in 2012 and is up 18.6% this year. Dow gained 7% in 2012 and is up 17.71% this year. Healthy gains - but not outsized or unheard of in bull markets. What seems remarkable is the steadiness of the assent. Can't recall any 1,000+ point dips on the Dow over the past 12-18 months. At current levels that would amount to only about a 7% pullback. November's election results and again Cyprus did jolt the markets a little - but 1000 points? Probably not. So, during this period a fully invested approach likely worked better than trying to hedge.
I think there's merit in all the various approaches presented in recent days. But, I don't think anyone - not Skeeter, Ted, Catch, MJG, or anyone else - is going to throw away a time-worn and finely tuned plan (which meets their own individual needs) based solely on a couple years' market performance.

Reply to @Art:
Hi Art,
Sorry for the delay in responding. I somehow must have missed it.
Form retirement, I have not yet got to slow down. My old firm keeps calling me back to the office from time-to-time to sort things out and meet with preferred clients. Seems nobody felt I did much but collect my time and money form being around the place. Then, when it was left up to others to do what Skeeter did ... Well, they are now seeing it was not so simple. After all, I grew with the position through the years, knew the people and knew how to handle issues to meet the customer's satisfaction. My boss is still there and she simple told them to do what Skeeter use to do ... after all ... it worked for him for many years. She was good at letting me go and do pretty much what I wanted to do and allowed me to take much of the summer off while she took much of the fall off. We could cover and work one anothers desk. Now she seems to have the mind set to let them learn on their own, much like she and I did. This is a small family run business and I handled much of the back office and she handled the front office and we could switch off while the others reported to us.
I have started billing them for my time when they call because the cusomers ask for me and if I have to come in to the office the rate is subject to what I find must be done. Somebody is going to screw something up real soon and real good ... and, I don't want to be around when they do. I don't think my boss does either and if she did not own the place she'd probally be out of there ... trying to kick back like I am doing. By the way I will get income trails for the next three years form the firm plus time that I might bill for my time. Told her she had to stay until my trails were paid.
So Art, That's how it is going. And, oh yes ... I play golf on Thursday afternoons and then drive to the coast for the weekend and then back to Charlotte on Sunday evenings. The wife still works in the local school system as a 52 week employee ... but, she works Monday thru Thursday through the summer months plus taking vacation. She will retire out of the system in about two years. We plan to gift the Charlotte homestead to our son when we move to the coast as it was gifted to us by my parents plus we have our own home too. In this way, we should be well pass the look back should we fall in poor health in the years to come and run out of money. I don't think so ... but, one really never knows.
I am still trying to find the time to start a restoration project on my 1992 Jeep Cheorkee that I have had for many years. I went and looked at a new one but just value my capital too much to let go of it. The Jeep needs a rear main seal, a set of new tires and just gone over in general but overall all I'd start out to the west coast in it on most any day. It is needed to put the boat in and out of the water at the coast and trail it back and forth during the off season rather than paying high slip and storage fees in the inlet. I have ramp acces through my HOA but not long term dock and storage.
I am not going there with Catch22 & Ted. There seems to be something of an issue ... hopefully, it will get worked out. They both are contributors and I would hate to see either leave. But, I do not enjoy the ongoing feud either.
I could go on ... but, I'd get in a rant. And, I just don't want to do that. Not now anyway.
Have a good one and thanks for asking.
How was the book?
Skeeter

Dear golub1: Why do they own 20 or 30 equity funds ? They don't know anything about investing, and want to make fund companies rich. Having to own 8 different funds for large-cap exposure is total nonsense. You can have adequate exposure to large-caps for two accounts by owning SPY in each account.
Morningstar found that single-fund portfolios had the highest standard deviation, delivering either the biggest gains or the heaviest losses. So owning just one fund can be a risky bet. Add a fund and the standard deviation drops significantly. Returns are lower, but the downside is less severe, too.
After seven funds, however, a portfolio's standard deviation stays pretty much the same regardless of how many funds you add. In other words, once you own seven funds, there may be no need for more.
I own just six funds, SPY, IHJ, PFF, PBDCX, PONCX, PRHSX

Well, I guess I’ll chime in here.
Within my highly diversified portfolio I have currently been sitting on the sidelines, for the most part, and harvesting from my crops their unrealized capital gains that I planted sometime ago. As the market moves upward, I harvest from them as they grow. Sounds a little biblical, it is, as I have watched through the years my unrealized gains get vaporized, from time-to-time, in a market downdraft. Now, I harvest form my gains as the market progresses upward. In this way, it reduces the possibility they might go stale before booking profit.
I just recently read Jeffery Saut’s weekly market commentary which I have linked below. It seems others that operate in a high risk environment learned that they too should harvest form their takings and put some back for use sometime in the future. I have linked his commentary below for those that might be interested in reading it. It is titled “The One Chip Rule.” http://www.raymondjames.com/inv_strat.htm
In addition, I’d like to thank Charles and David for their work in the “MFO Fund Ratings” spread sheet. Indeed this is great work. Having bet at some dog tracks ... in my earlier years ... Well, this spread sheet should aid in keeping one from putting money on a "slow" dog type fund.
I wish all “Good Investing.”

FYI: In my capital preservation portfolio I own the Investment Grade Corporate Bond Fund.
Regards,
Ted
http://blogs.wsj.com/moneybeat/2013/08/06/pimcos-july-fund-flows-spark-great-rotation-debate/tab/print/

Another good quarter from Oaktree (OAK)
_________________
Oaktree Capital beats by $0.19, beats on revsFont size: A | A | A
8:33 AM ET 8/6/13 | Briefing.com
Reports Q2 (Jun) adjusted earnings of $1.75 per share, $0.19 better than the Capital IQ Consensus Estimate of $1.56; revenues rose 62.7% year/year to $555.1 mln vs the $547.94 mln consensus.
Adjusted net income per Class A unit grew 97% for the second quarter, to $1.75, and 106% for the year's first two quarters, to $3.69, as compared with the corresponding prior-year periods, on gains in incentive income driven by fund realizations.
Distributable earnings per Class A unit grew 90% for the second quarter, to $1.94, and 116% for the year's first two quarters, to $3.73, as compared with the corresponding prior-year periods, on gains in incentive income, as well as higher investment income proceeds.
Economic net income per Class A unit grew 88% for the second quarter, to $1.13, and 63% for the year's first two quarters, to $3.16, as compared with the corresponding prior-year periods, as higher fund returns drove gains in incentives created (fund level) and investment income.
GAAP net income attributable to Oaktree Capital Group, LLC grew 129%, to $56.6 million, and 164%, to $114.1 million, for the second quarter and first two quarters of 2013, respectively, as compared with the corresponding prior-year periods.
Oaktree declares a quarterly distribution for the second quarter of $1.51 per Class A unit, bringing to $2.92 the aggregate distribution for the year's first two quarters, up 91% and 118%, respectively, over the prior-year amounts.
"Howard Marks, Chairman, said, “Our investment teams continue to deliver both exceptional cash returns and new opportunities for future growth and income. In the second quarter, our closed-end funds distributed $4.7 billion to investors, yielding record incentive income of $338.1 million. As a demonstrated leader in credit strategies, we continue to raise significant capital for our newest products to provide our clients with superior risk-adjusted investment performance across market cycles.”'
http://finance.yahoo.com/news/oaktree-announces-second-quarter-2013-123000566.html

You seem to be focusing on value-leaning funds (with funds that I like), but on the growth side is another obvious fund - Capital Opportunity VHCOX.
Managed by the Primecap team, and the only way to get these managers in a Vanguard fund (I believe the other Primecap-managed funds are closed, though you can get the team through Primecap Odyssey funds).
On the international side, I'd stick with VG's index funds - specifically, all world ex US, There are two such funds, tracking different indexes:
- VTIAX tracking FTSE Global All Cap ex US Index (5300 stocks, 46 countries in the index),
- VFWIX tracking FTSE All World ex-US (2200 stocks, 46 countries in the index)
The former has more (and consequently smaller) stocks; if one is going for an index, it would be my preference.

Additionally, some of the fund's dividend is a return of capital.

I also agree with the "one pie" theory for asset allocation, that is counting all your accounts as one pie. The majority of people have their retirement funds with different companies. One service that made it easier for me is Personal Capital. https://www.personalcapital.com
I have no connection with the company, I just use the service. It's free and it claims to be secure. I haven't had any issues with it and I get daily emails regarding my accounts and transactions. A good thing to have if you are overseas like I am and need to keep tabs on your ATM accounts as well as your investments.

I just did a search and found these. any thoughts how it might be?
Corporate Bonds
•Guggenheim BulletShares 2013 Corporate Bond ETF (BSCD)
•Guggenheim BulletShares 2014 Corporate Bond ETF (BSCE)
•Guggenheim BulletShares 2015 Corporate Bond ETF (BSCF)
•Guggenheim BulletShares 2016 Corporate Bond ETF (BSCG)
•Guggenheim BulletShares 2017 Corporate Bond ETF (BSCH)
•Guggenheim BulletShares 2018 Corporate Bond ETF (BSCI)
•Guggenheim BulletShares 2019 Corporate Bond ETF (BSCJ)
•Guggenheim BulletShares 2020 Corporate Bond ETF (BSCK)
•Guggenheim BulletShares 2021 Corporate Bond ETF (BSCL)
•Guggenheim BulletShares 2022 Corporate Bond ETF (BSCM)
•iShares 2016 Investment Grade Corporate ex-Financials Term ETF (IBCB)
•iShares 2018 Investment Grade Corporate ex-Financials Term ETF (IBCC)
•iShares 2020 Investment Grade Corporate ex-Financials Term ETF (IBCD)
•iShares 2023 Investment Grade Corporate ex-Financials Term ETF (IBCE)
•iSharesBond 2016 Corporate Term ETF (IBDA)
•iSharesBond 2018 Corporate Term ETF (IBDB)
•iSharesBond 2020 Corporate Term ETF (IBDC)
•iSharesBond 2023 Corporate Term ETF (IBDD)
High Yield Bonds
•Guggenheim BulletShares 2013 High Yield Corporate Bond ETF (BSJD)
•Guggenheim BulletShares 2014 High Yield Corporate Bond ETF (BSJE)
•Guggenheim BulletShares 2015 High Yield Corporate Bond ETF (BSJF)
•Guggenheim BulletShares 2016 High Yield Corporate Bond ETF (BSJG)
•Guggenheim BulletShares 2017 High Yield Corporate Bond ETF (BSJH)
•Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (BSJI)

Reply to @Sven:
Vanguard's theory (and this appears in many other places as well) is that rising rates are not necessarily bad for long term bond fund investors, because investors ultimately benefit from the higher rates and come out ahead. (Besides, you can't time the rate increases - people have been predicting the end of the world in bonds for years and lost out on significant gains.)
I'm not saying that Vanguard's comment regarding Wellington is a variation on this theme - it's not - but rather trying to respond to your comment that there are few safe havens.
A problem with bond funds, including many actively managed ones notably by Vanguard and T. Rowe Price is that they tend to keep average duration close to the benchmark, which is in itself flawed. Not only for the reason that M* gives (see, e.g. Apple floating loads of long term bonds rather than repatriating money because rates are so low), but for the related reason John Bogle gives (that the index has much too much in Treasuries).
So, for safe(r) havens, one can seek out more "creative" funds - ones which don't come close to their benchmarks. Not surprisingly, FPA New Income FPNIX did not lose much in May-July (about 0.38% was the worst monthly loss, vs a percent worse for most bond funds in June). Its problem is that it yields little, so it is more difficult for its yield to make up for even these small losses. Nevertheless, I still think of it as a "relatively" safe haven (and it is positive YTD).
Bank loan funds and high yield funds are also still largely positive YTD. But I don't have faith in either. The former because lots of bank loans won't float (the current market yield is below the bonds' floors, so as the market rate rises, the bonds' won't, and so the bonds will depreciate). The latter because everyone has piled into junk, so they're likely more overpriced than other bonds. That's why I'm poking around more flexible bond funds. Strictly on numbers, IFUNX has held up well ("modest" loss of 1.38% in June, no other significant monthly losses since May 2012), but I don't know anything about the fund.
In short - safe havens are indeed few. That doesn't mean one gives up looking.