"However, SEC mandated reforms were implemented at the time which further restrict the type of investments the retail funds can make. Many (most?) became government-backed money market funds. These changes made the retail funds much less profitable."
Brokerages and mutual fund companies seem to have done their best to confuse matters. They certainly made it appear as though people were being forced to accept lower returns.
If you were already investing in a US Treasury fund (e.g. PRTXX) or a US government fund (T. Rowe Price did not have one), nothing changed. If you were invested in a prime fund (i.e. one that could invest in corporate paper and other non-US government securities), things may have changed.
Financial institutions were reluctant (perhaps prohibited, I'm not sure) to allow you to use a fund that could freeze redemptions as your core/transaction/checking account. So they had two choices - convert their "core" fund offerings from prime to government, or require you to pick a different fund (a government fund) as your core account. They went with door number 1.
TRP changed Prime Reserve to Government MM (PRRXX), Fidelity changed Cash Reserves to Government Cash Reserves (FDRXX), etc. But T. Rowe Price also did something else. It took its high minimum (higher yielding) retail prime fund, Summit Cash Reserves, lowered its min to $2500 (dropping the "Summit" high min part), and renamed it Cash Reserves (TSCXX). So one still had a prime fund available; arguably a better one than Prime Reserve.
Here's T. Rowe Price's description of the changes required and what it did:
https://www4.troweprice.com/mmr/content/dam/money-market/articles/MMF Reform_US_04-12-2016_Update_v2.pdf
TSCXX wasn't forced to change anything. Here are the portfolio compositions as given in the April 2014 and October 2017 reports.

   Security Type     2014    2017
Commercial Paper      53%     52%
Muni Obligations      28%     23%
Foreign CDs (USD)      7%      5%
Treasury Notes         6%      9%
Domestic CDs           5%      3%
US Treasury Bills      1%      4%
Other (net)            0%      4%

- Are we going to legislate oversight and regulation of the nation’s financial institutions?
- You don’t suppose this might than become a political football every election season?
- If Vanguard, Fidelity and BlackRock were to contribute more to the campaigns of these Congressional financial gurus, might it might alter their thinking?
-
I tend to agree with the “float”. If you need a stable value on your cash investments, there are other options like FDIC insured bank accounts or T-Bills. As msf says, the floating rate doesn’t apply to the funds marketed to small retail investors (most of us). However, SEC mandated reforms were implemented at the time which further restrict the type of investments the retail funds can make. Many (most?) became government-backed money market funds. These changes made the retail funds much less profitable. That was enough to convince me to move to TRBUX.
If you could go back and view the old FA board discussions for fall / winter of ‘07, you’d find a number of threads questioning whether money market funds were “too risky” for small retail investors (most of us) - quite the opposite of a climate where discussions about emerging markets, junk bonds, and various passive approaches to equities dominate.

Here's a four page primer from Vanguard on the MMF rules, including background on why something like these rules is needed. It's dated 2014, before the rules became effective (late 2016).
https://personal.vanguard.com/pdf/VGMMR.pdf
The final paragraph begins: "We believe that these changes, along with the safeguards implemented in 2010, constitute a strong response to concerns that institutional money market funds may pose a risk to the financial system. While the majority of Vanguard money market fund shareholders won’t be affected by the new rules, some institutional
clients will be."
Remember that only institutional prime and muni MMFs float. Yours and mine don't.

FYI: The House Financial Services Committee has advanced a bill that would eliminate some of the strictures placed on the $2.8 trillion money market mutual fund industry in the wake of the financial crisis.
The legislation, which was opposed by Fidelity Investments, Vanguard Group., BlackRock Inc. and other major asset managers, would repeal a 2014 requirement that the riskiest funds allow their share prices to float, rather than maintain a stable $1 value. The panel’s action clears the way for a House vote on the measure.
Regards,
Ted
https://www.bloomberg.com/news/articles/2018-01-18/house-panel-backs-bill-to-scrap-floating-prices-for-money-funds

FYI: Although I don’t spend a ton of time watching the financial news, I see more than enough of the misinformation that too many people seem to regard as factual.
Last week I was appalled (though not totally surprised) to see a commentator describe 2018 as likely to be “a stock picker’s year.”
This is the stupidest sales pitch for active management that I know. And I don’t think “stupid” is too strong a word.
The idea seemed to be that there’s something special about this coming year that will give active managers an advantage over index funds.
Regards,
Ted
https://www.marketwatch.com/story/dont-be-fooled-stock-picking-is-still-a-losers-game-2018-01-17/print

FYI: Holding mutual funds feet to the fire when it comes to excessive fees could get a good deal more difficult if legislation is approved by the House Financial Services Committee this week making it tougher for consumers to sue, the Consumer Federation of America (CFA) said in a letter sent to lawmakers this week.
The CFA is asking House Financial Services Committee Chairman Jeb Hensarling (R-TX) and committee members to vote “no” on “The Mutual Fund Litigation Reform Act (HR 4738),” which would increase the burden of proof required by investors suing a mutual fund company for excessive fees. The bill is scheduled for committee markup this week.
Regards,
Ted
https://www.fa-mag.com/news/cfa-urges--no--vote-on-bill-limiting-investor-right-to-sue-mutual-funds-for-excessive-fees-36668.html?print

As it should have. He was talking about stocks, and there's a big difference between being a customer of a company and knowing a company. It's the latter sense in which he meant one should know what (company) one is investing in.
Still, when it comes to industries, knowing means something different. Working in an industry can give you a good sense of the health of that industry if you are attentive.
I was wondering whether you had any thoughts about how the CAPE index model will be adjusted for the new sector since this is a thread about DSENX. When real estate was carved out of financials, the CAPE index was modified to use a non-SPDR index fund, IYR.
I imagine that was done because it needed an index fund with a ten year history, and by definition, XLRE was a new fund without a history. Though IYR might have been chosen because it was more inclusive, holding mortgage REITS such as NLY that XLRE excludes.
However, that might mean that the CAPE index added a new group of companies (mortgage REITs) that it had not tracked before. A discontinuity. Regardless, another imprecision arose - the old history of the financial sector included real estate, while the sector itself no longer did. Was any attempt made to correct for this (e.g. recalculating the financial index history after pulling out the real estate component)?
This time things are even more interesting. The CAPE index tracks XLK for technology, but XLK combines technology and telecom. That's why there are ten "sectors" that the CAPE index uses, while there are eleven S&P sectors.
It is possible that State Street will decide to keep XLK as it is, in which case the CAPE index won't have to do a thing (other than watch the technology+communications "sector" continue to grow in weight). But what if State Street does finally create a communications Select Sector SPDR? There won't be any history for the new SPDR (just as there was no history for XLRE). Would the CAPE index turn again to a non-Select Sector SPDR? Also, as happened with XLF, the history for XLK will no longer precisely represent the new XLK after communications companies are carved out.
DSENX in turn will need derivatives that track whatever index or indexes the CAPE index chooses to track. Will they exist?
And they say that a machine can run an index fund.

What’s the virtue of a 10 year period? Seems too short on which to base any financial theory or lesson. But, over 100 years, Yup - the low cost passive fund should win out.

If you trend GLD and PRPFX, the 2 move in tandem. So, it could be argued PRPFX is a conservative way of owning gold, I think. I think you would own a fund like PRPFX for the same reason you would own a conservative balanced fund like maybe GLRBX, although over time I think a plain vanilla fund like GLRBX would have been a smoother and more lucrative ride. But in any case, it all comes down to being comfortable in how it fits your portfolio view.
What does that mean, PRPFX was "over-weight" gold? The weight within the portfolio doesn't change.

Mostly valid points @MikeM ...
With a combined 25% benchmark weighting to gold and silver, PRPFX will respond more to price changes in those metals than most funds having little or no exposure. Metals tend to be wildly erratic “assets”, which explains your preference at one time for this fund over owning GLD or a dedicated p/m fund. A bit like adding some water to your single malt to dampen the effect. I placed assets in quotes because there was a good thread here about 5 years ago debating whether gold should even be considered a “financial asset”.
Sounds like you had a reasonably good experience with PRPFX and moved out when momentum reversed. As with any open-ended fund, heavy selling by shareholders over short periods can ding returns, hurting those who stay behind - but there’s no way that I know of to prevent them, and I've occasionally engaged in the same practice to lock in a quick gain.
Adding a volatile investment to an otherwise conservative fund will affect returns during both the up and down cycles. Hussman, for example, once held significant mining shares in HSTRX. On the surface it appeared a mild mannered income fund. But in 2007 it outpaced the competition with a near 13% gain; than lost 8.37% in 2013. Suspect you’ll find those numbers track the performance / underperformance of GLD. (If memory is correct, p/m shares represented near 10% of the fund at times,)
I’ll go out on a limb and say I like gold / miners at the moment. In part that’s because most everything else appears so expensive. That said, timing the metals is a fool’s errand and I have 0% confidence in my outlook. Consequently, I currently maintain only a “token” foothold in a dedicated p/m fund.
Re “Overweight” (First mentioned in this thread by @PBKCM):
Unless a fund rebalances every day, rapidly rising prices for a particular asset might move that asset to a temporary overweight position relative to benchmark - until the manager rebalances. Don’t know how frequently PRPFX rebalances, but doubt it’s every day. So I’d expect that the fund went temporarily overweight gold for a stretch simply because it was appreciating much more rapidly than the fund’s other assets.

Schwab has always used cash accounts as, well, cash cows. It lards its "Intelligent" Portfolios (robo accounts) with cash, and it offers little in the way of interest for its core/transaction accounts.
Those are the accounts being addressed here. No broker (at least that I know of) offers prime MMFs for use in core accounts because of their potential illiquidity. Vanguard switched from offering VMMXX to VMFXX when the new MMF regulations kicked in. So we do need to be fair here. That said, VMFXX is yielding 1.24% (Jan 11, 2018). I'd mentioned FDRXX for Fidelity IRAs (0.95%) in another thread. Both way ahead of Schwab.
If you want the higher yields (and slightly higher risk) of prime MMFs, wherever you invest, you'll need to explicitly buy them. As Schwab writes in the disclosure statement: "You should also consider higher-return options for funds that are not needed immediately, as yields on any of our Cash Features [core account options] may be lower than those of similar investments or deposit accounts"
Schwab appears to be making mostly minor changes to its core account offerings. As I read it, Schwab is phasing out one option, while increasing insurance on its FDIC bank sweep option and adding higher interest tiers (rates not disclosed) on its bank sweep and "Schwab One® Interest" options. (Schwab One® Interest is where your cash is held by Schwab as a general obligation of the company, like "Fidelity Cash".) The option that's getting phased out would let you use one of Schwab's MMFs (sweep share class) as your core account. So all that remains to use for a core account is cash (no MMF) - cash in a bank, or cash held by Schwab.
Schwab is adding more tiers to the interest rate schedule for these two options. The highest tier is now at $1M, for all the good that does. The tiers will be at:

• Balances of $0 to $24,999.99
• Balances of $25,000.00 to $99,999.99
• Balances of $100,000.00 to $249,999.99
• Balances of $250,000.00 to $499,999.99
• Balances of $500,000.00 to $999,999.99
• Balances of $1,000,000.00 or more

Schwab had been using one bank for the bank sweep. So your cash was FDIC-insured "only" up to $250k, or $500K if it was a joint account. It will begin using two banks, so your money (if owned jointly) could be insured up to $1M (2 x $500K), getting you close to that $1M tier - a point that Schwab makes in its disclosure.
Much of the rest is boilerplate about bank insurance, which type of Schwab accounts can use which sweep features, etc.
The only negative I see in the change is the phasing out of a Schwab Sweep Money Fund as a core account option. For example, one will not be able to open an account using SWGXX, the "Sweep Class" shares of its Government Money Fund. That class is currently yielding 0.65% according to Schwab. To show how even here Schwab milks these core accounts, the fund's Investor class shares SNVXX currently yield 0.91%.

Oops. Sorry @bee. I thought this was from Ted and initially blasted it. (He who giveth shall receiveth.)
Torpedo recalled.
Apologies @Ted also. I need to look before I leap.
@bee raises an interesting question re PRPFX. And I listened to all 15 minutes of the video expecting the gent would eventually get around to that fund. But I see no reference to PRPFX or its multi-asset investment approach in the linked video. Perhaps a different video was intended?
What this is is a lopsided pitch for gold using scare tactics. I won’t dispute that the gentleman injects some real financial issues into his pitch (excess liquidity, high valuations, high debt, etc.). If folks have takes on those issues I’d be most interested in hearing their thoughts. (And a lot of his pitch is taken from John Hussman’s playbook.) But the presentation seems very lopsided and designed mainly to spook people into owning gold.
Everybody has their own take on PRPFX. Depends on your temperament, philosophy, life experiences and a whole lot of other factors. Those who read my musings must note I’m pretty risk averse. So I look for every possible way to diversify. Having a small chunk of this fund (10-15% of total) is just one aspect of that diversification.
I’ve never viewed PRPFX as something you buy or sell depending on your outlook for the economy or the stock market. Actually, I’d tend to view it more as an all weather fund, suitable at anytime. A good fund for those who agree with the “TED” series speaker’s doomsday prophecy would be HSGFX. A better choice IMHO than loading up on gold.
Regards

TED Talk Aug 2017:
Thinking about real assets as the "insurance" in your portfolio. Is PRPFX worth reconsidering?

FYI: EXECUTIVE SUMMARY
Fixed income funds posted a solid return for Q4 2017 (+0.46% on average),
but overall the performance was slightly off from Q3’s result (+1.11%).
Regards,
Ted
http://lipperalpha.financial.thomsonreuters.com/wp-content/uploads/2018/01/Fixed-Income-Q4-2017-v2-In-Design.pdf

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.