Investors have been hearing scary taper stories from the financial media for quite some time now. Mr. Bernanke made it clear that the Fed is not taking away the punchbowl, just replacing it with a slightly smaller one. Decreasing to $75 billion from $85 billion in bond purchases is not the end of the world and it should be done that way. With the entrance of Janet Yellen as Fed chairwoman, a sense of continuity has been achieved.
CNBC will have to find another topic to force feed viewers.

Reply to @BobC: Bob, it appears that he is targeting this advice as a 20-yr plan for investors in their 20's to 30's. For them I think the advice has merit and they can do without a bond fund until their 40's and 50's.
What it doesn't address is helping that age group adopt a savings mentality when many in that group struggle to just make ends meet. That's a hard fight. I believe many in that age group are also woefully lacking in financial acumen, heck, I'd bet half of them couldn't even balance a check book. By the time they figure it out most will be far behind the 8-ball looking for that winning lottery ticket or worse, easy prey for all the shysters and pseudo experts out there promising plans and systems doubling their money.
I speak as a father to 4 in this age group. After 30-years I've finally gotten one to think beyond the end of his nose. Unfortunately he's the one who's in the best financial shape already.
I think we can also look at recent retiree's and the boomers coming up the ladder and see proof of same. You'll find many of these non-planners taking your order at Mac & Don's or similar. Just sad.

Reply to @cman: While I don't necessarily agree with Ted on this, I can easily defend his point regarding cash: Ted is the manager of his investments. He will determine what he regards to be his overall cash position. If he buys a fund, it isn't because of the cash that they may or may not hold: he buys a fund to obtain a particular positioning in a specific financial area.
Seems like a valid perspective to me, if that's how you want to run things.

For a pretty good framing/summary of the Fed's considerations at this point, see here. Binya Applebaum, for those not familiar with him, is one of the best financial/econ reporters out there, imho: excellent ability to translate financial-ese and bureaucrat-ese into English without dumbing it down.
For me, a simple understanding of what they're thinking & doing, as background to go with a lot of other stuff, has a lot more value than the endless chatter on tapering alone.

Reply to @bee:
I stopped watching Shiller after lecture 3, but I found another course in financial theory, by Andrew Lo at MIT. Much better. I've already covered the first 7 courses, and by the end of this week I hope I will cover them all.
The most interesting part of this course is that it was held as the financial crisis of '08-'09 was underway, so half of each lecture is a discussion covering the financial crisis, as it happened.

Enjoy.

Reply to @cman: Good Stuff cman and fundalarm.

...prices are determined by two factors, the supply and demand from the actual use ... and the speculative ... manipulation of supply by producers and in recent years also by financial institutions.

Seems broadly applicable...land, houses, cash, credit, tulips, coffee, precious and board-basket commodities.
I've always viewed low commodity prices as a catalyst for growth...good for the consumer and an advantage to those companies that add value to their products, beyond the pass through. But, as you point out, if demand is true, the broad declines we've seen the past few years should reverse.

and yet, haasentab made money by buying irish debt at very discounted prices. same with the u.s... many people left the workplace, lots of pessimism, deleveraging still going strong, and yet.. financial markets are forward looking creatures and discount the future, which seems a bit brighter by the month... there is no return without taking risk -- that's for sure.

Ireland's mess is not over. Poverty struck for 900 years, the country will continue poor forever. Investors' dream of its becoming a financial gem is a losing fantasy, as soft as the bog which covers much of the country. Ireland's 14 years of economic boom were fuelled by debt and lunacy. Tourism and agriculture, not finance, are its wealth. The Irish will be damaged by the banks' debts and its dependence on German lenders for decades, not months.

There is a cult that gloats about gold. There are people who rub it in when it is going down precisely because of the cult following. Sort of like Apple and Android fans.
To me, people appear to be missing a bigger picture story of commodity markets in general over the last couple of years. All commodity prices are determined by two factors, the supply and demand from the actual use of the commodity and the speculative storage or manipulation of supply by producers and in recent years also by financial institutions (JPM has been the biggest player here). Gold has also enjoyed hoarding by Governments and central banks. Different commodities vary in the ratios of use demand to speculative/storage demand.
It appears to me that, for whatever reasons, the speculative trades in commodities as a whole has been unwinding over the last year or two across the spectrum with the extent of drop in value determined by that ratio. Gold with the smallest ratio (the author is wrong about Gold being totally useless, women across the globe would disagree) suffering the most.
As to why this may be the case, no idea. Just a strong suspicion it has to do with increasing scrutiny of banks and their proprietary trading portfolios. Also possibly due to probes on price fixing in commodities markets. Commodities may be getting repriced closer to their actual supply and demand.

Reply to @bnath001: From God's lip's to your friend's ear, if the financial advisor, which I doubt, said the tax was a mandatory 40%, he should immediately be fired. Hank is correct, the distribution is taxed as ordinary income.
Regards,
Ted

One of my friend who is 65 years old was told by some financial adviser that he has to pay mandatory 40% tax on 401k distributions.
is that true? I thought the taxes on the 401k or IRA will depend on the tax bracket for that year.
He is living off disability income. He is not working anymore due to illhealth.
thanks
nath

Reply to @Charles:
Hi Charles,
Thank you for the alert that introduced the free educational courses currently planned and available to the general public. The list is impressive and contains many subjects that interest me.
However, I doubt if I will sign-up for any of them. These are formal college level courses that are seriously presented. Sample problems, required reading, and homework assignments will be integrated into the presentation materials. That’s simply too serious for my interest level; it is a bridge too far for my limited goals. Overall. it is far too formal for my purposes and enjoyment.
In reality, the course work is not free since it will demand a considerable commitment of time. At this juncture in my life, time is my most prized commodity. That’s one reason why I invest in mutual funds and ETFs instead of separate stocks.
Indeed I did pay for The Great Courses DVD series on Behavioral Economics. That makes it the 34th time that I purchased one of their almost 500 courses. I don’t want to tout their product line on MFO, but I have enjoyed and learned from each lecture series. Viewing flexibility and reviews are yet other important ingrediens.
So has my wife and so has many family members. These series are so attractive that they are widely circulated within our family circle with considerable enthusiasm. It’s a win-win scenario at very modest costs, either financial or time-wise. I will likely continue to be a satisfied customer.
Again, thanks for the heads-up. Our universities frequently offer one-off lectures by prestigious professors as an introduction to a topic or as a preview to more formal course work. In my opinion, these are very good, but not as carefully crafted as The Great Courses format. Each one-half hour lecture is a joy.
Best Wishes and Merry Christmas.

http://www.sec.gov/Archives/edgar/data/1103243/000141304213000418/rockypeak497cls.htm
497 1 rockypeak497cls.htm
PFS Funds
Rocky Peak Small Cap Value Fund
Supplement dated December 13, 2013
to the Prospectus dated August 1, 2013
The Board of Trustees of the PFS Funds (the “Trust”) has approved a Plan of Liquidation (the “Plan”) relating to the Rocky Peak Small Cap Value Fund (the “Fund”), effective December 13, 2013. Rocky Peak Capital Management, LLC’s, the Fund’s investment adviser (the “Adviser”), recommendation to the Board to approve the Plan was based on the inability to market the Fund and the Adviser’s indication that it does not desire to continue to support the Fund. As a result, the Board of Trustees has concluded that it is in the best interest of the shareholders to liquidate the Fund.
In connection with the proposed liquidation and dissolution of the Fund, the Board has directed the Trust’s principal underwriter to cease offering shares of the Fund. Shareholders may continue to reinvest dividends and distributions in the Fund or redeem their shares until the liquidation.
It is anticipated that the Fund will liquidate on or about December 30, 2013. Any remaining shareholders on the date of liquidation will receive a distribution in liquidation of the Fund. If you have questions or need assistance, please contact your financial advisor directly or the Fund toll-free at 1-888-505-0865 or the Fund’s adviser, Rocky Peak Capital Management, LLC at 1-310-963-8009.
IMPORTANT INFORMATION FOR RETIREMENT PLAN INVESTORS
If you are a retirement plan investor, you should consult your tax advisor regarding the consequences of any redemption of Fund shares. If you receive a distribution from an Individual Retirement Account or a Simplified Employee Pension (SEP) IRA, you must roll the proceeds into another Individual Retirement Account within sixty (60) days of the date of the distribution in order to avoid having to include the distribution in your taxable income for the year. If you receive a distribution from a 403(b)(7) Custodian Account (Tax-Sheltered account) or a Keogh Account, you must roll the distribution into a similar type of retirement plan within sixty (60) days in order to avoid disqualification of your plan and the severe tax consequences that it can bring. If you are the trustee of a Qualified Retirement Plan, you may reinvest the money in any way permitted by the plan and trust agreement.
This Supplement, and the existing Prospectus dated August 1, 2013, provide relevant information for all shareholders and should be retained for future reference. Both the Prospectus and the Statement of Additional Information dated August 1, 2013 have been filed with the Securities and Exchange Commission, are incorporated by reference, and can be obtained without charge by calling the Fund toll-free at 1-888-505-0865.

Jesus. Sounds rather like the days when I was still active in my vocation/career. Lotsa people come to hear, but not listen; carrying with them all of their favorite preconceptions--- by which they miss the point. Utterly.
Toward the very end: "democratization of finance" is THE theme of the course, central to the course. So he says. I guess that works. Sounds just a bit hifalutin'. But he explains: it refers to the fact that more and more people are participating, and financial principles are being applied to a great many more corners and areas of life in general. For example, sub-prime mortgages, by which a great many people were convinced to take on home ownership that they could not afford. Finance as a discipline is spreading out. It could very well be that some of those folks got suckered into an arrangement that chiefly benefited the lender. Or it could be that they honestly didn't plan wisely. I would add that the law should NEVER permit exploitation---as with so many adjustible rate mortgages, baloon payments, etc.
I've never owned a home. I "own" one-seventh of the one I'm in now. (Divided up between mom and dad's kids.) It can be a really good thing. Or it could be an albatross around your neck. I knew a guy who moved from Roswell, NM to Birmingham, AL. He finally shared this thought with some of us one day, long after he had started-up in Birmingham:
"What's the difference between a case of syphilis and a home in Roswell, NM? ANSWER: You can get rid of a case of syphilis."

Reply to @TNK: You are continuing to try to fit what he is saying into your narrow and flawed conception of capitalism and socialism which treats them as black and white situations. So unable to grasp his main thesis and the source of your broadbrush painting. He isn't painting eirher socialism or capitalism as good as bad but as systems motivated by the same goal of collective risk management.
Collective risk management and the need to share is what creates societies and opportunities for commerce as the means. It is also more efficient that way. You can also have a capitalistic individual system where you are entirely responsible for your own health, protection from others, etc. That doesn't work either. It is more efficient to do this in a collective risk shared fashion within which individuals can differentiate themselves. Note that he introduces the concept of insurance a very capitalistic financial tool as motivated by that collective risk management.
This balance between individual and collective is in a spectrum that can go in one direction or the other but fails when it goes too much in either direction. We have seen failures in both directions.
Because of the collective shared risk management even capitalism comes with a social contract and people often forget that because they are focused so much on self and money and take the social contract for granted or ignore it. His thesis is that this is exactly why finance AS A TOOL gets a bad rap because so many of its practioners forget that.
He is proposing that things that threaten that social contract threaten the system of finance or what you might call capitalism based on it. Extreme inequality is one of them.
Nowhere has he proposed a political system as a solution but has pointed out the origins of policies such as progressive taxation that try to moderate that imbalance. Philantropy his his main suggestion not politically mandated redistribution. You seem to think he is advocating socialism/communism. That is just labeling without the ability to comprehend the ideas behind them or the ability to see beyond black and white as captured in your earlier response.
I don't necessarily agree with his entire thesis but it isn't necessary to do so to understand his thesis. He doesn't believe in EMH either but as you can see in his lectures, he doesn't do a black and white portrayal of that theory either and points out why it merits attention and where it doesnt and why.
The concepts of socialism and capitalism are related the same way and the reality is a mix of both. US isn't purely capitalistic and China isn't purely communistic as things have evolved. One can even make the case that there is no such thing as pure capitalism and pure socialism in reality. What the proponents of ideological capitalism seem to do is selectively pick and choose things from capitalism or socialism as long as it fits them and blame the rest as bad. That is Randian selfish apelike philosophy not the basis of finance as a discipline again two things people confuse.
As we evolve to address problems, it is good to understand why we have what we have first and the motivations for it so we don't lose the plot.
The kind of simplistic black and white thinking you have displayed and the inability to see anything that doesn't fit that thinking which is painted in talking point terms only leads to the kind of blind ideological debates we have in this country.
In any case, I am not here to defend Shiller's thesis against your mis-characterizations or broad brush painting, so I am just going to leave it here saying I beg to differ from your characterizations for reasons stated in more words than I intended or have time for. :-)

Hi Guys,
Another happy coincidence of postings. Only several days ago I posted on John Templeton’s 16 Rules for Investment Success. There is an amazingly tight correlation between Templeton’s affirmative rules and the 5 cautionary lessons learned summarized by Merriman in the referenced article.
In concise format, here are Templeton’s wisdom nuggets:
1. Invest for maximum total real (after-inflation) return
2. Invest – don’t trade or speculate

3. Remain flexible and open-minded about types of investments

4. Buy low

5. When buying stocks, search for bargains among quality stocks

6. Buy value, not market trends or the economic outlook

7. Diversify. In stocks and bonds, as in much else, there is safety in numbers

8. Do your homework or hire wise experts to help you

9. Aggressively monitor your investments

10. Don’t panic

11. Learn from your mistakes 

12. Begin with a prayer

13. Outperforming the market is a difficult task

14. An investor who has all the answers doesn’t even understand all the questions

15. There’s no free lunch

16. Do not be too fearful or negative too often
As simple as these rules of engagement seem, they reflect a lifetime of successful practical experience absorbed by one of the investment worlds hugely recognized and praised practitioners. Paul Merriman’s negative lesson summary fits snuggly into Templeton’s accumulated positive wisdom.
Here are Merriman’s 5 nullifying guidelines contrasted against Templeton’s positive assertions.
1. Blindly following pundits. Templeton says: ” Do your homework or hire wise experts to help you”.
2. Focusing on recent performance. Templeton says: “Invest – don’t trade or speculate”.
3. Thinking mutual funds are risk free. Templeton says: “There’s no free lunch” and “Learn from your mistakes”.
4. Believing fund sellers will protect you. Templeton says: : Remain flexible and open-minded about types of investments”.
5. Thinking advisers are a waste of money Templeton says: :… hire wise experts to help you” and “An investor who has all the answers doesn’t even understand all the questions”.
In the spirit of that last Templeton quote, here is another of his memorable remarks: “If we become increasingly humble about how little we know, we may be more eager to search.”
Here are a couple of additional quotations that speak to the hazards of the investor classes’ overconfidence. From John Kenneth Galbraith “We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know”. From Henry Kaufman: “There are two kinds of people who lose money: those who know nothing and those who know everything”.
Unfortunately, it is my experience that the US is populated with folks, some very fortunate financially, who have a deficient financial understanding and/or are limited by innumeracy. I will not totally place blame on our educational system. These folks typically had opportunities to address these shortcomings but elected the easy and painless pathway. Mostly, we always have the freedom of choice.
It is for this cohort of folks that financial advisors provide a meaningful and productive service. Only a fool practices medicine on himself if he is a medical illiterate. Lucky outcomes might happen, but, overall it is a losing gamble.
Surely not all physicians or financial advisors are equally skilled. So, one must always choose wisely. Based on his years of informative and worthwhile contributions to the MFO and the Fund Alarm websites, I conclude that BobC is a trustworthy and highly skilful financial advisor who is highly flexible depending on his clients needs and fortunes. Congratulations to BobC for his distinguished work ethic.
Okay Guys, let me have your best shots.
Merry Christmas.

Keeping this discussion broad...I'll include financial institutions in general.
I title this experience, "When BOA constricted Free into Fee".
Sometime in August my Bank, BOA, changed the rules on fees applied to accounts with direct deposit. By the way, it should be called Bank of (Mainland) America...BOA is not located in all 50 states... no branches in HI or AK.
In the past, any direct desposit satisfied a fee waiver for my BOA account. Since (Nov, 2013) the fee waiver requires a minimum direct deposit amount of at least $250. The fee for not meeting this minimum is $12 / month...ouch. This is equilivant to 13% of the $90 direct deposit. Due to the fact that I receive electronic statements (an additional old requirement to have fees waived) I missed reading the upcoming changes.
The fee hit my account last month and going into a branch to see if a different "free" checking account was available I was told that a number of new bars would need to be hurdled for these "Fees to be Free", such as, higher balance and a larger direct deposit.
I took my business to a local credit union and was pleasantly surprised with FREE on my terms. Also, I now have access to a nationwide network of credit unions that I can do business with...in all 50 states...No fee.

Reply to @BobC: Hi Bob. I think the comments on this post come from people who probably have an understand personal finance, love to do it themselves and make it their hobby. What goes over their head is that they are unique. They make up probably less than 5% of the population.
Most of my friends and coworkers are just not interested in learning about different investments, portfolio construction, ect... It bores them. They know they have to save in a 401k and they religiously do so every pay check and they put their money into Target Date funds, the best invention ever made for the typical retirement saver. They only become aware that they need advise when it gets close to retirement, or in our work case, another down sizing. Then the talk at the break room table is, my adviser said this or my advisor said that.
In most cases, I think, people seek out financial advise. They wouldn't be seeking if there wasn't a need, a perceived benefit and piece of mind.

From Jane Bryant Quinn:

There's no reason to own 10 or 15 [mutual funds], [financial planner Joseph] Tomlinson [of Greenville, Maine] says. They probably overlap each other. If you choose well-diversified funds, such as low-cost index funds that follow separate markets, all you need is a broad U.S. fund, a small-company fund, an international fund, and an intermediate term bond-fund, spreading your money among them in whatever way you think is best.

This is essentially a slight variation on the six bucket approach I mentioned above. Differences are that she ignores cash, she breaks global into international and domestic, and in bonds she ignores junk and international (the only substantial difference).
But while complaining that more funds would overlap, she chooses to do exactly that, by combining a small cap domestic fund with a broad based domestic fund. I agree with that approach however, because it offers ability to adjust relative weightings. By following that concept in the other areas (international and fixed income), one gets up to ten funds, despite the admonishment in her article to avoid so many.

http://www.sec.gov/Archives/edgar/data/912028/000091202813000006/summitgnmaptasticker12-20133.htm
497 1 summitgnmaptasticker12-20133.htm
T. Rowe Price Summit GNMA Fund
Supplement to Prospectus Dated March 1, 2013
On October 21, 2013, the Board of Directors of the T. Rowe Price Summit GNMA Fund (“Fund”) approved a proposed merger under which the assets of the Fund would be transferred to the T. Rowe Price GNMA Fund in exchange for shares of that fund.
The merger is subject to the approval of a majority of the Fund’s shareholders. All Fund shareholders at the close of business on January 30, 2014, the “record date,” will be eligible to vote on a plan of reorganization in connection with the proposed merger. It is anticipated that proxy materials and voting instructions will be mailed to shareholders of record in early February, and a special shareholder meeting will be held on or around April 30, 2014. The rationale for the proposal and detailed information regarding the proposed merger and the T. Rowe Price GNMA Fund will be provided in the proxy materials. If the proposal is approved by a majority of the Fund’s shareholders, the merger is expected to take place on or around May 16, 2014, at which point Fund shareholders will receive shares of the T. Rowe Price GNMA Fund representing the same total value as their shares of the Fund on that date. The merger will be structured as a tax-free exchange for shareholders of the Fund, although it is possible that the Fund could declare a taxable distribution to its shareholders shortly before the merger is consummated.
In anticipation of the merger, the Fund will close to new accounts and additional purchases. On page 11, the language under “Purchase and Sale of Fund Shares” is replaced with the following:
The fund will not accept any new accounts and will stop accepting purchases of additional shares from existing shareholders, other than shares purchased through the reinvestment of dividends, after the close of the New York Stock Exchange (normally 4 p.m. ET) on Monday, January 27, 2014. Closing the fund to new accounts and additional purchases does not restrict shareholders from redeeming shares of the fund. You may redeem or exchange shares of the fund on any day the New York Stock Exchange is open for business by accessing your account online at troweprice.com, by calling 1-800-225-5132, or by written request. If you hold shares through a financial intermediary, you must redeem and exchange shares through your intermediary. The fund reserves the right, in its sole discretion and without prior notice, to impose further restrictions or permit additional investments.
The date of this supplement is December 10, 2013.