http://markets.chron.com/chron/news/read?GUID=20493702
DoubleLine Launches DoubleLine Opportunistic Credit Fund
LOS ANGELES, Jan. 27, 2012 /PRNewswire/ -- The DoubleLine Opportunistic Credit Fund (the "Fund") has completed an initial public offering of common shares and has listed on the New York Stock Exchange, Fund adviser DoubleLine Capital LP ("DoubleLine") announced today. Organized as a non-diversified, closed-end management investment company, the Fund trades under the symbol DBL.
The Fund raised approximately $326.5 million in proceeds (before deduction of the sales load and offering expenses and exclusive of the underwriters' overallotment) in the initial public offering of 13,060,000 common shares at $25 per share. The Fund has granted the underwriters an option to purchase additional common shares at the public offering price less the sales load within 45 days of the date of prospectus, solely to cover overallotments, if any. Assuming full exercise of the underwriters' overallotment option, which may or may not occur, overall sales totaled approximately $375.25 million.
{...}
The Fund does not intend to employ investment leverage initially. Subject to DoubleLine's determination that the then-current market conditions are favorable, the Fund intends, at a future date, to add leverage to its portfolio by using reverse repurchase agreements, dollar roll transactions or similar transactions, and/or borrowings, such as through loans or lines of credit from banks or other credit facilities. The Fund will, however, limit its use of leverage from reverse repurchase agreements, dollar roll transactions or similar transactions, and/or borrowings, such that the assets attributable to the use of such leverage will not exceed 33 1/3% of the Fund's total assets (including the amounts of leverage obtained through the use of such instruments).

Reply to @kevindow:
The Bard said it best: What's in a name? That which we call a rose by any other name would smell as sweet.
"One could not have purchased FEHIX on 11/19/2007." Literally true, as a fund by that name (ticker) did not exist on that date. What's in a name? In 2007, you could not have purchased a company with the ticker "L", yet that company (Loews - LTR) did exist, and now trades under that symbol. Tickers change. The company didn't.
Perhaps your point is that the legal entity did not exist in 2007, because the "new" company was created last month. That's the way reorganizations work. When a company wants to operate under Delaware laws, it forms a shell company in Delaware, that shell company acquires the real company, and then the real company dissolves. Nothing else need change. (I am rather familiar with this process, as I worked with our company lawyers in reorganizing our company as a Delaware corp last year.) Shareholder of the old company get shares of the new company , but no one can buy shares of the new company until this transaction completes.
I gave you the example of Oppenheimer funds that are reorganizing as Delaware corps. Same management company, same fund family, same owners (shareholders). But you cannot buy shares in those Delaware-based funds (yet - the reorg has not completed).
You assert as a "fact" that M* should have noted when one legal entity terminated and another began. That's an "opinion", and one that you have yet to substantiate. Same management, same objective, same way of running the portfolio. Just a different legal entity.
Compare and contrast:
a)Oppenheimer funds (same family, same management, same objective, same ticker, but you could not buy the new investment company (fund) prior to reorganization)
b)Wells Fargo Advantage Ultra Short Term Income Fund (STADX) -was Strong Ultra Short Term Income Fund until Wells Fargo acquired Strong in 2004-5 (different family, same manager to this day(!) - Thomas Price - as with Strong (but different management company), same objective, same ticker, but you could not buy the new investment company(fund) prior to reorganization)
c) Wells Fargo Advantage Capital Growth Fund (SLGIX), formerly Strong Endeavor (SENDX) (different family, same manager to this day(!) - Thomas Pence - as with Strong (but with a different management company), same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization).
d) Perkins Mid Cap Value (JMCVX), was Berger Mid Cap Value (BEMVX) until Janus acquired Berger funds in 2003 (different family, same manager from the Berger inception to this day(!) - Thomas Perkins (with the same management company Berger used, same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization). Here's an extra twist - when Janus acquired the Berger funds, it also acquired a minority stake in the management company; it has since taken over a majority (80%) of Perkins, Wolf, McDonnell and Co, and renamed the company.
It appears that your opinion is that for each of these funds (and many more), the funds began anew when they were acquired. So all the violations of the Strong funds were washed clean when they were reorganized - they're not the same funds, often with changed tickers, so not the same track record and not the same shady history.

@kevindow -- the inception date of the fund has nothing to do with the fact when one could purchase the fund. many funds start with the firm's seed capital and first build a performance record before opening to the outside investors. of course, some 'star' managers, such as gross or gundlach, would be the exception to the rule.

I AM 47 YEARS OLD AND HERE ARE MY AMERITRADE SEP IRA ACCOUNT:
ARIVX-Aston River Road Independence-SV-9%
DLTNX-Doubleline Total Return-IT/BF-5%
FPACX-FPA Cresent Fund-M-20%
GNVRX-Geneva Advisors All Cap-LG-15%
RYBHX-Rydex S & P Midcap 400 Fund-MG-9%
SEQUX-Sequoia Fund-LB-13%
WPOPX-Weitz Partners III Opp.-LB-10%
YAFFX-Yacktman Focus-LV-19%
IN MY FIDELITY SEP IRA ACCOUNT:
BMPEX-Beck, Mack & Oliver Partners Fund-LB-12%
FAIRX-Fairholme-LV-18%
IVWIX-IVA Worldwide-WA-14%
JATTX-Janus Triton Fund-SG-6%
MFCFX -Marisco Flexible Capital-LG-18%
PRPFX-Permanent Portfolio-CA-8%
PYVLX-Payson Value-LV-16%
UMBMX-Scout Mid Cap-MB-8%

(it's been in a 30 year bull cycle but interest rates can't go down from here and since prices move inversely to yield . . .)
I suspect all fixed-income investments have become a risky asset.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Worried minds think alike. Adhering to the quaint old guideline of stocks/bonds mix according to age would be 40/60 but feel more comfortable with 35/65 or even 30/70.
But dislike bond exposure at this juncture point for the reasons above. A rather sticky wicket allocating a majority of assets to a credit market that offers a negative real return
on most anything that addresses the interest rate risk (shorter term higher credit qualities.) I/we restructured the entire fixed income side over a year ago, in hindsight over a year early. Fidelity holdings are floating rate, short term muni, New Markets.
Also RPHYX, RNSIX which I was introduced to here and much thanks for that. The remainder of long-only bond funds were rolled over into a couple multi-asset strategies launched by Loomis Sayles and Doubleline employing complex long-short derivative strategies across currency, commodity, stock and bond markets. Apparently too complex. The Loomis Sayles fund
managed (...) to get wrong-footed whipsawed daily with a steadily dwindling NAV in both up and down markets plus no yield (MARYX, don't go there.) Bye-bye, rolled into RNSIX which continues on quite a roll in up, down or sideways markets, don't ask me how, now 20% of assets, its three separately managed subportfolios are a comfort factor for an outsized position. I'm aware of the overconfidence/hubris factor that afflicts fund managers who consistently find everything breaking their way until not, see Bill Miller,
Ken Heebner and the alphabeta bet, confusing one for the other, alpha and beta. The Doubleline Multi-Asset (DMLIX) continues to break even after a year, no more nor less with scant yield, basically a hedge fund for the 99% mom/pop retail investor with the same dismal performance as the pricier high net worth 1% varieties, commiseration knows no class.
The accumulation phase ended with retirement nearly a decade ago, capital preservation is the goal. Long term wind-at-back bond fund complacency will end with surpise and shock in the sort of interest rate rise exceeding all forecast guesstimations by hundreds of basis points the likes of which bankrupted Orange County in the mid-'Nineties. Amnesia is not a strategy. Seared both sides like a Texas-style steak by the '08 market crash the pain avoidance shift has been to the next burner to heat up. I'm not a shorter but it has its appeal regarding fixed income at present despite being dead wrong for over a year.
In a much higher interest rate environment laddering Bulletshares etfs hold vast appeal
for a buy-and-forget capital preservation minded individual with far better things to do (think beachwalk) than pay attention to financial markets having become a wall to wall mess, bumper to bumper, stem to stern, in my version because complexity favors the sinister.

Hi Catch, As I recalled you are invested in Utah 529 plan, right? If there is only 6 years of investment time left, your current 80/20 equity/bond allocation is too aggressive in my opinion. At this point the emphasis should shift toward capital preservation, but other may choose different paths.
What you proposed is similar with 50% allocated to bond/cash equivalent as the age-based "growth" portfilio. Given the low interest rate environment, short term bond index and FDIC insurance saving are not attractive options. I would pick longer duration bonds such as Vanguard Total Bond Market Index. Several years before withdrawal starts you will need to change your equity/bond/cash allocation again.
http://www.uesp.org/Investment-Info/Age-Based-Investment-Options.aspx

Reply to @Old_Joe:
Looking at the data, you'll see that groceries in general have risen pretty quickly, but that eating out has risen only modestly (I've seen reports about how the Dardens and such are racing to the bottom in prices due to the economy). Put it altogether and you get a combined monthly increase of 0.2%, and an increase for 2011 of 4.7%.
Food at home rose 6% in the past year, including rises of 7.9% for meat, poultry, fish and eggs, and 8.1% for dairy products. But if you have a sweet tooth, that stuff only went up 3.8%.
People tend to be more sensitive to losses and less sensitive to gains, which is why they notice small losses more than significant gains, and likewise why they notice the prices that are going up but not so much what has declined or not gone up much. That makes the averages appear worse than they actually are.

invest w/ an edge commentary
Wednesday, January 18, 2012
Editor's CornerInvestor Heat Map - 1/18/12
Got Drachma?
Ron Rowland
U.S. stock benchmarks built on the January rally, with the S&P 500 closing above 1300 today for the first time in almost six months. Gains have been broad-based the last few days with most sectors participating and the laggards having only minimal losses.
A casual observer might think the bullish behavior is connected with earnings season. If so, it is partly because analysts created lower expectations since last quarter. In October, Wall Street expected 15% earnings growth this quarter. Now the consensus is only 7%. We are still early in the cycle though, making further generalizations difficult at this point.
Just before the long weekend, S&P downgraded its sovereign debt rating for nine European countries. This was followed Monday by a cut for their erstwhile savior, the European Financial Stability Facility. The downgrades appear to have had much the same impact as similar action did for the U.S. last August. Rather than higher borrowing costs, at least some of the affected governments were able to sell debt at even lower interest rates. The main thing this tells us is that no one cares what S&P thinks any more.
One place in Europe where rates aren’t falling is Greece. Negotiations with lenders are underway, but bond traders seem to think a default is imminent. Germany and other neighbors are not near as frantic about the possibility as they were a few months ago - which suggests their plans for an orderly dissolution of the Euro currency are probably complete. Get ready for a return of the Greek Drachma.
The world’s preferred safe haven is still the U.S. for now. Ten-year Treasury yields here are holding below 2% and show no hints of moving much higher. Economic data was generally good since last week. December retail sales ticked up since last year with notable strength in automobiles. Consumer sentiment improved, as did an index of homebuilder confidence. We are dubious the current strength can continue much longer, but for now we won’t fight the tape.
Sectors
The Industrials sector held on to the first-place position it seized last week and gathered even more bullish momentum. Materials is not far behind, though, after jumping from #5 to #2 since our last report. Financials fell to third place as resistance near the October peak proved formidable. Health Care picked up a little steam but still slipped back to the fourth-place position. The week’s worst-performing sector was Energy. Lower crude oil prices are no doubt a factor, but energy-related equities actually began sliding a few days earlier. We will see in the next few days whether crude’s move back over $100 helps the oil stocks. Utilities - which not long ago had a firm grip on the top sector position - is now almost in last place, just one rung off the bottom of the list. For now, at least, Telecom is still the lowest-ranked sector.
Styles
Equity Style categories remain packed into a tight range with little dispersion from top to bottom. This allows odd phenomena, such as the Large-Cap Sandwich. Large Value is in first place and Large Growth is on the bottom. We also have a strange pair near the middle of the pack with Mega Caps and Micro Caps right next to each other. Mega Cap is probably being held back by a large Energy allocation. Value is still ahead of Growth at all cap levels.
Global
This week’s Global picture should please anyone who likes symmetry. The number and magnitude of positive categories is nearly a mirror image of the negative ones. The U.S. is still on top, but China is moving up quickly. In fact, China had the best weekly performance of all 32 equity categories we track. Latin America and Emerging Markets moved up to third and fourth places, respectively, after both turned in above-average performances. Canada held steady near the middle of the pack. The U.K. slipped from #2 last week all the way to #7 now. This was partly due to a weakening pound, but the emerging-market surge was a bigger factor. Pacific ex-Japan gained some relative strength but is still in a bearish trend. Japan slid further down the ranks while Europe continued to hold a death grip on the bottom rung of the ladder.

Hi Sven,
USAA offers three national munis USSTX (Short Duration...yielding 2.62%), USATX (Intermediate Duration...yielding 4.14%), and USTEX (Long Duration...yielding 4.56%). The other dynamic with any kind of bond fund is the fund price. It can appreciate in downward moving interest rate environments and depreciate in upward moving interest rate environments.
Over the past year all three funds have enjoyed price appreciation as well as yield. This is, in part, due to the major hit munis took in 2010. I usually don't use Yahoo Finance chart tool because it reflects only price changes in a fund. Morningstar charts incorporate both price and dividends (capital gains) and therefore is a better comparison chart tool.
In the case of comparing bond fund prices I like to track these three funds together using Yahoo finance. Since yield is predetermined (see above), price is what an investor can adjust their allocations to. I like to allocate more of my muni money to the longer duration bond (USTEX) when prices are appreciating and move back to the shorter term muni (USSTX) when the trend reverses.
Charting these three funds together can give you this information because the longer term duration will reverse (cross over the intermediate fund first and then cross over the shorter term bond), sometimes very quickly . To me this is trend following strategy I use for bonds...lengthen my duration at times...shorten duration at time.
Here's the yahoo chart for these three funds. Remember this is only a price chart not the actual value chart (price + dividend). Change the time frame and move the scroll bar to observe the the crossovers. The price trend for muni has been really strong lately...the 1m,3m and 1 yr performance has been outstanding. The 2 YR and 5 YR paint a different story.
http://finance.yahoo.com/echarts?s=USTEX+Interactive#chart10:symbol=ustex;range=1y;compare=usstx+usatx;indicator=dividend+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Reply to @Mark:
Hi Mark. Yes, I agree. That is my recollection too. But I thought he used '08 and '09 as his guide to down and up years. Maybe not exclusively, but those 2 years were major inputs on his view of manager reaction and performance... to my recollection. So hence, looking at any performance data, 3 year, 5 year or even 10 would have been vastly skewed to '08/'09 results in 2010. So I guess to me performance was the same thing.
That said, I miss Fundmentals posts. Can't say I always agreed with him, but he always made me think. I'd say he may have had the biggest impact on how I swayed my portfolio towards managers whose main criteria is to preserve capital - loose less. Funds like YAFFX, ARIVX, FPACX, MACSX, HSRTX.
And to paraphrase Jimmy Durante; THANKS FUNDMENTALS,
WHERE EVER YOU ARE.

Mediocre active managers should be worried. Perhaps this is why American Funds currently lists the total assets of its Capital World Growth & Income Fund (CWGIX) as 68.2 billion (referenced as “Fiscal Year 2011”), while Lipper gives the total assets for CWGIX as of 12/31/2011 as 44.5 billion.

Hi Max,
Per the prospectus: " PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a diversified portfolio of high-quality bonds and other fixed income securities. At least 65% of the Fund’s total assets will be invested in U.S. government obligations, mortgage and asset-backed securities, corporate and municipal bonds, collateralized mortgage obligations (CMOs), and other fixed income securities rated A or better by either Standard & Poor’s Ratings Group (S&P), Fitch Ratings (Fitch), or Moody’s Investors Service (Moody’s), or equivalently rated by any other nationally recognized statistical rating organization (NRSRO). Up to 20% of the Fund’s total assets may be invested in below investment-grade fixed income securities, commonly referred to as high-yield or “junk” bonds, if they have a minimum rating of B by Moody’s, Fitch, or S&P, are equivalently rated by any NRSRO, or, if unrated, are deemed to be of similar quality by Dodge & Cox.
The proportions held in the various fixed income securities will be revised in light of Dodge & Cox’s appraisal of the economy, the relative yields of securities in the various market sectors, the investment prospects for issuers, and other factors. In selecting securities, Dodge & Cox considers many factors, including yield-to-maturity, quality, liquidity, call risk, current yield, and capital appreciation potential."
Also indicated is up to 20% may be invested in high yield bonds.
As to bloat, well; I guess that is all relative. PTTRX is at $244 billion.
DODIX returns are not out of line from what I peeked, and is similar to PTTRX. Also, if I recall properly, the fund held up well in 2008.
So, what do you think about this fund, and what drew your attention?
Gotta run.....
Catch

I pulled out of my small and mid cap US funds in the summer of '11 and put the money into one fund, ARIVX. Very happy with the fund. Definitely a "sleep good at night" fund.
I've decided my buy and hold funds will be funds managed by managers with capital preservation at the forefront. ARIVX and YAFFX on the large cap side fit that bill for me.

Not to put too fine a point on it, but all returns in a retirement account - except for a Roth - are taxed as ordinary income. That rate's often higher than the current capital gains rate, in which case your tax would be higher in an IRA than out. It's particularly pressing if you put a tax-free bond fund in a retirement account, and accrue tax liabilities as a result.
David

Part 2:
Individual fund notes:
FVALX, INTLX: These Forester funds have demonstrated the ability to limit losses by going to cash when conditions so indicate and they do so without worrying about whether they will fully participate in the recovery. Hence they fit the goals of this portfolio well.
Forester was so successful with this simple strategy that FVALX became the only equity fund to have positive (albeit close to zero) returns in 2008.
Unfortunately, this brings in people who look at the rankings, see this fund at the top in 2008 and invest and get disappointed when the fund lags in a bull market.
This fund is chosen for the very strategy (that was incidentally vindicated in 2008) with the full knowledge that it will not necessarily be anywhere near the top in bull markets or even beat the index.
Alternative to FVALX is Amana Income AMANX which does not provide as much downside protection but has done well using a very conservative approach in value investing and keeping the volatility low but it will be slightly more volatile than FVALX. Another slightly higher volatile alternative is Yacktman fund (YACKX)
Alternative to INTLX is Sextant International SSIFX (coincidentally managed by the manager of AMANX) for similar reasons.
AMAGX: A very well managed Large Cap growth fund with a long history of good performance. The downside protection is also reasonable within its class even though there does not appear to be any capital protection strategies in place.
QRSVX: Not a well known fund but is one of the very few funds that is widely available without a transaction fee, has at least a 5 year history and has managed to limit downside in the bear market in the small cap category. The volatility is also kept low.
A better known substitute is Royce Special Equity (RYSEX) if available without a transaction fee. Newer Intrepid Small Cap (ICMAX) has done very well although its short history may be a concern as well as Pinnacle Value (PVFIX) if available without a transaction fee. Both ICMAX and PVFIX are low volatility funds and have capital protection as a goal of the fund to fit the goals of this portfolio well.
MAPIX: The only selection without a 5 year history but comes with a very strong pedigree from Matthews Asia that specializes in Asian funds. This fund has extremely low volatility, even lower than most domestic equities and has managed to deliver very good total returns with a combination of stocks, convertibles and preferred shares.
Alternatives would be either Matthews Asia Pacific (MPACX) at higher volatility with good downside protection or Matthews Asian Growth and Income (MACSX) at lower volatility but can potentially lose more money in bear markets.
BPLEX: An alternative investment fund that tries to get good returns in both bull and bear markets. A long-short fund that can be mistaken for another performance chasing choice because of its recent performance. But this would be a good choice even if its performance in 2009 was just average or even below average.
Looking under the hood shows this fund to be quite different from other long-short funds that try to use both long and short depending on the stock valuations. This fund seems to switch between a primarily long fund (but with short positions to hedge) with good stock selection or a primarily short fund (with long positions to hedge) depending on the macro market conditions thus minimizing individual stock market timing risks.
This is not different in strategy from Forester's philosophy except that its uses shorting rather than just go to cash and uses small caps rather than large caps.
So it does very well in longer bear or bull market years and lags during transitions but without losing much money.
Unfortunately, none of the alternatives for this fund come anywhere close to it in performance as they primarily seem to depend on picking the right stocks to go long or short across all conditions rather than acting like a good long fund or a good hedged fund depending on macro conditions. It is a unique standout.
ARBFX: Another alternative investment fund which depends on arbitraging mergers and acquisitions by buying a company that is being acquired and often shorting the company acquiring. The risks for such funds come only if the M&A does not go through. The earlier you get on as soon as an M&A is announced, the riskier. This fund takes very little risks by waiting to get on and arbitraging just the last few months before an M&A. This keeps the volatility very low and the gains low as well.
An alternative is the similar Merger fund (MERFX) which has a disadvantage because of its size and so may not be able to move quickly in and out.
HSTRX: Hussman's conservative allocation fund is managed in a risk-managed fashion where the portfolio is continually and pro-actively positioned to address the current risk evaluation of the market. Unlike his strategic growth fund, this fund does not take any significant bets on equities and so any incorrect decisions in his strategy does not have as much of a downside impact unlike the other fund. This has allowed HSTRX to show very consistent and impressive performance over a long period of time with very little volatility.
MGIDX: Intermediate duration mortgage securities fund that manages to keep volatility low with good performance and uses shorting/options to achieve this. The ability to short or use options will make this fund able to provide downside protection and manage credit and interest risks, a good idea when mortgage rates are likely to rise in the future.
Alternative is PTMDX - PIMCO Mortgage-Backed Securities D which shorts even more aggressively.
PGNDX: A GNMA fund that manages risk via shorting while preserving the upside of a GNMA fund. Good due to the same reasons as MGIDX above.
Alternatives are non-shorting GNMA funds such as USGNX from USAA, VFIIX from Vanguard or BGNMX from American Century which may have more losses if the mortgage rates were to rise rapidly.
PTTDX: An intermediate investment grade fund that also manages risk via shorting and useful in an expected interest rate rising environment in the future. Low volatility.
Alternatives are non-shorting funds with low volatility THOPX Thompson Plumb Bond or CPTNX American Century Government Bond Inv
WEFIX: A fund with the ability to move between short and intermediate durations based on market conditions and hence able to take advantage of the conditions better than a strictly short term fund. Does not use shorting.
Alternatives are USSBX from USAA, WEFIX Weitz Short-Intermediate Income, VFISX Vanguard Short-Term Treasury, PLDDX PIMCO Low Duration D. The last one from PIMCO does use shorting.

Hello DAK- Like Catch, I haven't followed the portfolio, but here is Fundmental's entire post. I "archived the archive" shortly before FA went away, "just in case".
Because it's length exceeds the allowed maximum here, I've divided it into two parts for you.
Regards- Old Joe
"Make More, Lose Less" Portfolio
Posted by Fundmentals on December 09, 2009
I am sure many of you have come across the situation of a friend or a family member clueless about investing ask you to help them with a stash of money.
The real-life requirements are usually "simple":
1. "Want your help to make some money. I can lose money all by myself"
2. "I can put it in the market for 5 years. Can leave it there longer if it is making money but not if it is losing money"
3. "Don't ask me to do anything more than once a year"
The following portfolio is designed specifically for people that are not:
(a) expecting to beat the market
(b) don't want the portfolio to go down much (likely to panic and sell at the bottom if they went down 10% or more)
(c) would like some decent gains - more than what they can get with money market funds, CDs or even just bond funds without which they will not take the risk of investing at all and
(d) don't want to fiddle with it more than once a year.
The Portfolio-
Domestic Equity:
5% Forester Value (FVALX) - Large Value
5% Amana Trust Growth (AMAGX) - Large Growth
5% Queens Road Small Cap Value (QRSVX) - Small Value
International/Global equity:
10% Forester Discovery (INTLX) - World Allocation
10% Matthews Asia Dividend (MAPIX) - Diversified Asia/Pacific
Alternate investments:
10% Robeco Long/Short Eq Inv (BPLEX) - Long/short equity
10% Arbitrage Fund (ARBFX) - Merger/arbitrage
15% Hussman Total Return (HSTRX) - Conservative allocation
Bonds
7.5% Managers Intermediate Govt (MGIDX) - Mortgage securities/Govt
7.5% PIMCO Total Return D (PTTDX) - Intermediate Investment Grade Bond
7.5% Weitz Short-Interm Income (WEFIX) - Short-Intermediate Term Investment Grade Bond
7.5% PIMCO GNMA D (PGNDX) - GNMA
Backtested performance:
If portfolio invested on 1/1/2008, results as of 11/13/2009:
Total return: +15.05%;
2008 Performance: -4.79%
2009 YTD: 20.84%
Portfolio X-Ray:
Stocks 52.3%; Bonds 38.1%; Cash 9.6%
Stocks: US 56.00%; International 44.00%
US equities:
Large cap 27.4%;
Mid cap 22.8%; Small Cap 49.8%
Value 36.9%;
Blend 53.0%;
Growth 10.1%
International equities:
Europe 24.1%;
Pacific 38.5%;
Canada 18.9%;
Emerging Markets 18.5%
Bonds
Taxable 78.70%;
Uncategorized 21.30%
Credit quality High 78.7%;
Uncategorized 21.30%
Duration: Medium 20.2%
Low 58.5%
Uncategorized 21.3%
Costs
Portfolio average 1.72%
Portfolio construction notes:
The portfolio is constructed to solve a basic flaw in traditional portfolio construction. Diversification using high volatility equity funds (even index funds with market volatility) results in deep losses during bear markets as most such equities become correlated and go down together.
Just depending on bond allocation to reduce losses requires primarily allocation to Treasuries as it is the only type of asset that can be depended on to show negative correlation with equities in bear markets. But unlike in the past, Treasuries starting with the current situation of low interest rates cannot be expected to provide much gains going forward so the portfolio may turn out to be too conservative or too aggressive based on what happens in the market regardless of how much is allocated to Treasuries.
As a solution, portfolio picks only funds designed with a strategy to reduce/minimize losses during long bear markets and has some capital protection goals in place. The overall volatility is reduced by depending on each fund to reduce its own volatility rather than depend on lack of correlation to reduce the volatility.
Note that this is not the same thing as picking funds with the highest returns in either bear or bull markets or both. Nor are the returns attributable to some fantastic market timing in picking which stocks to buy and when to sell.
In fact, most of these funds will likely not consistently appear in the top 10% of their class except occasionally. But all of them will have shown the ability to limit losses by reacting to long-drawn down market conditions and make decent gains in long-drawn up market conditions.
In other words, the only market timing they will show will be in recognizing long bear markets as in recognizing the difference between 2008 and 2009, not what happens month to month. None of them try to time tops and bottoms.
Methodology:
Portfolio Requirements:
1. Capital protection and lack of volatility extremely important. No long periods of losses. No "wait for 10-20 years or more" excuse for losses.
2. Asymmetric behavior - as much of the upside as possible, as little of the downside as possible
3. Simple portfolio with high quality no-load funds widely available in the main brokerages
4. Only annual tune-ups
5. Total return more important than income
6. No assumption of bull/bear markets for the portfolio as a whole, no forecasted assumptions of economy or any other indicators, doom/gloom predictions, etc.
Concrete requirements:
1. Not more than 12 funds.
2. No single fund with less than 5% allocation or more than 15% allocation
3. Portfolio must be diversified but not necessary to cover all asset/fund classes. Only asset classes that have shown consistent returns without long loss periods and small drawdowns. Riskier assets only within risk-managed funds.
4. No assumptions of correlation or lack of correlation between asset classes going forward but no gross overlaps between funds. Some overlap is fine.
Screening criterion for funds:
1. No-load, ER less than or equal to category average, been in existence for at least 5 years.
2. No losses in 3, 5 or 10 yr (if available) rolling periods (amazing how many asset classes or funds drop out here)
3. Manager has been around for at least the category average
4. Minimum initial purchase not more than $3000 (i.e., minimum not more than $60k portfolio)
5. Best 3 month performance must be better than worst 3 month performance over its lifetime (amazing how many funds you lose with this criterion)
6. Best volatility-adjusted performance (3-yr and 5-yr) in class, not necessarily the best returns.
7. Volatility of each fund on its own must not exceed 10% of total stock market index, total bond index or balanced index as appropriate.
8. Lowest volatility to break a tie all else remaining the same.
9. No bias towards active or passive funds as long as the above criterion are satisfied
10. Allocation percentages based entirely on relative volatility-adjusted returns (3-yr and 5-yr), no ad hoc allocation decisions.

Reply to @fundalarm:
Thanks for the reply FA.
USAA does offer a short term muni fund, USSTX, which might be a way of transitioning onto a lower rung on the muni ladder...kinda like a CD ladder.
My thoughts for both (favorable tax status and rising rate appreciation) got me to thinking there might be mutual funds / ETFs that are managed with both a growth and tax strategy. USAA offers,
USBLX, Growth and Tax Strategy:
"The investment seeks a conservative balance for the investor between income, the majority of which is exempt from federal income tax, and the potential for long-term growth of capital to preserve purchasing power. The fund typically invests a majority of assets in tax-exempt bonds and money market instruments and the remainder in blue chip stocks. It is managed with the goal of minimizing the impact of federal income taxes to shareholders"
It holds 55% bonds, mostly munis and 45% blue chip stocks such as Apple, Exxon Mobile. It has a low turn over rate (19%) so most of its dividends are tax exempt.
Finally Fundmojo gives this fund an A+ rating:
http://www.fundmojo.com/mutualfund/fund_report/mutualfund/USBLX
Other funds thoughts:
HBLIX
GLRBX
BERIX
HSTRX
PRPFX
JMSCX
BRUFX
VILLX
ICMBX
OAKBX

For sure there have been a few managers we fired that have come back to put up great numbers. But there are some that we should have fired sooner than we did. There were signals that were pretty evident (at least in hindsight) that indicated the manager(s) had lost touch, or had changed their process, or had tweaked the fund when it didn't need tweaking.
On the other hand, we fired Longleaf many years ago after a manager told us he did not know of any pending distribution. The next day or so, there was a huge capital gain distribution (this in a year when the fund was down quite a bit, too). Within a week, we sold every position and moved on. I can overlook a couple of years of underperformance, if the underlying philosophy, buy-sell strategy, and management remains consistent. But something like the Longleaf issue, means we could no longer trust what management told us. I know they have a good record, but, like Janus and a few others, we will look elsewhere. There are a lot of great managers from which to choose.

Reply to @scott:
Hi Scott,
Thanks for your reference to AQR Capital Management’s interpretation and implementation of the Risk Parity concept. Although I am generally familiar with the concept, my understanding of its details, especially its execution aspects, is extremely shallow. Your reference has somewhat deepened my knowledge base.
I downloaded the AQR document and spent an hour reviewing it. In the spirit of the Internet, here is my WikiView of the paper.
I am favorably impressed by the directness, the honesty, and the technical characteristics of the report. Its content clearly identifies the prospects and the limitations of the risk parity strategy. It helps to establish a trust in the author’s firm.
I applaud the AQR philosophy that management costs, particularly in the Hedge Fund universe, are far too high. The current cost structure seems appropriate, but the huge initial investment hurdle is an unassailable entry mountain for most private investors. I hope some group alternatives exist as is often the case.
A major AQR position is for ultra diversification across products, markets, and globally. It is ubiquitous in their document. I completely agree, but that is not a novel investment idea.
AQR talks about the complexity of risk, about its multidimensional nature. Yet when reporting their methodology, they revert to the conventional standard deviation measure of the risk parameter. This defection to the conventional representation has implications further down the road in my review. For now, the AQR document failed to walk the talk.
I was pleased with the ADQ presentation of investment category outcomes from the past 40 years, particularly with the segmentation of their discussions into decades and into different crisis periods. History does matter and informs our decision making.
I applaud ADQ for properly crediting the academic work completed by Harry Markowitz and James Tobin in the 1950s. These are the cornerstones of efficient portfolio construction and the investment separation concepts. Again, these are well established risk control concepts that are taught in every financial college course today. Nothing new here.
Let’s get back to the definition of risk once again. The ADQ team acknowledges standard deviation shortcomings, but uses it throughout the paper. That’s okay, except when displaying the potential benefits of leveraging in the Efficient Frontier curve given as Figure 6. Markowitz and Tobin used standard deviation as the full measure of risk because that was likely their simplified understanding five decades ago. By resorting to that same definition, ADQ understates the risk of Leverage when investing.
Note that the Leveraged portfolio in Figure 6 is still a linear function of Risk. ADQ knows better. See the warnings in their disclaimer section. At one point, they say: “It is also possible to lose more than the initial deposit when trading derivatives or using leverage.” That’s honest, but it is not properly reflected in the linear extrapolation relationship depicted in Figure 6. For the leverage notional depiction, the curve should bend, convex downward. As expected rewards increase, at some point, the risk price tag is likely to become exorbitant. The leveraged risk/reward tradeoff is definitely not linear.
Without leveraging, the standard Risk Parity portfolio is likely to deliver muted returns (perhaps similar to the Permanent Portfolio genre). The commonsense risk/reward investment tradeoff axiom remains intact; higher expected reward means higher risk adventures.
ADQ offers to sweeten the deal by engaging in very active Hedge Fund leveraging techniques, many of which are fairly presented in the paper. These techniques include special forecasting skills, preferential market assessments, and very active, and accurate money management tools. Hedge funds typically operate in this space. ADQ has considerable expertise and experience functioning in this specialized environment. But those operations increase risk; success can never be guaranteed, and risk is not fully represented in the Figure 6 plots.
ADQ has the experienced talent to execute this investment approach. They have been doing it for years. Just recognize, that is a risk mitigation method that degrades in risk control as leverage stretches for higher returns.
Market watchers have long recognized the realities of “fat-tailed” return distributions. About 15 years ago I did personal Monte Carlo computer simulations to inform my retirement decision. I did my own computer programming. Initially, I postulated Bell curve return’s distributions.
To enhance my simulation fidelity, I modified my code to do Bell curve returns when the randomly selected volatility was within a stipulated standard deviation factor, and then defaulted to a power-curve distribution when that standard deviation criteria was violated. The power-curve distribution better models the real world fat=tail return’s distribution.
Of course, my portfolio survival rate declined with the wilder ride that the fat-tails modeling projected. I still retired as planned, but my wife and I decided on a smaller portfolio drawdown rate as a result of those simulations.
We were never happy with the robustness of those simulations because the point of departure from the Bell curve, and the decay exponent in the postulated power-curve distribution were arbitrary. There is a paucity of data in the fat-tail regime. Inputing an exponential decay rate is pure guesswork. Assumptions must always be made in the borderline zone between orderly and unpredictable future market behavior. Luck is important.
I’m sure you made a wise decision in your ADQ investment. I know you do not expect miracles. It’s a nonlinear world.
Best Wishes.

FROM EJONES COMMENTARY
I thought you would be interested in the commentary below from Investment Strategist Kate Warne on the December jobs report.
Strengthening Job Market Improves Investor Moods
The economy added 200,000 jobs in December as the job market strengthened more than expected at the end of 2011 (based on a gain of 178,000 expected, according to Bloomberg). In addition, the unemployment rate dropped to 8.5% from a revised 8.7% in November, continuing to trend lower and also better than the 8.7% expected. The private sector added 212,000 jobs, while government employment fell slightly.
Investors anticipate that improving job conditions could help create a circle of stronger consumer spending, better economic growth and, in turn, more jobs.
Signs That the Job Market Is Healing
December's job gains and drop in the unemployment rate are reinforced by many other sources reporting improving job conditions, including the following:
ADP survey showing record job growth -- Private-sector jobs rose 325,000, according to ADP. That was the biggest monthly job increase since this survey started in 2001.
Falling first-time unemployment claims -- The average number of initial unemployment claims over the past four weeks has fallen to the lowest level since June 2008, as fewer people are losing their jobs.
Rising hours and wages -- Hours and wages both rose slightly in December, another positive sign. Wages rose 2.1% in 2011, an improvement from last year.
What's the Big Picture?
While it may be tough to sift through the month-to-month figures when assessing the overall picture, we believe the longer-term perspective shows a trend of solid improvement in the job market. Over the past year:
The private sector created 1.92 million jobs, up more than 60% from 1.17 million in 2010.
Factoring in a loss of about 280,000 government jobs, total jobs increased 1.64 million in 2011. That was an increase of 74% compared to 2010, the first year of job growth after the Great Recession.
The economy dug itself into a deep hole in the recession, with almost 9 million jobs lost, but the recovery is gaining strength, and about 30% of those jobs have been recovered over the past two years.
Overall output is now greater than before the recession. And as is usually the case, job growth lagged but followed along doggedly and accelerated over the past year. While job growth is still not as strong as most would hope, and there's a long way to go, the considerable progress shouldn't be ignored.
Investors who worried that this recovery would falter may be reassured to realize that while it may be slow, its path doesn't seem much different from past recoveries. It takes time and patience. And we think the same perspective is true for your investments. Stocks can benefit from the growth in the economy and earnings over time, and have played an important role in helping investors achieve their long-term goals.* An improving job market suggests this could be a good time to review your investments and make changes if needed.