@DS,
k, point taken, I guess.
I did not read Rice Delman so episodically and implicatively and glossily as you, but maybe that's because for years I have been hearing him whinge on about the long term.
>> From 2000-2010, the market's net return was zero
We have to be careful about, hmm, what's a good word for larger-scale cherrypicking?
For some reason the decade you cite was a decisive argument for active management. SP500 sucked majorly, yes, but when you look at some big favorites sometimes cited here at MFO --- FCNTX, FLPSX, TWEIX, FPACX, PRWCX, VWELX, DODGX, and WEMMX, say --- the total from a $10k investment ranges from just under $14k to more than twice that (the two Fido funds, coincidentally). Those results only improve if you include 2010 rather than ending 1 Jan 2010.
Naturally you had to have held them for the long term. (Many bailed out of FCNTX sometime in 01 or 02, and even more did likewise with all of them save First Pacific in 08-09. )
So sleep through volatility if you have faith. Easy to prescribe. And right, no glossing, no ill prep.

Hi David.
Hmmm ... my concern is the implication that your total return in the current market cycle is 231%. That comes about because the bull market is disconnected from the bear portion of the cycle. From 2000-2010, the market's net return was zero which is not evident from the chart.
You, and he, are right: markets go up in 3-4 times as many years as they go down. But if you gloss over the ugly fact that the recovery periods for many funds was five or six years (DODGX took 63 months to return to zero following its max drawdown in the current cycle), you're ill-preparing them to be the long-term investors you might seek.
David

“This chart clearly shows that when stock prices are rising, they rise a lot and for a long time. When prices fall, they fall a little and for a short period.” - Does that guy really believe this? If life were only so simple ...
I’ll grant that stocks rise more years than they fall (over long periods). But downdrafts can be long and painful. Look how long it took the NASDAQ to get back to 5,000. A lot of folks bought in at the highs in ‘98-‘99. And as David explained - A 50% down year followed by a 50% up year leaves you with 75%.
Totally unrelated I guess ... but look at how many years interest rates have been falling. Unless you expect them to go negative in this country, we’ve probably already seen the best days (for rates).

This is the year to beef up one's donor advised fund. Because the standard deduction will be so much higher next year, far fewer people will be able to itemize. One is more likely to be able to deduct those charitable contributions this year. The DAF provides a way to retain those deductions, while caching the cash for contributions you'd be making anyway in subsequent years.
To Lewis' concern about DAFs slowing down the transfer of money to charities. That is a real problem. We prefer making our routine donations directly, and use our DAF primarily to handle appreciated securities and to serve as a reservoir for non-routine larger donations, generally disaster relief. However, the tax changes seem to make a 2017 DAF contribution the better way to go, at least until the laws are changed again.

That is a significant departure.

I agree and I've owned it for a number of years. It's leading M*'s Global Real Estate category in pretty much every time period. Anyone have any recommendations for an alternative? Based on what I was able to screen at M* it doesn't really seem like there are any funds that do what they've done.

Howdy folks,
First of all, most of us at one time perhaps thought of opening up a bitcoin wallet and stashing a couple of coins there for giggles. Alas and alack, I didn't. Rats. [rono looks around for a show of hands]
Is it worth the tulip-maniacal craze? Probably not, but who really knows. On the news last week, there was a segment on how in South Korea bitcoin is very mainstream. Keep in mind that they're been about a decade ahead of us when it comes to mainstreaming new technology. If I recall, the whole country has had broadband for going on ten years. What we will want to watch is the winter games and how our athletes and visitors use it.
I think the whole world is looking for a way to test the waters without actually opening up a wallet.
Oh, and for those that have studied bitcoin and mining them, think about how much Mordor has mined.
and so it goes,
peace,
rono

It looks like VASFX has been trading for a few years now, and it hasn't performed well. But I am likely missing something here.

The successful momentum investors I think of over the years here at MFO are Junkster, rono and Flack. Probably others too. I believe they have been very successful at it. Me , not so much. It's hard to duplicate someone else's strategy.

FYI: Wall Street doesn’t expect technology stocks to repeat 2017’s banner year that has seen the sector return almost twice as much as the S&P 500 index. After four consecutive years of outperformance, tech companies face mounting concerns about the potential for increased government regulation and continued rotation by investors into higher-taxed industries as a result of U.S. tax reform. Most analysts see the bull market continuing, but at a less ferocious pace. Here’s a look at their predictions.
Regards,
Ted
https://www.bloomberg.com/news/articles/2017-12-20/party-s-over-for-tech-stocks-as-outlook-grows-cautious-for-2018

Hi @Mitchelg
You note a good point about flexibility with some investment houses. Several years ago I had a "finger problem" combined with a "too busy of a day syndrome" with a Fidelity purchase. I bought a Fido fund I had not intended to purchase. The fund happened to be one with the 60 day holding period or a 1% sell fee would be subtracted. I didn't realize the purchase problem until the next day. A phone call explaining the error removed the errant purchase and no fees were attached. Customer service/relationship has always been a most positive experience for us with Fidelity.
Never hurts to ask, eh?
Regards,
Catch

A nice piece by Grantham who pretty much covers the bases in his suggestions. And I get the feeling he’s as befuddled by today’s equity markets as I am. Makes a lot of different suggestions depending which way markets run. I get that he likes EM. The problem with those kinds of suggestions is they can take years to pay off. Might double next week. Might also fall 25% in a year before rebounding and rising 50% over 6 months. Not for the conservative investor.
One of his suggestions is “liquid alternatives” - which Investopedia loosely defines as hedge funds for the little guy (low minimums and few restrictions on redemption) - as the answer to the conundrum he sets up. But, with these you’re paying a ton in management fees and are highly vulnerable to the decision making of the manager. I’m not convinced most are any better at guessing which direction to lean toward at any given moment than most of us are. Some get it right. Many don’t. A change in manager can spell disaster for a previously successful fund. Shorting equities costs the fund additional money in the form of interest and also increases risk. So I’m not a fan of liquid alts.
@bee - The knock against PRPFX has always been that as an individual you can purchase the bonds, gold, silver, natural resource stocks, Swiss Francs, real estate and aggressive growth holdings (and in the same proportions) cheaper yourself than paying Mr. C to do that for you. My answer is: Yes you can. But who among us has the time, resources and wherewithal to do all that - and than to rebalance it all periodically? If anyone here is replicating the fund on their own, they haven’t voiced it. I don’t know what the “right” amount is for that type of holding. I hold a bit - and sleep very well on it. Guess it amounts to something like 5-10% of my total. Content to leave it alone and take distributions elsewhere. I do consider it something of a liquid alt - but not as normally viewed or defined in the investment community.

Whenever you read expressions like "innovative" and "sets itself apart" (here, "in that the minimum management fee goes to zero if the funds don’t outperform their benchmark"), you should be wary of hype.
Here's what M* had to say: "It's a rare [but not unique] situation in the industry. The performance fees of most other funds that levy them are structured in a way that makes a negative or zero net expense ratio mathematically impossible."
It wasn't writing about these funds. That's a quote from 2011, where M* was describing Bridgeway Funds. The title of that article was "Bridgeway Pays Shareholders to Invest, for Now". Bridgeway reduced management fees so low (well below zero, unlike Allianz) that the total ER of two funds were 0.00% or less.
Basing a performance fee on a twelve month performance is akin to companies jiggering quarterly performance to keep the market happy. A year is too short a period of time to allow a manager's strategy to play out. Instead, it encourages window dressing and conservative investing if the fund is slightly ahead, and excessive risk taking if the fund is way behind.
As noted in this CBS Moneywatch article also about Bridgeway in 2011:
"[Bridgeway's] aggressive performance fee ... is calculated on the fund's average assets over the trailing five years, instead of the more common three years".
Funds don't generally use one year performance figures. For example, Fidelity uses a rolling 36 month period to benchmark performance.
See also Barron's Should Fund Managers Get Paid for Performance

Appendix: I struggled to uncover the options trading in which PRWCX engaged at one point. Geez - had to go way back to their December 31, 2011 Annual Report to locate it.
FWIW - “Before we review the portfolio, we want to briefly discuss the Capital Appreciation Fund’s covered call overwriting strategy, which we have employed for more than three years. Covered call overwriting involves buying a stock and then selling a call option—a contract whereby we agree at a future date to sell the stock at a predetermined (strike) price if the stock is above the predetermined (strike) price. In return for selling this call option, we are paid a premium (typically 3% to 6% per annum) that provides extra income to the fund and its investors. While this strategy caps our upside in an individual stock (usually 10% or higher), it provides incremental income that can enhance total returns and lower our downside risk. Over the last three years, this strategy (return combination of underlying stocks, call income, and dividend income) has generated a stronger return than the fund itself and has done so with materially lower risk. As of December 31, 2011, a little more than 20% of our equity holdings have calls written against them. Given the excellent returns and even more excellent risk/reward profile of this strategy, we believe it will continue to play a meaningful role in your fund.”

Good find @Hank!!

Trailing comment.
Thanks to all that have made comments on this thread.
I now have a few trailing comments that I'd like to make.
One of the things that goes back to a comment I made was that "some distributions are taxed while some are not" is that non deductable contributions when removed in a sense are not taxed but become factored in with the normal distribution thus reducing the part that gets taxed. Since, I made some non deductable contributions to my traditional ira through the years this is something my accountant has to deal with each year as I take distributions. (I do not think this was covered in the link I provided).
Again, since I hold enough income generating securities that kick off a good amount of interest, capital gains and dividends (I take all fund distributions in cash.) thus far I have not been forced to take any in kind distributions. In addition, I use that sleeve system and KCMTX would become a member of the global hybrid sleeve which is found in the growth & income area of the portfolio. Although, the size of the position when it comes to the overall portfolio would be small it would have a greater influence within its sleeve which now consists of CAIBX, PMAIX & TIBAX. I would build KCMTX's position over time through excess income generation over and above the required needed for RMD's. So, having a good income stream is beneficial because it provides the opportunity to add new positions without having to sell other securities to make the buy (from my perspective).
On my comment about how certain types of income gets taxed this applies more to taxable accounts; but, since interest, dividends and capital gains are a part of total return along with capital appreciation I felt it worthy of comment.
One of the great things about investing is that choices can be made in a fashion that allows each of us to obtain our goals. The comments I made center around what I do; and, by no means was I saying that they would be right for others to follow. With this, there is no one right way (or wrong way) to have success (or failure). We can each govern as we feel best.
I wish all well this Holiday Season ... and, most of all "Good Investing."
Skeet

I was trying to locate a 2 or 3 year old fund report for PRWCX to refresh my recollection of their strategy back than (2014 or 2015). Can only locate the most recent annual and semi-annual reports on their website. Is there a way to go back in time and see what a fund’s manager was saying a few years ago?
(I realize that with some fund managers the tune never changes. :))

Just finished reading 'The Wizard of Lies' aka Bernie Madoff, and got to wondering if PRWCX could be a.....nah? Or could it.....nah.

It’s a small niche mostly mid-cap fund that morphed into a bloated large-cap mostly blue chip fund than transformed itself into a pseudo hedge-fund trading options on its equity positions for defensive purposes. Some call it balanced. Price says it’s closed - but otherwise isn’t saying exactly what it is.
Who was Madoff? Did money beat a path to his door?
—
Appendix: I struggled to uncover the options trading in which PRWCX engaged at one point. Geez - had to go way back to their December 31, 2011 Annual Report to locate it.
FWIW - “Before we review the portfolio, we want to briefly discuss the Capital Appreciation Fund’s covered call overwriting strategy, which we have employed for more than three years. Covered call overwriting involves buying a stock and then selling a call option—a contract whereby we agree at a future date to sell the stock at a predetermined (strike) price if the stock is above the predetermined (strike) price. In return for selling this call option, we are paid a premium (typically 3% to 6% per annum) that provides extra income to the fund and its investors. While this strategy caps our upside in an individual stock (usually 10% or higher), it provides incremental income that can enhance total returns and lower our downside risk. Over the last three years, this strategy (return combination of underlying stocks, call income, and dividend income) has generated a stronger return than the fund itself and has done so with materially lower risk. As of December 31, 2011, a little more than 20% of our equity holdings have calls written against them. Given the excellent returns and even more excellent risk/reward profile of this strategy, we believe it will continue to play a meaningful role in your fund.”

@bee: Although it does not post estimated annual cap gains until they actual happen, Morningstar does show dividends and cap gains over the past two years by date and amount under quote section if you input the symbol

@msf, your point is well taken. As I at least have learned from MFO, it would have been smarter for me to focus on taking the one with the least negative volatility since that's what we're more sensitive to. Nonetheless, there's no doubt in my mind that some people would prefer your first option and others would prefer the second- if we were ever in a situation where you knew what the future would bring. If we don't know the future then those spikes might scare me more out of fear the bounce back wouldn't happen each time.
I also think your last point about splitting the portfolio into buckets or sleeves with different "goals" and different approaches is a smart way to do things. We're told to keep much more than a one month cushion in "cash" and we all have to be able to deal with the unexpected from time to time (I had my car inspected in October and ended up with a new muffler) so hopefully most people aren't walking a tightrope every month.
@MikeM, I think by definition if you own something that's an insignificant portion of your portfolio then it's not going to make much difference. One caveat, though, is that it's not really about the individual fund, its about the totality of your portfolio. I think, at least for myself, I'd be far more willing to put 20% in a balanced fund or several of them because I feel like I understand them better, I've read a lot more about the benefits of a "balanced" portfolio over many years and in most cases alternative funds aren't going to tell you enough about their process/algorithm to understand it at a level that might make you feel comfortable enough to make a big allocation. Funny enough, we don't actually know the details of how a balanced fund makes it's decisions either but I feel like I know more than I really do.
I certainly don't want to give anyone advice and this isn't what I'm doing with my own portfolio, but there's no reason you can't have both balanced funds and alt funds in a portfolio. They'll do different things for you depending on the type of alt fund(s) you choose but the combination could provide better diversification than just relying on balanced funds or a combination of stock and bond funds.
You mentioned early on that you like to compare these alt funds against a balanced fund like PRWCX. It might also be worthwhile to compare it to a very simple alt strategy like SMA10 or SMA12. You pay a lot for these complicated algorithms and if they can't beat something that you could do on your own with very little effort then they'd have to have something else really special to keep me interested. That could be a super smooth ride, far better tax efficiency or even the potential to generate positive returns in a big downturn, but in a lot of cases complicated isn't better.

Dogs of the Dow is an early rules-based strategy. Quant has come a long way since then.
I ran a simulation back to Jan 1999. One-year holding periods, rolling on a weekly basis. So 938 "years" were tested.
Dogs of the Dow (5 lowest priced Dow stocks from top 10 Dow yielding stocks) averaged 8.63% per year return vs 6.85% for SPY. Dogs beat SPY 57% of every year tested.
But the standard deviation from holding just five stocks was higher. So the average Dogs Sharpe and Sortino ratios were lower than SPY. And average Dogs max drawdown was higher than SPY.