FYI: S&P 500 sector weightings are important to monitor. Over the years when weightings have gotten extremely lopsided for one or two sectors, it hasn’t ended well. Below is a table showing S&P 500 sector weightings from the mid-1990s through 2012. In the early 1990s before the Dot Com bubble, the US economy was much more evenly weighted between manufacturing sectors and service sectors. Sector weightings were bunched together between 6% and 14% across the board. In 1990, Tech was tied for the smallest sector of the market at 6.3%, while Industrials was the largest at 14.7%. The spread between the largest and smallest sectors back then was just over 8 percentage points.
The Dot Com bubble completely blew up the balanced economy, and looking back you can clearly see how lopsided things had become. Once the Tech bubble burst, it was the Financial sector that began its charge towards dominance. The Financial sector’s sole purpose is to service the economy, so in our view you never want to see the Financial sector make up the largest portion of the economy. That was the case from 2002 to 2007, though, and we all know how that ended.
Unfortunately we’ve begun to see sector weightings get extremely out of whack once again.
Regards,
Ted
https://www.bespokepremium.com/sector-snapshot/bespoke-sp-500-sector-weightings-report-january-2018/

Wow - Just waded through Grantham’s dissertation. Kudos to him and those who understand all these charts and comparisons to historical (hysterical?) bubbles. Do my fund managers at Oakmark, Dodge & Cox or TRP engage in this type of micro analysis? I rather hope not. And this type of analysis seems far removed from the kind of common sense horse wisdom voiced by the likes of Munger and Buffett over the years.
Remember the OJ trial? “If the glove doesn’t fit, you must acquit.” When pieces of a puzzle no longer fit together it’s time to take a second look and exercise some caution. That’s all I’m getting to. When you’ve got prolonged 2 - 2.5% returns on “safe money” alongside double-digit returns on most everything else, it’s time to take a second look at the big picture. Two more parts of the puzzle - In our part of Michigan there’s “Help Wanted” signs everywhere. Yet wages and wage inflation remain very low. And during the normally slow winter construction season if you want a granite countertop professionally delivered and installed you’re looking at a 2-3 month wait after placing an order because they can’t keep up with demand. Trying to obtain decent skilled labor for renovation work during the hot summer months nearly impossible nowdays, with entire city blocks packed end-to-end with construction vehicles.
Despite the indications of a sizzling economy and years of stock market gains, interest rates at both the short and longer end (AA+) remain stubbornly stuck in the 2-2.5% range and wage inflation low. Couple the low wages with various entitlement curtailments (everything from public education to medical care) and the “average Joe” is worse off today than a decade ago. So, IMHO many pieces of the broader puzzle appear out of whack. I don’t recommend panic selling of investments. I do suggest a bit more caution be exercised, be it through raising cash, diversifying risk assets more broadly, concentrating more on funds known to have weathered financial storms well in the past, paying off debt, or just investing some of the recent gains in your own “infrastructure” (home, transportation, etc.).
I am not a financial advisor.

@bee,
Thanks for the information and links. In my brief review of this information ... Well, it just confirms that the stock market is richly priced. Does it mean the market is going to correct anytime soon? Probally not in view of the recent passage of tax reform. With this, I look for stocks to get even more pricey. And, if you own stocks as most of us on the board do ... our portfolios should increase in their value.
Many have talked about financial engineering at the corporate level and it now seems to have found its way into government. With the Corporate cash that is expected to come back to the US I'm thinking a good bit of it will be used by a good number of companies to buy back their own stock. In doing this it will reduce the amout of shares in float thus spreading corporate earnings over less shares thus increasing profits without an increase in revenue. I'm also thinking that there will not be a lot spent for capital inprovements for plant expansion and moderaziation; and, with unemployement at about 5% well, it just can not get much lower. Again, this will benefit stock holders.
I might make a lot of typos in my typing; but, I still think well enough to figure this out. In addition, I am not expecting the average working citizen to catch a windfall in the form of benefits and pay raises from thier companies.
I could continue ... but, what's the point. It all boils down to financial engineering.
Skeet

@DavidV- With respect to your question: "What would be optimal investment for consistent income return of 4%", I think that @bee, above, gives you a pretty good insight. Both @Ted and @bee are well regarded with respect to financial matters; because they both mention VWINX perhaps you should give that fund particular attention.
The problem which all of us face is that all data sets for financial calculations are backward-looking: forward-looking data sets are very hard to come by. @LewisBraham, immediately above, expands on this.
@MikeM, above, makes an excellent suggestion with reference to on-line "Monte Carlo" sites which can be very helpful in analyzing individual retirement schemes. The Monte Carlo simulators have long been championed here on MFO by another poster, @MJG.
I've used the "Search" feature to go back and find a few of his references and links to such sites:
MJG Post #1 provides this Monte Carlo link.
and MJG Post #2 provides this Monte Carlo link.
You mentioned that "He will get help in portfolio management." Perhaps it would be helpful if you could expand a bit on this aspect- will he have the benefit of a professional manager of some sort?
We all wish you well in your efforts to help.

@willmatt72 Yes. I found this excerpt particularly amazing (Talk about a conflict of interest!):
"At the Baron fund family, the fee oversight is complicated by the fact that Mr. Baron, the largest shareholder in the investment company and the manager of its largest fund, has a financial incentive to keep fees high. In addition to his salary and bonus, tied to performance among other measures, he gets a reward based on a percentage of the fees his funds bring in, according to regulatory filings."!
https://www.mutualfundobserver.com/discuss/discussion/37722/why-are-mutual-fund-fees-so-high-this-billionaire-knows-ron-baron#latest

Synopsis (Breyer worked for Ted K), typical pros and cons and overreaction to gov intrusiveness:
https://www.bloomberg.com/news/articles/2011-01-20/airline-deregulation-revisitedbusinessweek-business-news-stock-market-and-financial-advice

A necessary condition for gambler's ruin to be valid is that there be a zero sum game. One doesn't even have to know what gambler's ruin is to know that it doesn't apply to the equities market (long term upward trend - not zero sum).
Similarly, randomness is a necessary condition for mean reversion. Even if one doesn't know what mean reversion is.
The moral is that if one assumes that the market is random, then by that very hypothesis last year's returns mean nothing for next year, the last nine year's bull market means nothing. And if one doesn't assume the market is random, then by definition mean regression is invalid (doesn't apply).
So one either buys into the randomness assumption and ignores recent data, or doesn't buy into it, in which case "mean regression" can't be used to justify decisions. Any attempt to the contrary is effectively an appeal to "fake math".
Find the economic/financial rationale as you asked about for your short term decisions. Otherwise, yes, you're making investment decisions to "sleep-at-night".
P.S. Gambler's ruin is not gambler's fallacy. The former is a long term concept, the latter a short term one. The latter says that just because you've tossed five heads in a row, don't rely on that to bet on tails (as being "overdue"). But you might just check that coin to see if it is two headed before placing your next bet. Just as you might want to look for reasons why the market did well recently.

>> varies by how hot the hand is. Is this a way of advising (sometimes) to bail from extreme runups?

Point well taken. In the 90s - a few years from retirement - I found myself taking a crash course on investing. Bogle either drove me to drink or put me to sleep. Andrew Tobias, while less esteemed in the investment community, was much easier to digest (The Only Investment Guide You’ll Ever Need).
One thing that has always influenced me is Tobias’s suggestion small investors pick up all their marbles and walk away from the stock market if they ever find themselves in the midst of a gigantic bubble. Of course, the problem with this is in actually knowing whether a bubble exists. And he wasn’t clear on how to determine that. An additional problem now is that interest rates are much lower and the bond market likely more precarious than at the time Tobias wrote. So there isn’t a good alternative place to hide.
I did listen to Tobias, and also Bill Fleckenstein, in the late 90s and moved mostly to bonds prior to the 2000 equity rout. Fair to say the two of them saved me some money back than. Today I’m light on equity exposure - but not completely out as Tobias suggests. Subscribed recently to Fleck’s Daily Rap. Can’t say whether it’s a good investment or not, but does offer a starkly different perspective to most of the Bull crap coming from mainstream financial sources.

FYI: Losses in technology and financial stocks weighed on Wall Street on the last trading day of 2017, in what has been a banner year for U.S. shares.
Regards,
Ted
Bloomberg:
https://www.bloomberg.com/news/articles/2017-12-28/asia-stocks-head-for-muted-open-after-record-high-markets-wrap
Reuters:
https://www.reuters.com/article/us-usa-stocks/wall-street-set-to-end-the-year-on-dour-note-idUSKBN1EN13K
MarketWatch:
https://www.marketwatch.com/story/dow-sp-set-to-power-to-fresh-record-on-2017s-last-trading-day-2017-12-29/print
IBD:
https://www.investors.com/market-trend/stock-market-today/stocks-have-big-gains-for-2017/
CNBC:
https://www.cnbc.com/2017/12/29/us-stocks-open-higher-sp-500-tracking-for-best-year-since-2013.html
AP:
http://hosted.ap.org/dynamic/stories/F/FINANCIAL_MARKETS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT
Bloomberg Evening Briefing:
https://www.bloomberg.com/news/articles/2017-12-29/your-evening-briefing
WSJ: Markets At A Glance:
http://markets.wsj.com/us
SPDR's Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
SPDR's Bloomberg Sector Performance Pie Chart:
https://www.bloomberg.com/markets/sectors
Current Futures: Negative
https://finviz.com/futures.ashx
Quote

@jerry, I’d agree on the last 2 items. Not very profound. Rate them both “Duh.” His first offering, however, is somewhat provocative: “Financial advice is the only business where you are better off giving customers what they need versus what they want”.
Learned in taking T/F tests that when you encounter a statement containing a word like “only” or “always” you’re best off marking it false. My thinking here is that there are many endeavors where one is better off giving the customer what he needs rather than what he wants. Law enforcement, medicine and education come to mind. Probably many others.
And based on the exhorbitant fees charged by some financial principals (including some fund companies) along with a flotilla of “suspect” product offerings it seems to me many haven’t really bought into the idea that they’d be better off giving the customer what he needs.

FYI: Many individual investors and financial advisers consider equal-weighted index funds to be a sure-fire way of beating the stock market.
They’re wrong. In fact, equal-weighted funds, which give the same percentage allocation to each of the stocks they own, are more likely to lag their capitalization-weighted peers — which weight each stock according to its market valuation — on a risk-adjusted basis over the long term.
Regards,
Ted
https://www.marketwatch.com/story/these-top-ranked-index-funds-arent-built-to-handle-the-next-stock-market-crash-2017-12-26/print

FYI: Mark Hulbert, a fellow MarketWatch columnist and respected observer of the financial advising business, recently wrote a thoughtful critique of the massive rush to index-style investing.
I just wish the headline had been different.
Regards,
Ted
https://www.marketwatch.com/story/jack-bogle-to-investors-avoid-these-junk-etfs-2017-12-19/print

FYI: I’ve been on a high lately. A financial high, that is … and bitcoin is my drug of choice. Strange as it sounds, research indicates that what I’m feeling is not much different from an actual drug experience.
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/allan-roth-my-brain-bitcoin

A sort of pleasant surprise is that the results seem more rational and informede than I expected. PEOPLE HAVE OBVIOUSLY MOSTLY READ SOMETHING ABOUT THE ISSUE/PROBLEM. fOR EXAMPLE ALMOST EVERYTHING i HAVE READ ABOUT RETIRING PLANNING INCLUDING ADVICE TO FINANCIAL PLANNERS IS THAT ONE SHOULD PLAN ON LIVING TO 90. hENCE IT IS NOT SO SURPRISING PEOPLE SEEM TO BE PLANNING ON LIVING Sorry the cap lock went on . I am not really shouting

FYI: It is that time of year, when the financial industry engages in its annual ritual of making forecasts, which is usually little more than the prelude to looking foolish. Titles like “Outlook for 2018, “What to expect in the new year,” or some variation thereof litter the landscape. Over the years, it has been my distinct privilege (and truth be told, pleasure) to point out how silly this process is.
Regards,
Ted
https://www.bloomberg.com/view/articles/2017-12-15/wall-street-wises-up-to-the-folly-of-forecasting

FYI: In the good old days of the investment industry the life of fund selectors and investors was much easier, since equity funds invested straightforwardly in equities—as did their fixed income peers with bonds. Even mixed-asset funds were easy to classify, since they had fixed or target portions of their portfolios invested in equities and bonds in combination with cash as a risk-free position. Investors could simply buy a fund that had an equity portion that was suitable for their risk appetite.
Regards,
Ted
http://lipperalpha.financial.thomsonreuters.com/2017/12/monday-morning-memo-how-to-properly-classify-mixed-asset-funds/?utm_source=Eloqua&utm_medium=email&utm_campaign=00008DM_NewsletterLipperAlphaInsightFundInsightsWeekly_Other&utm_content=Newsletters_FundsInsightWeekly_Dec122017

Hi Guys,
Like it or not, volatility is a characteristic of markets. It does change, sometimes dramatically, over various periods, but the historical record tells the basic truth. In very gross terms, annual equity standard deviation is approximately double annual returns. That's not likely to change, so investors must accept that as the uncertainties of expected returns.
Variability always exists. The arithmetic average return will always be larger than the geometric return. That disparity grows as return standard deviation increases. The geometric average return Includes a correction for Standard Deviation. The geometric return is what determines your end wealth. The equation tells the story.
The approximate equation is: Expected Return equals Average Return minus 1/2 times the standard deviation squared.
Therefore, I take issue with Ben Carlson's closing statement. Portfolio volatility matters; it is your enemy. Portfolio Standard Deviation directly impacts long term returns in a negative way. That's why we work hard to select portfolio components that hopefully reduce our portfolio's volatility.
Carlson is a terrific financial writer. In this instance, he was not representing a viewpoint from an individual investor's portfolio perspective.
Best wishes on accomplishing that target goal.

FYI: During three separate interviews this week I was asked if I was seeing any signs of complacency among investors, markets, or clients.
If anything, the people I talk to are more concerned with the high probability of lower market returns in the future but my view is surely clouded by the clientele and readers I deal with on a regular basis.
Whether my sample size is representative or not, measuring market sentiment is getting harder and harder these days. Everyone now has a megaphone to voice their opinions — social media, blogs, 24-hour financial television, podcasts, conferences, magazines, financial news websites, etc.
Regards,
Ted
http://awealthofcommonsense.com/2017/12/what-a-complacent-investor-looks-like/

You could have written that headline 20 years ago...
That said, tech is -- and will --put severe financial pressures on many industries -- displacing (or buying or replacing) them.
(Physical-) travel agents? (Mostly - )Long gone.
Retail? Check.
Pay/cable TV? -- Amazon prime, Netflix, and (soon-) streaming Disney/Fox content direct.
Many others too. Glad I will be out of the workforce soon. The "AI job-pocalypse" is coming...

I’m skeptical of financial journalism when I see loaded terms like “wall of money”, “fever pitch”, “spree” ...
I get the point that munis are more in demand than a month earlier. As someone who stepped gingerly into a couple muni funds 6 or 7 months ago (PRFHX, PRFSX) I can tell you the action has been decidedly undramatic. The former has picked up a couple percent over that time. The latter has gone slightly under water since I bought.
No discussion of munis would be complete without attention to (1) a generally long-lasting overbought condition of bonds in general (going back decades), (2) a generally long-lasting overbought condition of high yield bonds (going back to post-2008), a rapidly flattening yield curve that is making shorter duration bonds increasingly attractive relative to longer duration bonds and (4) a frothy equity market that is causing investors to seek shelter - even in low yielding fixed income instruments.