@MikeM, While the upside/downside capture ratio seems a useful stat, there is this lurking question of a repeatability. Funds that did well in one downturn may not do well in another. This is one of a number of hidden dangers I see in alternative funds, and I think before one buys one an investor should do a detailed analysis of how the fund is currently positioned, the manager's philosophy towards hedging and the manager's outlook for the market currently and then decide whether you agree with the philosophy or not. WBMAX seems to be designed around a value investor's philosophy towards hedging, buy the cheapest sectors of the market and short the most expensive. That has not worked well at all of late because the cheapest sectors such as energy and financial services have continued to underperform while the most expensive such as biotech have continued to outperform. That means WBMAX is losing on both sides of its bets, hence the underperformance. The question is do you agree with manager Redleaf's analysis or not and if you do agree, can you take the pain of him being wrong for a while?

FYI: When wading through the predictions of financial doom and gloom ahead, keep in mind one key component of human nature.
Regards,
Ted
http://fundreference.com/articles/2015/1000555/the-clowns-of-wall-street/

Hi little5bee.
Windhaven portfolio is an actual portfolio of ETFs. There are 2 portfolio options, aggressive and moderate. The 2 portfolios are managed by a team of managers. The difference in the 2 seems to be the range of equities each may hold. Off the top of my head, the aggressive portfolio can range from about 25-75% equities, depending on how management perceives the world economic futures. The moderate portfolio has a lesser range of movement. Per my Schwab adviser, these portfolios have never been near the max or min of their ranges. One selling point for me was even the aggressive portfolio held up as well as a moderate balance mutual fund during the last recession.
The fee for the Windhaven portfolio is 1%. Really no different then the fee you pay for a typical mutual fund portfolio. The portfolio is always up to date (daily) and view-able. You actually get an email every time management makes a buy or sell plus managements reasoning for the buy or sell.
Don't know if the financial adviser you golfed with is a Schwab advisor, but I do know the adviser gets a referral fee paid to them by Schwab. So, yes they have an intensive to sell.

MARKETS
Calpers Struggles as Its Return Falls Short
Largest U.S. pension fund earned 2.4% in fiscal 2015, shy of 2.5% goal
By TIMOTHY W. MARTIN WSJ
Updated July 13, 2015 6:43 p.m. ET
The California Public Employees’ Retirement System fell short of its annual return target in fiscal 2015, as public pensions around the U.S. struggle through one of their worst years since the financial crisis.
The $301 billion pension fund, the largest in the U.S. by assets and known as Calpers, said it earned 2.4% on its investments for the fiscal year ended June 30 because of a slump in the markets and weak private-equity returns. The performance was just shy of its internal goal of 2.5%. It was Calpers’ poorest year since 2012, when it earned 1%, and down from 18.4% in 2014.
Pension investments have been challenged this year by low interest rates, uneven market performance and the recovery of the U.S. dollar, which has weakened gains in global stocks.
Calpers played down the importance of its 2015 performance, noting that the pension fund had topped three- and five-year internal targets with returns of 10.9% and 10.7%. Calpers assumes it will produce annual returns over the long run of 7.5%.
“We try not to get too fixated or excited about any one-year return,” said Calpers Chief Investment Officer Ted Eliopoulos on Monday at a board meeting. “The strength of our long-term numbers gives us confidence that our strategic plan is working,”
Mr. Eliopoulos, who was named CIO last year, has moved Calpers to simplify its portfolio and dial down the risk. Those moves include halving the number of external money managers it works with by 2020, plus winding down its hedge-fund program. Reducing risk in its portfolio also could have the effect of missing out on outsize returns.
“It’s a marathon, not a sprint,” he said. “Nobody expects stable 7.5% or 8% returns year in, year out.”
http://www.wsj.com/articles/calpers-return-falls-short-of-annual-target-1436802617
Tough Times For Broadly Diversified Portfolios
How’s your globally diversified strategy faring these days? Having a tough time? You’re not alone–the headwinds are fierce. For the first time in recent memory, the overwhelming majority of the major asset classes are in the red on a trailing one-year basis. As a result, broadly defined asset allocation strategies are suffering, at least relative to the stellar numbers in recent years.
Using a set of ETF proxies for the trailing 250-day (1 year) total return, only US stocks, US REITs (real estate investment trusts), and US bonds (broadly defined) are posting gains among the major asset classes. By contrast, the other 11 asset classes are in varying states of loss over that period.... The lesson, of course, is that mean reversion is alive and well when it comes to market (and portfolio strategy) returns.
With Charts

http://www.capitalspectator.com/tough-times-for-broadly-diversified-portfolios/

Hi Dex,
Often the retirement decision is a high anxiety event because of portfolio performance uncertainty. If the retirement depends on a portfolio drawdown, a few bad years can do lasting damage.
There are plenty of millionaires in the USA. In very rough numbers (it changes so precision gives a false signal), the Millionaires Club is about 5% of US households. Since there are about 123 million households in the US, there are about 6.2 millionaire households. These households are not evenly distributed across the Country. Here is a recent estimate map published in the WSJ:
http://blogs.wsj.com/economics/2014/01/16/where-are-the-u-s-s-millionaires/
The Southern states are at the bottom of the heap. The likelihood of a millionaires household increases with age, with education, with being married, and with multiple wage earners in a household. No great surprises. About one-third to one-half of millionaires are in households below typical retirement ages. Here is a Link that makes that claim (see chart 4):
http://taxfoundation.org/article/who-are-americas-millionaires
However, when retiring, sometimes “A Million is Not Enough”. That’s the title of a book by financial advisor Michael K. Farr. But the real answer depends upon many individual factors that can not be adequately addressed in any book.
Many of these individual factors can be nicely addressed by exercising retirement planning tools that are accessible on the Internet. I have referenced these resources frequently on MFO, and am not reluctant to do so again. I am a fan of these tools since they help to reduce retirement planning anxiety, especially when Monte Carlo analyses capabilities are integrated into their toolkits.
One of my favorites is The Flexible Retirement Planner site. Here is the Link:
http://www.flexibleretirementplanner.com/wp/
The workhorse tool on this site is its Monte Carlo simulator. Please give it multiple test runs for your specific circumstances. Exploring “what-if” scenarios will increase a user’s understanding of what is influential, what actions are positive, and what options are harmful.
A more barebones Monte Carlo simulator, with many fewer options, is available on the MoneyChimp website. Here is the Link to it:
http://www.moneychimp.com/articles/volatility/montecarlo.htm
The MoneyChimp code inputs can’t be made more simple. You get to choose your own tool. I might test both resources because both are efficient time-wise.
The bottom-line output from either simulator is the probability of success (avoiding portfolio bankruptcy). There are many actionable options to move the likelihood into an acceptable green-coded probability zone. This is a terrific planning tool, and should make a final decision just a little more comfortable and definitely more reliable.
Knowing how to become a millionaire is not a mystery; the discipline to achieve that goal is yet another matter. The ball is in your court. I wish you good planning, a good decision, and good luck.
Best Regards.

Hi, Mike M -- How do you like the Windhaven portfolio? Last year, I played golf with a financial advisor who highly recommended them. Do you get to see the actual portfolio, or is it structured like a mutual fund?

What's a bank account :-)
Seriously, the only bank accounts I have are for other benefits - a local bank account ($250 balance) to get a safe deposit box and a legacy BofA eChecking account ($0) to get a 10% bonus on my credit card cash rewards.
Bill pay, ATM, checking - all out of my brokerage accounts. Merrill Lynch pioneered CMAs a third of a century ago.
Yes, you can have VG transfer money to a bank account. Every time you get a dividend from a fund, you'll need to check that it has hit your settlement account, then transfer that amount to your bank. (VG will automate transfers, but you can't set it up for a variable amount, such as the dividends from a fund.)
I have VG fund dividends deposited directly and automatically into my non-VG brokerage account (where I have full CMA features), but that's because they are in VG fund accounts, not a VG brokerage account.
BTW, there can be a benefit to using a "real" bank. Some financial institutions won't set up links to brokerages. Capital One 360 (not to be confused with Capital One) would not set up a link to Fidelity (Fidelity uses UMB as its bank for checks, but the account doesn't show up as a "real" bank). But Capital One 360 had no problem setting up a link to Schwab bank (not a Schwab brokerage account), because that is a real bank.

Assuming you are talking about an immediate fixed income annuity, the biggest disadvantage are the low record interest rates and hence they aren't paying out much of anything. The way to go is a longevity annuity aka deferred income annuity. However what I leaned there is you can't buy any of these in a retirement account past a certain age generally around 68 to 68 and 1/2. There is a new product, a Qualified Longevity Annuity Contract, that you can purchase in an IRA in older age. This product has some advantages such as being exempt from your annual RMD. Personally, I would only buy an annuity from New York Life because of the company's history of financial stability.

Hi Guys,
In a recent post, MFO members anecdotally reported on favorite female mutual fund managers. Many successful female mutual fund managers were listed on this honor roll.
In one of my contributions to that exchange, I naively asked the question if any studies exist that compare the overall performance of female managers to their equivalent male counterparts? I wondered if “there just might be a pony there”?
That’s a dumb question since the financial world is inundated with data and analyses. The obvious answer is a firm “Yes”. It just required a very easy web search which I finally did.
I discovered a nice paper by two Professors titled “Is Manager Gender Important in the Performance of Mutual Funds?”. Here is the Link to their paper:
http://digitalcommons.csbsju.edu/cgi/viewcontent.cgi?article=1007&context=acct_pubs&sei-redir=1&referer=http://www.google.com/search?q=is+manager+gender+important+in+performance+of+mutual+funds+welch&hl=en&biw=&bih=&gbv=2&oq=is+manager+gender+important+in+performance+of+mutual+funds+welch&gs_l=heirloom-serp.3...19847.26172.0.28485.6.2.0.4.0.0.203.328.0j1j1.2.0....0...1ac.1.34.heirloom-serp..5.1.199.POIkJIO7yeM#search="manager gender important performance mutual funds welch"
The Link is more ominous than the paper itself, although the study does do some heavyweight, multifactor curve fitting to data culled from Morningstar reports. However, both the Introduction and the Conclusions sections of the report are easy going.
Here is the paper’s Abstract:
“We investigate whether there are differences in characteristics and performance of mutual funds caused by the manager’s gender. Through examining a large sample of U.S. domestic equity mutual fund, we find some evidence that suggests female managers have a lower risk tolerance than males. This leads to the observation that females tend to hold a higher total number of assets (stocks) and fewer assets in their top 10 holdings than do male managers. We then analyze performance within funds over time in order to evaluate the impact of changes in management’s gender composition on funds’ performance. We find some evidence that the percentage of female managers managing a fund is negatively related to the fund’s performance over time.”
Of the 2,217 mutual funds that satisfied the studies selection criteria, about 10.5% were managed by females. That’s a respectable sample size. It was further sorted into meaningful sub-groups by the researchers to explore special purposes like does performance change when management changes gender?
Although in the general population females tend to be more conservative investors, and most of the professional money managers exhibited these same conservative characteristics, the female mutual fund mangers also demonstrated some aggressive investment features like holding high P/E stocks. It seems as if the schooling, the training, and the experience somewhat dissipated the generic female predisposition.
On a grand scale, gender performance differences are muted and illusive.
My takeaway from this brief literature review is that there is no easily identified pony there. If there were, mutual fund companies would be frantically hiring females to manage their funds, and investors would be flocking to buy them. Like many investment options, it appears to be a wash with noteworthy exceptions. There are terrific female mutual fund managers; the task is to find them.
Based on our earlier submittals, MFOers have already done some of this homework. I will not especially search for female managers, and I will not exclude them either. I'm gender neutral with respect to mutual fund management.
Best Regards.

I like Faber and find him highly amusing (who else has responded to the question on CNBC of how you should allocate assets with "it depends on how many girlfriends you have"?)
I hope that there is not another 2008.
That said, this is my honest view:
That if it looks like we may be heading in that direction, the Fed will bail out Radio Shack (after the fact), Shake Shack and even Shaq.
They will try every voodoo economic BS tactic left. You will see QE4, you will see NIRP. Heck, a ban on physical cash so that no one can escape NIRP wouldn't surprise me. Every trick in the book will be used - you think that what's going on in Shanghai in terms of banning short selling and other "rules" can't be put into place here, at least to some degree?
They will bail out, print and nationalize like there's no tomorrow - if it comes to that, because the alternative if we have another 2008 and go back to square one is this:
All of the attitude by the Fed of "don't audit us, don't question us and no we aren't going to respond to an investigation about the Fed leaking information" will be ignored in a bleeping hurry.
If we have had QE1, 2 and 3 and operation twist and all other manner of financial engineering BS and we find ourselves back at square one after another 2008-style situation, Janet and company will have a lot of 'splaining to do (and they don't seem fond of that) because the anger will be immense and Congress will ab-so-lutely point the finger at them.
You think people were mad at Wall Street after 2008? LOL, at the very least twice as bad if it happens again.
If we have another 2008, in some ways it'll be game over. There will be tumbleweeds hosting CNBC because no one will be watching. The rejection of stocks by the public will be extraordinary - you're not going to get anyone back in and probably for years. The Fed will be too busy in hearings to do much. Attempts to push the public back into risk assets after that will be likely met with legitimate anger (or at least a collective middle finger.)
So yeah, I believe that there is a sense of "reflate or bust" desperation with governments around the world who don't want another 2008 because of all of the many things that would imply.
Perhaps I'll be wrong but I continue to fear that this time around if there's a crisis you will want to own assets instead of sitting in cash or bonds.
We'll see.
---
Someone posted this at ZH in the comments section years ago and I don't disagree with the gist of it, although I'm not as negative and think the how/why (I don't think they'd print like there's no tomorrow because this is the end, but because they believe another 2008 would be some degree of "game over") is different. I don't think another 2008 would be "the end", but I perhaps can see where it would be the end of the global economy as we know it today. Perhaps this is "the ultimate bubble" for use of a better term and what we look like as a global economy on the other side of it will be very different.
"Hope you didn't put much money on that bet, Dawg. These fuckers are going to print hard enough to wake the dead. They'll print like mo'fos, print like mad men, print like fly pimps. Print until their eyes bleed.
They will print via the swaps, via bank bailouts and mergers, via fixed Treasury yields, via real honest-to-God negative interest rates, via loans to banks on no collateral, via payroll tax reductions, and in the end via actual fiat paper instruments which they might very well drop in bails from actual mutherfucking helicopters.
They will not give two figs what anyone thinks.
Here is why.
Because this is the Goddamned end of it my friend. There is no accounting beyond this point. There will be no history of it. No one to take notes of rates of exchange, or of the graft and violence, nobody to worry about the deficit or the GDP or the national debt of any nation large or small under the blazing Goddamned sun.
End. Of. It. Does anyone bitch about how Rome totally debased their coinage at the end? Hell no. But whoever did it had enough to hand and grabbed some land with a nice vineyard and sat back and waited for the Middle Ages to start 700 years further on.
And that's what a singularity is about. Anything that passes through is striped of all meaning. Nothing we think is important now will remain so beyond the event horizon. Nobody will remember, nobody will write about it, nobody will be held to any standard. Ever for ever."

Faber's macro commentaries make sense (and I agree w/some of them), but he's been calling for a catastrophic drop for so long (YEARS!) that people now dismiss him as a perma-bear whenever he's quoted/interviewed in the financial media and/or tells people to adjust their allocations.
But, like most pundits, despite "being wrong" for YEARS when The Big One(tm) does come, whenever it comes, I'm sure he'll be right out there saying he-told-us-so.
Frankly I think the 'generational buying opportunity' was not 2008-09, but will occur at the bottom of the NEXT global market crash ... which I agree w/Faber will happen in the forseeable future. I remain ready to pounce, but am also quite comfortably positioned in the markets and will remain there for a looooong time to come.

Mary Miller did a bang-up job as head of T. Rowe Price's fixed income division. Before taking over, their fixed income funds were mostly duds. IMHO, she turned the division around and it remains competitive to this day. She left Price several years ago for government service.
From Wikipedia: "Mary John Miller serves as the U.S. Department of the Treasury's Under Secretary for Domestic Finance ... responsible for developing and coordinating Treasury's policies and guidance in the areas of financial institutions, federal debt financing, financial regulation, and capital markets. ... Previously, Miller served as Assistant Secretary of the Treasury for Financial Markets ... Prior to joining Treasury, Miller spent 26 years working for T. Rowe Price Group, Inc., where she was the director of the Fixed Income Division and a member of the firm's Management Committee. In November of 2011, Miller was included on The New Republic's list of Washington's most powerful, least famous people."
To the basic question here: I suspect it's for the same reason that males seem to dominate this board. For every Anna, you'll find three male-sounding names like Ted, Old Joe or Hank. Probably has to do with the relative attraction finance holds for the genders - especially when they are young. No doubt gender stereotyping plays a big part. That's also been an issue in many scientific/technical areas which largely attracted males until quite recently.

Bubbly + Help from state-backed margin finance company = What ???
Chinese shares dropped almost two percent in early trading, reversing much of gains made on Monday following unprecedented steps to stabilise a plummeting market.
Asian assets were also increasingly burdened by rising concerns over massive losses in Chinese stock markets over the past month or so.
Unprecedented emergency measures from Beijing helped Chinese stocks to bounce on Monday but trading remained highly volatile.
In an extraordinary weekend of policy moves, brokerages and fund managers vowed to buy massive amounts of stocks, helped by China's state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.
"Prior to the selloff the Chinese market looked bubbly, kept rising even as the economy is slowing. It will take some time for the market to calm down," said Shuji Shirota, head of macroeconomics strategy group at HSBC in Tokyo.
"Judging from Japanese experience it is not easy to support share prices just by price keeping operation," he said, referring to Japanese attempts in the 1990s to shore up the stock market by using public funds to buy shares.
Fears of instability in the Chinese economy dented many types of assets that are thought to be leveraged to demand from China.
In the currency market, the Australian dollar fell to a six-year low of $0.7452 on Monday and last stood at $0.7485.
Shanghai copper posted its steepest daily drop in 5 months on Monday, while Chinese steel prices are at their lowest level since the depths of the global financial crisis. Iron ore has fallen 17 per cent since mid-June.
http://profit.ndtv.com/news/market/article-asia-shares-win-reprieve-but-greece-china-concerns-limit-gains-778868
Related to China margin stabilization efforts.
"The stocks exemplify one of the keys to China’s recent market selloff: Some of the biggest losers are companies with a relatively small portion of their shares freely traded, many of them bought using borrowed money."
http://www.wsj.com/articles/chinese-firms-discover-margin-lendings-downside-1435653636

One day inflation is going to kill all retirements. That said I see the problem two ways and I'm not sure I would call one of them about "financial literacy". Some other literacy maybe.
1) Some people just don't make enough to save. It is easy to preach saying you should at least save a little etc. However, it is not easy to make argument it is going to matter if its too little.
2) People need to figure out the difference between iWant and iNeed. In our iWaste my iMoney on iWatch culture, that's the biggest problem. It is all about iWant. That's not financial literacy. That is something else.
Finally let me add or economy seems to be running primarily on consumption. If people start saving and not consuming we will have other problems. This is an excellent example of an article that makes rounds once a quarter or so. I call such articles the "who killed Marilyn Monroe" variety. When you don't have anything to report this is always a stock article to pull out and pen. Like the 1% vs 99% article. We keep discussing it, but there is no real actionable result, ever.

I try to convey this fact to all that will listen. This is as much of a National crisis as Health care and yet resolving this will not buy votes for either of the primary Parties.
1) How do you fix a problem which requires a certain level of financial literacy?
2) How do you address an issue which is viewed differently based upon your own personal views (politics)?
3) In a so called free society, how do you impose a policy on all to protect all?

Forgetting about the emotional value (which is itself very real), there's a financial planning benefit to being free of mortgage payments.
Those payments must be made each and every month; one way or another you must come up with the cash. That is a significant demand on cash flow. Get rid of that, and you have much more flexibility (expenses are then mostly discretionary).
If your portfolio does poorly, it's easier to cut back on expenses for awhile. So you're free to invest more in equities; your survival doesn't depend so much on what you've got in cash and fixed income.

Article by Craig L. Israelsen:
"So after six years of a surging bull market, I wanted to revisit that analysis to discover: Does value-oriented investing still win out? My goal was to find out whether the value premium has persisted among U.S. large-, mid- and small-cap equity indexes — and, if so, to quantify its impact."
and,
'These findings do not argue for eliminating growth-oriented assets from a portfolio. However, the analysis does suggest that a value “overweight” is justified in the long run — particularly among small-cap U.S. stock mutual funds."

Article:
can-value-investing-still-trump-growth?

Hi Guys,
I find it a challenge to gauge Bill Gross. His long term bond trading record is undeniably brilliant. He guided PIMCO to enormous power and success. Yet some of his pronouncements and analyses seem superficial and deeply flawed.
The fact that he falls short in knowing the details of the California water policies doesn’t especially trouble me. He’s an investment expert and not a water management expert. We all think we know more than we actually do. One would hope that he would be better at not putting his foot in his mouth as he so frequently does.
But that is not Bill Gross. He is consistently loud, often offensive, and unfailingly arrogant. If anything, he is definitely opinionated. Perhaps these are necessary attributes to become a first-rate bond trader and money manager.
Bill Gross is enigmatic. His thin book. “Everything You’ve Heard about Investing is Wrong”, was warmly received by other investment gurus. In it, he is very sensitive to the plight of wage stagnation and its impact on our future GDP growth rate. He recommends zero taxes for the lower levels of our income earners.
In the introductions to each book chapter, some of his examples are pertinent and illuminating while others have a child-like character. His IQ is unfathomable from his writings, but high IQ is not a requisite for investment smarts or investment success.
As an ex-marine, if that’s ever possible, the only tactic he learned was a frontal attack. He surely applies that tactic when making financial decisions and when dealing with competitors. He wears his feelings and beliefs on his sleeves. I like that.
Although I trust that he believes what he says, I don’t believe that he is an especially insightful market forecaster. Like MFOer Sven, I prefer Paul McCulley’s market perspectives over the Gross viewpoints. That’s a tough call given Gross’ overall record. In this instance I vote for analyses substance over past outcome.
Some folks are luckier than others. Given the inconsistencies in his analyses, it is not clear if Bill Gross is highly skilled or just a lucky outlier over such a huge timeframe.
Best Wishes.

@LLJB and @LewisBraham...Wonder if any research has been done with regard to funds that quickly recover from MaxDD? Its the recover time that causes prolonged sleeplessness for most investors.
A market meltdown causes one form of insomnia, but funds with prolonged slow recovery time from MaxDD turns patient investors into financial zombies. Talking from experience here.
I now look for managers and funds that have shorter recovery time from MaxDD.
MFO's @Charles discusses/explains Recovery Time here:
Thanks Charles
Research paper on Subject:
Risk Management : Using SAS to Model Portfolio Drawdown,
Recovery, and Value at Risk

"No bubble has ever broken until individuals pour money into the market and retail investors have avoided the stock market since the financial crisis." – Jeremy Grantham