FYI: Very ambitious goal, beating the S&P 500;
Regards,
Ted
http://www.loomissayles.com/Internet/InternetData.nsf/0/618FAE38F0B01A04852579D100478172/$FILE/Capital-Income-Fund-Launch-PR.pdf

I own one CEF - First Trust Strategic High Income 2 (FHY). It trades at a very small premium. It returns about 9% which is virtually all income (i.e. no return of capital, except for a very tiny amount last September.) It invest mostly in corporate bonds. It's also given me about one percent capital appreciation over and above the income distribution since I acquired it 2 months ago.

Reply to @catch22: Hi catch, tried timing market last yr, but only a small portion of my portfolio, got no where so I got 'p*ssed off' and bought more bonds.
So I think it's maybe best just to have a couch portfolio and just watch it over the next 20s+ yrs, then when you are about to retire put everything into bonds. Remember fundamentals? He had a very robust portfolio with constant variables/frequent tradings and much careful analysis. I've compared his portfolio when he was constantly posting few yrs back, guess what? his portfolio has similiar yearly returns of index target funds 2030 @ 3 yrs. I think you are right, just how much you want to gains are how much you can stand and how much maalox you need at night. And if you do plays with all the numbers, you are more likely to belong to the 15% of the guy that keep loosing [since about 84% of funds loose to index over time].
regards

Thanks Mark. As it happens, I use TIBIX, DLTNX AND RNDLX as well. I’m transitioning to an income focus from a strict capital appreciation approach. It sounds like you’re a few years ahead of me. RNDLX is interesting in that it has a closed end fund component that adds an element not found in open end funds. Thanks again for your thoughts.
From a “bucket” perspective, it may still be a good idea to set aside some long term I’m-not’-going-to –touch-this-money and allow it to just grow in value. But as one really begins to think about retirement, the immediate thought is “how do I replace the paycheck I won’t be getting”. That really snaps the income focus into view.

I agree with the "buckets, schmukets" thought. Why make things so complicated? We use a very simple approach. Any dollars you might need from your portfolio over the next 3-5 years should be in cash, CDs or short-term bonds. In good years, we capture gains from our other investments (stock, balanced, longer-term bonds) and use those for cash flow. In down years, the set-aside dollars are used so that sales in down markets are not necessary. This is a very easy strategy to implement. No buckets of separate accounts required.
The other part of this equation is maximizing tax strategy. In other words, don't leave money on the table that could fill up lower tax brackets. For example, if you still have room in your 15% taxable income, consider using IRA (taxable) accounts to max out the bracket (especially the 10% bracket!). Conversely, if your income looks like it could push you above the 25% bracket, you might want to emphasize income from your non-taxable accounts. Manipulating tax brackets is a smart way to maximize your portfolio strategy.

David's comment "look carefully before you leap" should be applied to almost ALL funds. Every manager/management team has periods of under-performance, assuming they do not have authority in the fund prospectus to become chameleons. Investors need to understand when those periods might be for the funds in which they are invested, and either be prepared to move in and out of funds or create enough diversification in their portfolios to offset these time periods. Sometimes correlation is almost all the same (remember 2008-09).
We have used PRPFX for a long time as a core holding in client accounts. Yes, Mr. Cuggino has not had to operate in periods of rising interest rates. But I would be very hesitant to suggest he is incapable of structuring the fund's bond holdings to reduce interest rate exposure. He has already shortened duration over the last few months. And gold, adjusted for inflation, is still below its 1980 price level. Does that mean $2,000 per ounce is around the corner? No, but it tells us that it could have a long ways to go, especially given all the uncertainties in the world, and the fact that many central banks (especially China) are selling dollars and buying gold.
As with any fund that has done well over the last 5-10 years, investors would be wise to capture gains (not get out of these funds, but at least reduce exposure to original investment dollars). That, in itself, could help to reduce potential downside risk.

@Zenergy - I did not. During my mutual fund phase I was looking for capital appreciation and more importantly momentum in the funds I chose. The funds that I hold today that do provide an income stream are TIBIX, DLTNX. RNDLX and HIX. I suppose one could add MAPIX into that mix but it it not as steady or consistent as the others.

Hi Prinx
For expenses, it’s tough to beat Vanguard HY – VWEHX. In addition, MWHYX (Met West HY) is well managed and pays a nice yield. If you want a little stock with your high yield, then FAGIX (Fidelity Capital & Income) is a good choice. AllianceBernstein High Income Advisor, AGDYX, has a little more global reach and has had nice returns and yield.
Are you looking strictly for a high yield bond fund or income? If income, take a look at Allianz Income & Growth, AZNDX. It’s classified as a moderate allocation fund, but pays a very nice distribution with the holdings almost equally divided among equity, bonds and convertible securities. Don’t go by the stated yield at web sites, but take a look at the distribution itself.
I think you have some time before rates rise in any meaningful way, but depending on what you are looking for, these are a few options to explore. Good luck.

We have sold all of our TIP holdings, which is where almost all of our inflation bond dollars were. We have a few dollars at PIMCO and Vanguard in their funds and will sell them this week, too. With yields already at negative levels or close to negative levels, there is no incentive to owning tips. And long-term U.S. treasury bonds are for suckers only.
For dividend income, we like SDY, TIBIX, PAUDX, PFF, WASIX, EM bonds.
FWIW, Gross is really scrambling to retain dollars, at least that is how it appears. The big gains they made on derivatives appear to be history, so the fund is scrambling to find a magic bullet, which may not exist. In the meantime, Arnott looks to have as good a handle on things as anyone. We like what we see with PAUDX, and the dividend is pretty attractive, too.

Reply to @WxByHart:
You asked: "And how do I compare all of the fees within the annuity, including the hidden ones, versus a self directed IRA?"
Request from your agent the contract you would have to sign, including all related documents and to use a yellow highlighter to mark all fees to be incurred by you on an annual basis. The fees list would be totally inclusive as noted by BobC in his reply. Request the agent to list and total all fees and include in the list the surrender charges going out for 8 years or whatever the period may be. Request the agent to sign the document for your records and request the document to be notarized (likely available within the office) at the time of signing.
Or for yourself, have the agent do all of the highlighting so that you are aware of the full, total fees. Have someone else qualified to review this type of contract and offer their opinion of fees and the value of the investment to you. Place the document under your pillow and sleep upon this proposed decision for as long as needed.
Our retirement funds accts., which include Trad/Roth IRA's has an average expense of .73%..........period. The only other expense one might find with a self-directed IRA is an annual dollar fee of $30 or so; if the total acct value is less the $30K or whatever value is set by the vendor. Your total will exceed this.
Your main decision appears to revolve between wanting an annuity with some future insurance payout versus an IRA. Obviously, only you can make this decision; based upon all other variables and assets going into your retirement years.
Our list:
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)

Morningstar itself lists a 2% redemption fee AND a "deferred load" of 2%. Look at FPA Capital page on M*. Front Load and 2% redemption fee BUT no deferred load.
I'm happy if you are saying there is no deferred load on FPACX and FPIVX, but then M* stinks - which I know it does for various other reasons. I don't see M* listing deferred load on top of other redemption fees or confusing the two for other funds with redemption fee.
Again, redemption fee is different than deferred load. It is regarding deferred load that I'm concerned. Even in the prospectus, it says "deferred load".

From BobC: "Remember that all managers will have periods of under-performance. When that occurs, use it as a buying opportunity if you are underweighted. And, just like stock funds, don't be hesitant to capture significant gains as they accumulate."
...........Quite. I've simply been "sitting" on my PREMX shares and letting the monthly dividends build.

My suggestion is that you hire a manager who has real experience in this area. We use Templeton TGBAX as a core holding in client accounts and compliment it with Goldman Sachs GIMDX or GSDIX. There may be someone who does a better overall job than Hasenstab right now, but his ability to grasp the minutiae of currencies is darned good. That being said, we like Goldman because of the depth of research and strong knowledge of their team. GIMDX has most of its fund in local currency bonds, so if you believe it is prudent to hedge against a possible decline of the dollar, it might be a good option.
Fidelity New Markets is also a good option, but it is a dollar-based fund. Nothing wrong with that, but investors need to understand how the different funds work.
We have looked at PIMCO, but like their other bond funds, they are really loaded up on derivatives and do not do much local currency bonds, expect for the very short term PLMDX.
While I think Foster is a great manager, keep in mind that his experience is mostly in the stock side of the equation, not bonds. MAPIX, which he used to run, is a fund we use for "chicken" exposure to emerging Asia, not as a fixed-income play.
Remember that all managers will have periods of under-performance. When that occurs, use it as a buying opportunity if you are underweighted. And, just like stock funds, don't be hesitant to capture significant gains as they accumulate.

Reply to @catch22: Take a look at the issue with the Illinois Teacher's Pension Fund, which was invested (and probably still is) in a huge number of exotic derivatives products.
http://news.medill.northwestern.edu/chicago/news.aspx?id=166746
"Dale Rosenthal, a former strategist for Long Term Capital Management, the hedge fund known for its epic collapse in 1998, and a proprietary trader for Morgan Stanley, has seen his share of financial complexities.
But when shown a seven-page list of derivatives positions held by the Illinois Teachers Retirement System as of March 31, obtained by Medill News Service through a Freedom of Information Act request, the University of Illinois-Chicago assistant professor of finance expressed disbelief.
“If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank,” Rosenthal said. How bad is it? After losing $4.4 billion on investments in fiscal year 2009, and 5 percent on investments in fiscal 2008, the teachers’ pension is now underfunded by $44.5 billion, or 60.9 percent, according to the Commission on Government Forecasting and Accountability’s March 2010 report. By comparison, only 20.3 percent of the Chicago Teachers’ Pension Fund is unfunded."
There are pensions borrowing from themselves, as well.
http://articles.businessinsider.com/2012-03-14/politics/31162913_1_pension-costs-pension-system-pension-fund

Reply to @catch22: Thank you for the excellent response. I think this:
" A recent note on Bloomberg, related to another money area; is that someone's survey (for the auto industry) indicated that 46% of the under 30 age group would forgo the purchase of a new car; if it meant that they would have to give up their internet connection. This tells a lot, too. "
...Is particularly telling, both in terms of financial health and in terms of priorities.
"The country has a large group of boomers retired and retiring (10,000/day) for the next 10 years or so. Many of them will never step back into a full blown equity position in the markets (may get burned some with bonds, too); but will attempt to remain conservative to retain exisiting capital. With a few reports I have read and/or viewed, there are also many young folks (even though they may have a decent job) who are also very skeptical about the benefit of investing risks. There is also a large group between the boomers and the young one's with decent jobs; who have work that only pays the bills and nothing left over to consider for an investment, let alone those who are not employed. "
Exactly, and this is the Arnott article that speaks to this in stocks (and I think one can take the situation and apply it to houses)
http://online.wsj.com/article/SB10001424052970204795304577223632111866416.html#printMode
"but I am fully aware of the early 80's recession with high inflation that was killed by Volker with Fed policy to drive interest rates to suck the life from high inflation."
Yeah, and there is no Volcker to be found.
Finally, as for housing, I think student loans is going to be a major issue, too:
http://market-ticker.org/akcs-www?post=203759
"Total student debt outstanding appears to have surpassed $1 trillion late last year, said officials at the Consumer Financial Protection Bureau, a federal agency created in the wake of the financial crisis. That would be roughly 16% higher than an estimate earlier this year by the Federal Reserve Bank of New York."
And now we find that a large portion of that is 30 days+ overdue and things aren't good with the age group....
http://www.zerohedge.com/news/first-crack-270-billion-student-loans-are-least-30-days-delinquent

Hi scott,
You noted: " As for housing, I think even that has stunned me. I think there is intrinsic value in a house. It can be rented, there is value in the materials (and speaking of inflation, I find it interesting that houses have cratered, but have the building materials gone down? I don't think so.) Yet, there's not enough buyers out there. I have friends who owned, then chose doing a short sale. They are able to get another house, but their credit is f'd. How many other people are in that position? Look at a real estate website in a major city and see how many short sales are listed.
What happens if rates were to "normalize?" (the FDIC calculated 40% of the U.S. households have insufficient income and credit to buy a home, http://www.zerohedge.com/news/guest-post-how-housing-affordability-can-falter-even-house-prices-decline) If you look at some major cities now, owning is clearly becoming cheaper than renting, but real estate is just not happening. Older people who are downsizing are going to find that there isn't enough of an audience in the younger generations to buy their bigger houses. Lastly, houses have done down dramatically, but in many places, property taxes have risen. "
>>>>> Though my note is not directly related to the original post/questions, but is related to your note.
I am reminded of a lyric section; of which, I attempt to use when guaging all areas of the global "big picture" to also attempt to envision of where monies may be placed for the best benefit to our portfolio and its risk/reward label.
The song from the hippie-dippie days by Kenny Rogers and The First Edition; and the lyric section: I just dropped in, to see what condition my condition is in...
Related to the buy or rent for one's housing. Knowing you view all of this area and others, too; I do believe or should I write "I am firmly in place on this thought" that what was and now is since the market melt and all of the ramifications continues to not be the money world I grew into, being a baby boomer. Through most of 2009 I would periodically talk back to the tv talking heads when too many of them would state that everything is going to be okay and this (market melt) won't be much different from the early 80's recession. I sure don't know what models or thinking that they were using; but I am fully aware of the early 80's recession with high inflation that was killed by Volker with Fed policy to drive interest rates to suck the life from high inflation. What I consider to be my non-formal economic education that allowed me to argue against their points of view is that 3 major areas of impact were in place in the early 80's that were mostly gone for the economic ramifications of the 2008 melt.
1. many boomers were in or approaching peak job earnings years
2. manufacturing facilites were in place in this country
3. very little foreign competition was in place against manufacturing
To the above: boomers had lots of money to do with whatever they chose; and was and still is a very large percentage of the population. Many of this group, being without more than a high school graduation and many without this level were able to obtain well paying work at the big 3 auto makers; along with great benefits. This is gone, eh?
As a side benefit to my living in MI and knowing its previous manufacturing base; and also knowing that many of the factories had literally been demolished long before the market melt; there was no longer any base to fall back upon, as was the case in the early 80's. The passage of NAFTA & GATT in the mid-90's had already begun to cause many U.S. firms to move to Mexico; and as the next 10 years passed, more of this area also moved to China and related areas.
The talking heads had somehow avoided or were unable to assemble anything but theories from text books, one must presume. Many of them surely did not have a real perspective of what was, but no longer existed; to attempt to assemble some wonderful and fanciful view of an "everything will be alright" theory.
As to the buy/rent crowd among the young. Heck we know many don't have enough money and/or will remain mobile in their search for work. No reason to have a fixed house in place with all of the hassles. I fully understand this and agree in full to this kind of thinking. A recent note on Bloomberg, related to another money area; is that someone's survey (for the auto industry) indicated that 46% of the under 30 age group would forgo the purchase of a new car; if it meant that they would have to give up their internet connection. This tells a lot, too.
Lastly; you and I have both mentioned the following:
The country has a large group of boomers retired and retiring (10,000/day) for the next 10 years or so. Many of them will never step back into a full blown equity position in the markets (may get burned some with bonds, too); but will attempt to remain conservative to retain exisiting capital. With a few reports I have read and/or viewed, there are also many young folks (even though they may have a decent job) who are also very skeptical about the benefit of investing risks. There is also a large group between the boomers and the young one's with decent jobs; who have work that only pays the bills and nothing left over to consider for an investment, let alone those who are not employed.
Our house attempts to filter what we hear/view, read and know for a fact to proceed with our investment areas.
Okay, enough of my jabber; as one could write many pages regarding the 3 above areas.
Take care,
Catch

Reply to @WxByHart:
Likely that I have not had enough coffee yet this morning; and some days the old brain cells are not working, so I shouldn't even place a question; but I will ask anyway.
You wrote:
" The nice thing about my existing NWM Roth IRA Annuity, is that I bought it 20 years ago when I was 30, which locked in my minimum guaranteed settlement rate (based on a shorter life expectancy). So if I rollover into that account, that rate is going to be better than the rate I would get with a new annuity, since life expectancy is longer today than it was 20 years ago (and I've already absorbed a lot of the expenses associated with the annuity).
--- Assuming the following: Trad. IRA and annuities monies are taxed as ordinary income, and Roth IRA monies not taxed upon withdrawal.
>>> If I recall from your first write, you had the Trad. IRA noted above with NWM which you converted to a Roth IRA, yes? Also noted above.....NWM Roth IRA Annuity.
This is a tax sheltered acct. within a sheltered acct; with an additional layer of expenses to you, from the insurance company.
Is the noted guaranteed settlement rate you mention a fixed, annual rate of interest on the monies in the Roth? Is this what this statement means?
And what are you planning to rollover into the "NWM Roth IRA Annuity"?
As far as the non-Roth money is concerned, I could roll it into my new 401-k (which is better than my former), but then the bulk of my retirement will be determined by market performance over the next 10 to 15 years. At least with an annuity, I have some guarantees, while also staying in the market. And as far as the front-load sales charge goes, since I'll be rolling over 140k, my rate will drop from 4.5 to 2.0% for all money over 100k...which is comparable to mutual fund sales charges. And the expenses within the NW Mutual Select Variable Annuity will average 1.23%, which is about the same as the Morningstar Mutual Fund average of 1.22%, and much better than the Morningstar Variable Annuities average rate of 1.74%. The final advantage over a traditional IRA is the ability to move my money around among several different fund families without a fee.
>>>I'm confused with this above paragraph. It appears you're talking about rolling over an old 401k to your new employer 401k; and also stating you will be restricted by market performance. The answer would be "yes", regardless of which employer 401k. You could likely always place all of the monies into a "stable value" area of the 401k, which is available with most 401k's if you are concerned about making choices of other investment areas.
>>> You note: "At least with an annuity, I have some guarantees, while also staying in the market." What does this mean? I will presume the annuity has a life insurance package combined with investment options for type of guarnateed payout at some future point.
>>> Where is the $140k coming from?
>>> You note: " The final advantage over a traditional IRA is the ability to move my money around among several different fund families without a fee. " Who told you this, that there is an advantage with the annuity? We have Trad. and Roth accts with Fidelity and do not have additional fees unless we wander outside of Fidelilty offerings; and then may only find a fee here and there, depending upon which other fund family we may choose to invest with, among the several 1,000 other choices.
>>> You note: " my rate will drop from 4.5 to 2.0% for all money over 100k...which is comparable to mutual fund sales charges. " This is a one time 4.5% front load on $100K, yes? Or is there also an annual fee/expense of 2% on these monies?
>>> If this annuity is a life policy, with a guaranteed payout blended with investing choices; perhaps the fees are in line. I can not speak to this, as I am not an insurance person, nor do I choose to be one from the investigative side. I am also not able to validate your noted above regarding the M* numbers for these products. A plain jane variable annuity (to be used when all other tax sheltered options are exhausted or not available) with Fidelity, has 57 fund choices, an average expense of about .95%; but is not a guaranteed life payout insurance plan, but also does not have any penalty features associated with most annuities during the first 1-7/10 years.
You note: "I plan to get all of the expenses and fees in writing before I sign on the dotted line, but it seems like I can get some security with the little extra expense it would cost to go the annuity route. "
I am only playing the devil's advocate here; to better understand what you are attempting to do, and that you may also discover some additional questions to ask your insurance salesperson. If you are not involved in a "must do" time frame, you should investigate this plan to your fullest abilities.
Lastly, you suggest that you are wary of market losses going forward. You are not alone in that boat. Capital preservation should always be a prominent consideration for one's monies, regardless of age. If one goes backwards too far in losses, it requires that much more in future gains to offset the losses. This also applies to overcoming front-load or recurring fees. These fees are loss dollars that must be overcome with forward gains in one's portfolio. To this note; and regarding the insurance company variable annuity you mention, who will be making the choices of which funds to invest your monies? I note this; as with the few folks I know who use investment advisors, none were able to position their client monies coming into the market downturn in 2008. I also presume your monies in your 401k are placed to your own choices.
Welcome to MFO. You will gain much knowledge from the wonderful folks at this forum.
Respectfully,
Catch

Hello prinx, Skeeter here …
With the forecast of rising interest rates I began to reduce my allocation to fixed income back in October of 2010. I know, you are thinking kind of early … Well, not really … and, here is why. As bond prices began to pull back stock prices were moving upward so I reduced my allocation to bonds form 30% to 25% and raised my allocation to good dividend paying stocks and funds of same by a like amount. I actually increased the income stream during the process and I have had capital appreciation on the investment move. So that was indeed a good move from my thoughts.
Now, I know that one needs to maintain some bonds within their portfolio for diversification and with this I am presently about 25% income. To reduce my allocation to 20% and raise cash by a like amount means I have some dead money form a yield generation perspective and more cash than I need to move into and out of for special strategy investments form time to time. In addition, I have been reducing my allocation to equities because I feel they have gotten ahead of themselves and are scheduled for a pull back. With this, I am awaiting their pull back and when this occurs perhaps bond valuations will increase as investors leave stocks and move to bonds. I will be doing just the opposite … I’ll reduce my allocation to bonds and move the money to good dividend paying stocks, perhaps some commodity funds too, while keeping my cash allocation at its current level.
Presently, I am 20% cash, 25% income and 55% equity and other. I just don’t see me drawing my bond allocation back of 20% nor do I see me raising my allocation to equities and other to more than 65%.
Some might have a different strategy … but, for now, the above is my game plan to deal with rising rates and a stock market pull back.
A simple ... but, likely an effective strategy ... or at least, it has been in the past on more than one occassion.
Good Investing,
Skeeter

Comment - Re:
"My brother in law is retiring and has a simple IRA that he wants to move from American funds to Price and reallocate. Currently, they've got him 90% in equities! ...
He's 63 and ...very conservative... His goals for this account, are basic capital preservation with some safe growth...."
------------------------------------------------------------------
I'm troubled by the inconsistency between the (current) 90% equity allocation and your statement that he's "very conservative."
Are there other assets elsewhere (possibly sizable) which ARE conservatively invested, so that the "90% equity allocation" makes sense and IS consistent with your statement regarding his investment approach?

Howdy good people,
My brother in law is retiring and has a simple IRA that he wants to move from American funds to Price and reallocate. Currently, they've got him 90% in equities!!!! [I don't even recall being 90% long myself during the dot.com run].
Also, please note that I've been investing with Price for about 20 odd years, and so am familiar with a lot of their stuff. That said, I could still use your good offices in how to set him up and what are your particular Price fund favorites. Nothing fancy, just Price mutual funds.
He's 63 and just filed for social security; no debt, very conservative (worse than his sister and she's bad), other monies, wife has DB pension, benefits, successful kids, etc. His goals for this account, are basic capital preservation with some safe growth. Size, small 6 figs.
Thanks muchly,
peace,
rono