"Perma bear" does strike me as a curious locution, and potentially a way to avoid the argument. We don't have a similar term who folks who are sure that stocks will climb relentlessly higher; I haven't heard much of "perma bulls." Perhaps because their flame-outs are more spectacular, so their careers come to a more abrupt end?
Too, we might need to think about time horizons to define "perma." Is someone who's been deeply skeptical for three or four years "permanently" bearish? And what does saying that say about our own depth of vision? Taken in the context of a forty year career, should we think of four years as "forever"? It was for a lot of the value investors who retired in 1999 and early 2000, worn down by ridicule and the market's ability to generate 200% returns for speculative funds.
David

That's because a rising stock market is always considered to be its normal state. Hence we see terms like 'correction' to describe a decline. Correction from what? Semantics suggest that means it's moving opposite to the 'correct' way of "from the lower left to the upper right." I loathe that term -- a 'correctly' moving market moves according to reality, and reality can go both up and down.
The 'perma-bears' (or bulls) are the ones who repeatedly call for a drop and end up sounding like a broken record for a prolonged period of time .... which, in the 24-hour news cycle of in-your-face "journalism" means someone can come across as a perma-bear after only a few years. To wit: Marc Faber is on CNBC preaching the same thing for years. He may be right *sometime* but being that dogmatic about forecasting -- let alone investing by it -- is a fools' errand. But the one time they're proven right, their track record of early (and thus 'wrong') predictions are totally ignored, because ZMGHEWASRIGHTANDCALLEDIT! What short memories we have, and how uncritical our thinking has become in recent years, eh?
"Can't say more, we've got a commercial break. But coming up next, Pundit X on why this decline is only going to be a temporary correction and it's the perfect time to buy, buy, and buy some more. Stay tuned."
Edit: I do think Ed raised some very valid points/concerns about bonds within balanced funds, though.

My engineer buddy is crowing …
My high school buddy who became an engineer by profession has now started to crow as his 60/40 walking allocation consisting mostly 60% invested in the S&P 500 Index, about 35% in the aggregate bond index plus keeping about 5% in cash has now come to life and has bettered my recent performance. His numbers for the past one, three, five and ten year periods, tracked by Morningstar, are 6.8%, 10.0%, 10.0% and 5.6% respectively while mine, also tracked by Morningstar, on my master portfolio which uses my sleeve management system, are about 2.9%, 10.1%, 9.8% and 6.9% respectively. The above performance numbers do not reflect special investment positions (SPIFFS), held from time-to-time, as they added to our above performance numbers but not reflected in this analysis.
It seems, over the past ten year period my master portfolio has bettered his 60/40 portfolio by more than twenty percent. So, it seems active management has out performed passive management over the long haul while passive now leads over the shorter period and they both have performed about the same through the mid years.
In comparing both of our portfolios to CTFAX which is a professional run hybrid type asset walking fund based upon setting its stock and bond allocation by the varying price valuation of S&P 500 Index has returned 3.2%, 6.6%, 8.9% and 6.2% for the same respective periods. I have linked it's Fact Sheet below for those that would like to review same.
https://www.columbiathreadneedleus.com/content/columbia/pdf/LIT_DOC_3C97987F.PDF
It is interesting that his S&P 500 Index fund has returned an average of 7.0% for the ten year period while his bond index fund has returned 4.2%. Perhaps, Mr. Buffett provided good widsom and thought path that an investor would do well by just investing in the S&P 500 Index along with some US Treasury bonds.
I score both of us as winners over some of our classmates that chose many years ago not to become investors. No doubt, the years ahead for both of us will most likely be easier than those that chose not to become long term investors. We have classmates that bettered both of us during our working years ... but, I don't think they will going forward as most of them did not invest and thus prepare for retirement. I know some of them lived high on the hog and spent most of what they were making to live a high profile lifestyle. Some of these folks will just have to keep working ... but, neither of us will as we both have smiles.

"Perma bear" does strike me as a curious locution, and potentially a way to avoid the argument. We don't have a similar term who folks who are sure that stocks will climb relentlessly higher; I haven't heard much of "perma bulls." Perhaps because their flame-outs are more spectacular, so their careers come to a more abrupt end?
Too, we might need to think about time horizons to define "perma." Is someone who's been deeply skeptical for three or four years "permanently" bearish? And what does saying that say about our own depth of vision? Taken in the context of a forty year career, should we think of four years as "forever"? It was for a lot of the value investors who retired in 1999 and early 2000, worn down by ridicule and the market's ability to generate 200% returns for speculative funds.
This isn't to say that some folks aren't "more cautious than my reading of my facts warrants" or "more risk averse than me." Mostly, I worry when we find it convenient to wrap ourselves in our shawls and move on.
There's a cool and thoughtful piece entitled "The Rhetoric of Hitler's 'Battle,'" written by a famous rhetorician and literary critic, Kenneth Burke. Burke writes:

Hitler's "Battle" is exasperating, even nauseating; yet the fact remains: If the reviewer but knocks off a few adverse attitudinizings and calls it a day, with a guaranty in advance that his article will have a favorable reception among the decent members of our population, he is contributing more to our gratification than to our enlightenment (The Philosophy of Literary Form, 191)

. The "Battle" he's talking about is Mein Kampf, translatable as My Battle or My Struggle.
There are a sort of interesting piece on valuations in the latest Advisor Perspectives. You might recall Grantham's argument that markets don't succumb to bears until their valuations cross the two standard deviation level. He thinks we'll be there around the time of the elevation. The article has some nice visuals on the rhythm of Tobin's Q as a valuation metric.
David

Hi @bee,
No, I'm definitely not equally weighted. I much prefer to dollar cost average over pretty long periods of time so it can take years in some cases and that can influence the relative size of positions. The Grandeur Peak funds were an exception because of the hard closes. I don't have any hard and fast rules about position sizes but the largest, POAGX is about 5% of my overall portfolio now, including stocks, and I'd be hard pressed to imagine any single fund being more than 10% overall based on my current approach. I definitely don't want to bet a big portion of my portfolio on any given manager and I also don't want to have investments where it's more difficult to admit or even recognize if I'm wrong because I have too much invested.
I do have a handful of asset allocation goals that I reconsider annually based on global market capitalizations (calculated from various MSCI indices) and my position sizes, or intended position sizes, are generally targeted to support those goals for my overall portfolio. I want to be overweight emerging/frontier markets, small-caps and healthcare, roughly equal weight the U.S. and underweight foreign developed markets and large cap stocks generally. Currently I have more allocated to the U.S. than I'd really like but in most cases I prefer to be gradual in my adjustments. I also like to be flexible enough to take advantage of perceived opportunities so the goals have to be flexible as well.

T. Rowe is an interesting case as it isn't owned by a larger financial conglomerate such as a bank and has long specialized in no load funds. Yet I do think it has drifted some away from its original mission with advisor share classes and some funds seeming pretty bloated.

Price sold advisor funds more than two decades ago (as a way to distribute NTF), so this isn't a particularly recent drift. Several of their best funds have been closed for years, and they have not shown reluctance to close them when they hit certain sizes (though one can make the case that those thresholds are set too high).
I agree with you that as a general principle, bank/broker/insurer-"owned" funds tend to pay less attention to their "customers" (fund shareholders). But I find that's too sweeping a generalization to be especially useful in fund searches. I wouldn't want to penalize T. Rowe Price just because it's public.
Also, I've never been entirely clear on what the term "fund shop" or "fund family" means. I take it loosely as the marketing/distribution arm, "branding" if you will. But I'm not sure precisely what company one is really talking about.
"Families" often outsource the day-to-day management, so I don't think "family" is the management company. For example, Vanguard contracts with Jennison Associates, a Prudential subsidiary. The family is still Vanguard, not Jennison, and Vanguard makes sure that management owner Prudential isn't gouging the shareholders.
From a practical perspective, it's who controls the fund's board, whatever entity that is.
I know of three (and only three) examples of true fund independence that proves the rule (by demonstrating in rare instances the parent "family" doesn't necessarily control):
Selected Funds moved from Selected Financial Services (a Kemper subsidiary) to Venture Advisers (Davis) in 1993, after Yacktman bolted. Shelby Davis took over management of both funds - SLASX and SLSSX (then called Selected Shares). Not long after, management of the latter was outsourced to Bramwell Capital Management (Elizabeth Bramwell, who had recently left Gabelli). Was SLASX better when managed (mostly) by Chris Davis (at a privately held company) or by Donald Yackman (via a Kemper company)?
Lightning struck a second time in 2005, when the Clipper Fund moved itself from Pacific Financial Research to Davis Selected Advisers. Here too, same question - Pacific Financial Research was acquired by UAM in 1997 (publicly traded), with UAM acquired by Old Mutual in 2000 (also publicly traded). In the ten years since it moved to Davis, this once fine fund has underperformed its category by 1.83%/year (per M*).
My favorite independent board was The Japan Fund, which I've described before. A coda to that post is that Nomura killed off The Japan Fund last year by merging it into Matthews Asia Japan Fund. As you can see from this mid-2014 comparison of Japan funds, this is likely a good thing for the shareholders (not to mention the fund going no-load).

@MJG This hit home for me: "Choose a fund manager who has a storied personal success history who also has a focused fund holding approach. Not all managers are equal, and time will isolate skill from luck. All investment ideas are not equally promising. Managers who limit how far down the idea list they venture increase the odds for excess returns above benchmarks. Well, that was the logic backstopping the criterion.
From my perspective and limited experience, that rule has not been especially productive."
That was my logic for investing in FAAFX. "Not especially productive" has been an understatement, and the end of this year it will be five years. I know @Charles is with me.
Maybe it will still work out, but I am leaning against star managers, in favor of management teams, and in favor of index funds going forward.

>>>>Ed's argument: all three asset classes might be subject to sharp, sustained declines over, say, the next decade. As a deep value investor, he's pretty much appalled by what he sees as a fundamental disconnect between corporate prospects and stock prices.<<<<
"sustained declines" Sounds like a perma bear for the next decade and wonder how long he has had this feeling. Or am I misreading something?? We have seen in the recent past where fund managers have had similar feelings and their funds have seriously lagged over the past many years from holding far too much cash. ARIVX is one of several that come to mind.

Dear friends,
A number of folks have had questions about Ed's arguments concerning the performance of traditional balanced funds. Being shy and retiring, Ed is not predisposed to post on the board but he does read your comments, often scanning them daily.
Four notes, then, as a sort of gloss on Ed's August essay:
On balanced funds: traditionally balanced funds have provided portfolio protection in falling markets because their two dominant asset classes have had correlations that were, on average, negligible (the one-year correlation over the past century is between 7-10%) and, in times of economic decline, negative (the correlation has been as low as -93%). The Depression, for example, saw consistently strong negative correlations. Cash, at the same time, was not correlated with either. In the past couple decade, the Goldilocks correlation has been positive: both asset classes rose as interest rates fell.
That's been good for investors and helps explain why the Vanguard Balanced Index fund (VBINX) has been nearly unbeatable: dirt cheap, fully invested, religiously rebalanced between two rising asset classes. But correlations tend to be dependent on two factors: beginning valuations and the rate of inflation (hence, of rising interest rates). A combination of pricey assets with rising prices cause stocks and bonds to become positively correlated (as high as 89% correlated), prominently in the inflation wracked '70s. That data is all courtesy of a 2013 PIMCO study. "This analysis," they conclude, "challenges conventional wisdom for asset allocation."
Ed's argument: all three asset classes might be subject to sharp, sustained declines over, say, the next decade. As a deep value investor, he's pretty much appalled by what he sees as a fundamental disconnect between corporate prospects and stock prices. Bond yields can't go any lower unless you anticipate investor acceptance of negative yield, of the sort Switzerland is getting away with: instead of paying interest, the Swiss government promises to return your principle, minus a modest annual holding fee, in a decade. An article in the August 6 Financial Times heralded the sea change in the nature of bond investing, from "risk-free returns" to "return-free risks." And money market reforms now allow money market funds, often used in mutual fund portfolios, to use variable NAVs; that is, for the first time you might buy a MMF at $1.00/share and see your shares soon priced below that.
It's likely that a balanced fund will still be less-bloodied than a pure equity fund but it still might be surprisingly bloody for years. How many? A balanced fund could remain underwater for six to eight years if the bond portfolio doesn't offset the declines in the equity portion. The New York Times published an okay short piece on recovery times, noting that the average recovery time since 1900 for the stock markets has only been about two years, buoyed by dividend yields as high as 14%, but that six to eight year periods can't be discounted.
On 1987 and 2007: the argument is that 2007 initiated a slow-rolling disaster where markets fell, rose, steadied, fell, rose, fell, steadied, fell ... That gave "the smart money" time to reposition to minimize the bloodshed. The market in 1987 rose 44% between January and August, turned choppy for eight weeks, then the crash rolled out over just four trading days in the middle of October: Wednesday (-3.8%), Thursday (-4.2%), Friday (-4.6%) then Black Monday (-22.6%). Markets worldwide fell 40-60%.
Analysts tend to attribute the crash to geopolitical instability (uhhh, Iran was firing Silkworm missiles as U.S.-flagged merchant ships) and computerized trading. "Portfolio insurance" programs, designed to minimize losses by selling fast in the face of a declining market, may have created a negative feedback loop in which each sale triggered a new alarm and another sale. Such algorithms were the province of ultra-sophisticated investors in 1987, today they're common though no one knows how common since the folks who use them don't necessarily advertise the fact. The highest number I've seen is 84%, a common number is 70% and the most conservative is 50% of all U.S. equity trades.
The question is, does the rise of artificial intelligence and its deployment by the ultra-sophisticated minimize or heighten the prospect of an "oops" on a truly global scale. I suppose if you find the widespread deployment of drone into our airspace reassuring (pretty pictures!), you're also likely to find the widespread deployment of AI in the financial markets reassuring.
As an investment concern, the difference is important: you can't react to a 1987-style event, you can only endure it or try to find satisfactory ways to permanently hedge your portfolio in advance. Given the doubts, above, concerning a balance strategy and the availability of insured one-year CDs paying 1.25% (with 12-month inflation at just 0.1%), Ed might recommend that you seriously consider the latter.
On paring his portfolio: Ed's wife, from time to time, points out that he has no rational need for 25 mutual funds. I get the impression he sighs, looks at the lot of them, thinks "but he was so promising as a baby!" and then chucks one of them out of the sleigh. I'll let you know if he shares a more-detailed methodology.
On the difference between Ed and me: I'm the taller one, he's more ... uhh, full-figured. Edward used to co-manage a multi-billion dollar mutual fund, I peaked out at mismanaging my multi-thousand dollar 403(b) account. The other difference is that Ed writes everything that appears under the banner "Edward ex cathedra" while I churn out the fluff and babble. Which I mention just for the sake of folks who are new to the Observer and have misattributed some of Ed's arguments, observations, grumbling and/or brilliance to me.
Back to patching the concrete at the end of my driveway,
David

Hi Guys,
I’m thoroughly enjoying and learning from this exchange. It’s being conducted in a civil way with emphasis on what works, or at least what is believed to work. Thank you all for many fine contributions.
I’m going to change direction a little by discussing a selection rule that I once included in my fund selection rules for a portion of my portfolio, but now have serious doubts. The two funds that I selected based on this rule have been disappointments recently. They both were successes 15 years ago, but over the last decade there has been a disquieting erosion, a “regression to below the mean”.
First the criterion. Choose a fund manager who has a storied personal success history who also has a focused fund holding approach. Not all managers are equal, and time will isolate skill from luck. All investment ideas are not equally promising. Managers who limit how far down the idea list they venture increase the odds for excess returns above benchmarks. Well, that was the logic backstopping the criterion.
From my perspective and limited experience, that rule has not been especially productive. In fact, I now consider it a failed rule and have mostly abandoned it. Some things die hard but slowly since an accumulation of data is required.
My 15-plus years of experimentation with the rule have been with the Masters Select Equity fund (MSEFX) and the Marsico fund (MFOCX). Both funds outdistanced their Benchmarks in their early history, sometimes by impressive margins. In the last decade, their performance have hit hard times and have generated negative Excess Returns. I’m incrementally reducing my positions in both funds.
Both funds are supposedly managed by superstar managers. The MSEFX teams are carefully screened, selected, and monitored by a professional methodology developed by the Litman-Gregory firm. The methodology uses multiple filters to output likely “superior” management teams, and fires those that fail to satisfy expectations. The Litman-Gregory resources must exceed those accessible to individual investors by an order of magnitude.
Tom Marsico managed the Janus fund to dazzling outperformance in the late 1980s and 1990s. Morningstar named him a fund manager-of-the-year for his terrific record. He is a talented and skilful stock selector who learned his craft under the legendary Fred Alger.
Yet both managements have suffered poor performance for a decade. Regression to the mean is an irresistible force in the equity marketplace. Markets change and so must fund selection criteria.
I hope this post adds to this expanding discussion and keeps it on target.
Best Wishes.

I can't add much in terms of how I evaluate funds because the points already made are excellent and cover most of what I pay attention to, but I also like focused funds where I feel pretty confident I'm really getting the manager's best ideas. That doesn't override other factors and in some cases increases their importance. For instance, I don't like funds with lots of assets to manage but I like them even less when they only have 20-30 holdings.
In terms of past performance, I also like to research the manager's history with other funds and how they've done. On M* if you follow the "Management" link for a fund you'll see each manager and be able to click a link for "Other Assets Managed". I then look at how other funds did when that manager was in charge and if the time period is too long ago to be seen on M* I use Yahoo's Performance link for those funds. Yahoo seems to display all historical data whereas M* only provides the last 10 years.
Finally, on a slightly different note, I keep a list (in both a M* watch list and a spreadsheet) of any fund that has interested me over the years. Sometimes I get ideas from David's commentary or fund reviews, sometimes from the MFO discussion board, sometimes from an article on M* or elsewhere, and sometimes just from screening for funds with strong long-term performance records. Over the years I'm sure there are lots of sources that have contributed to my list. No matter where the ideas come from, when a fund sparks my interest based on many of the factors mentioned by others it gets added to the list and when I do have a need for a new fund that's where I go rather than starting with all funds and trying to find the one I like best. Right now I have about 125 funds covering pretty much any category I have ever been interested in and even some that I've never been interested in, I own 16 of them and I'm pretty sure it would take less than an hour to research and find a fund if I thought it was necessary.
My spreadsheet gets updated once each year (other than adding something to the list) with annual performance records, cumulative performance records, AUM, expense ratios, turnover, manager tenure, number of holdings, active share and ulcer index to the extent available, and it also allows me to compare the performance and other stats from funds I've invested in to others that I have liked for one reason or another. Since I don't turnover funds very often it means I get some benefit from the work other than just choosing a new fund.

FYI: International stock mutual funds outperformed the U.S. stock market for much of the past 10 years. But international funds fell behind in the past year amid difficulties in stimulating moribund economies in Europe and China as well as Greece's debt problems.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MjAxMjE2NzI=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=webLV080615.jpg&docId=765330&xmpSource=&width=1000&height=1063&caption=&id=765246

hank said
August 2 edited August 2 Flag
A few morsels from Ed:
"Some men are born mediocre, some men achieve mediocrity, and some men have mediocrity thrust upon them. - Joseph Heller"
Will this be mediocroty thrust upon us? As in;
Hi ! I'm from the government,and I'm here to help you.
The New School's Teresa Ghilarducci weighs in on mandated savings, risk aversion and avoiding fees
Aug 5, 2015 @ 10:46 am
By Bloomberg News
Retirement policy wonks don't usually get hate mail. But in 2008, Teresa Ghilarducci, an economics professor at the New School for Social Research, proposed replacing 401(k) plans and their income tax break with a mandated government savings plan for all workers. The blowback from some Tea Partyers was so intense that the school's chief of security gave her his cell phone number.
The plan called for mandatory savings of 5% of salary, with the government handling all investment decisions, guaranteeing a rate of return above inflation, and ultimately paying out the retirement money in a lifelong annuity. It's pretty radical. Conservatives hate it. She continues to advocate for it, though she won't comment on whether she has discussed it as one of the cadre of economists advising Hillary Clinton in her presidential bid.
About 15 years ago, Ms. Ghilarducci started to focus on getting to retirement in fighting shape.
“It was a pure money play,” she said. “I lost some weight and am devoted to my seven-minute workout app and weight training at the gym." It's not about vanity, she said, "but the money I hope to save if I can avoid illnesses such as diabetes and osteoporosis.”
Ms. Ghilarducci said if she didn't have access to TIAA-CREF she'd park her money in Vanguard index funds.
“It's against my religion to invest in actively managed funds,” she said. "I suspected they were fishy when I was younger, and now we have plenty of evidence that passive [investing] is better."
After doing some intensive research on long-term care insurance, she decided to pass. She cites the high premiums on the policies and new research that suggests that budget-busting extended care will be needed by fewer elderly people than previously thought.
“Pushing for Medicare to expand to cover long-term care is my best bet, and honestly, it's everyone's best bet,” she said.
Many retirement experts and myriad online tools suggest aiming for retirement income that can replace 70% to 80% of your pre-retirement income. Ms. Ghilarducci, who has based her plan on living until 92, is out to replace 100%.
http://www.investmentnews.com/article/20150805/FREE/150809967/this-retirement-expert-got-death-threats-for-her-policy-reform-ideas
WHO INVITED TERESA GHILARDUCCI TO THE TABLE?
Lunch and populism with Hillary Clinton’s least-likely adviser.
BY NANCY COOK
This article appears in the June 27, 2015 edition of National Journal Magazine as Who Invited Teresa Ghilarducci to the Table?.
Ghilarducci's big idea, then and now, is to create government-run, guaranteed retirement accounts ("GRAs," for short). Taxpayers would be required to put 5 percent of their annual income into savings, with the money managed by the Social Security Administration. They could only opt out if their employer offered a traditional pension, and they wouldn't be able to withdraw the money as readily and early as with a 401(k). The government would invest the money and guarantee a rate of return, adjusted to inflation.
To pay for the program, Ghilarducci calls for ending tax breaks for people with 401(k)s —breaks that, according to her and others' research, now go primarily toward wealthier Americans. Instead, every taxpayer would receive a $600 refundable tax credit that would go toward the 5 percent annual contribution.
Plenty of economists and policymakers—especially on the state and local levels—have proposed some version of government-run retirement accounts. But no plan has been quite so grandly liberal as Ghilarducci's, which would create a new federal program easily as massive as the one wrought by the Affordable Care Act—and do it by mandating that Americans contribute 5 percent of their earnings. "You don't like mandates? Get real," she wrote in a 2012 Times op-ed. "Just as a voluntary Social Security system would have been a disaster, a voluntary retirement account plan is a disaster."
http://www.nationaljournal.com/magazine/teresa-ghilarducci-hillary-clinton-adviser-20150626

Hi MrRuffles,
I do not have a rigid formulaic set of rules, but I do deploy a generic set that serve as guidelines to reduce the selection field to manageable proportions.
Here is my candidate set, not necessarily in order of importance and it is not necessary that all need to be satisfied. Flexibility and gut feelings are important contributors to the final judgment. Here are my golden 11 rules:
1. A mutual fund that fits nicely into the more important asset allocation plan. Check the Morningstar fund asset distribution.
2. Low costs, like below the category average by at least 25%.
3. Low turnover rate, like 50% annually or less. I want a decisive management that is committed to its decisions.
4. Positive Excess Returns above appropriate benchmark for various, but not necessarily all, longer-term timeframes. That means mostly positive Alphas and Information Ratios above zero after examining different timeframes.
5. An understandable investment selection policy that offers the potential for market outperformance. Something unique that warrants the extra costs.
6. Seasoned and stable fund managers with quantifiable track records.
7. Trustworthy fund firm with deep pockets to hire superior fund managers and research teams.
8. Gut feeling that this fund will deliver the goods over time.
9. A commitment to stay the course with the selected fund to allow a proper test period, like maybe at least 3 years unless circumstances drastically change.
10. A default option to hire an Index fund if nothing satisfactorily surfaces.
11. The fund should have a near zero cash position. I’ll do my own cash management.
12. I’m sure I forgot something. Others will add to this incomplete list. No great discoveries in my golden 11.
Please keep in mind that I’m a very senior investor in the Required Minimum Withdrawal phase of my investment life. On average, I probably adjust my portfolio about twice a year. I’ve never been a very active trader. I am slowly moving my portfolio towards a higher percentage of Index products primarily motivated by cost considerations.
Each of us have different goals, timeframes, and portfolio ambitions. What I do might not mesh in any way with your investment and financial profiles whatsoever. When investing, nothing is ever cast in stone.
I wish you the very best success in your mutual fund decisions. But remember that in the long scheme of happenings, it is really a small matter. Your asset allocation decision has far more influence on your investment success.
Best Regards.

Here's a list of internet funds from 2001. Very familiar names from the dot com era. Was M* wrong to pan this subcategory en masse, given that the vast majority of these funds are no longer with us?
If M* was going to pick one, should they have picked a fund with unproven management (all newbies), or followed the manager (Ryan Jacobs) who built that fund's record (a la Gundlach, but also Winters)?
Hindsight is wonderful. Since the M* "dissing" was in the 1999-2005 era, wouldn't it be more relevant to look at the fund's performance in, say, the decade of the 2000s? (So that we can see whether it would have been worthwhile avoiding the fund prospectively.)
VF suggested using VFINX for comparison. I'm okay with that (of course, since that stacks the deck :-) ) Using the same M* charts, we can get what $10K would be worth at the end of that decade. For WWWFX, it was $6527. VFINX lost only 1/3 as much, winding up with $9,045.
I'm in complete agreement that M* tends to fawn over some funds and managers; PIMCO/Gross is indeed a fine example of that. There, you can look at M*'s comments vs. performance over the next 1-3 years and see the disconnect.

VF you are so right on this. M* has a bad habit of either dissing some very good funds or simply ignoring them. The latter is just fine by me, since it means those funds fly under the radar and do not amass large asset bases. They also will diss all funds of a fund company they don't like. For instance, they currently hate a large, midwest-based company, and rarely have anything good to say about any of that company's funds, despite the fact that several are quite good. For years they billed and cooed with PIMCO and had Mr. Gross at virtually every M* conference (along with the other same managers every year). Unfortunately, M* is the only game in town for detailed research.

Just curious if you are referring to American Century funds, Bob.

VF you are so right on this. M* has a bad habit of either dissing some very good funds or simply ignoring them. The latter is just fine by me, since it means those funds fly under the radar and do not amass large asset bases. They also will diss all funds of a fund company they don't like. For instance, they currently hate a large, midwest-based company, and rarely have anything good to say about any of that company's funds, despite the fact that several are quite good. For years they billed and cooed with PIMCO and had Mr. Gross at virtually every M* conference (along with the other same managers every year). Unfortunately, M* is the only game in town for detailed research.

We made a lot of clients happy for a number of years when we owned MFLDX from late 2007 through 2013. While we are no longer in this fund, I think we learned a few lessons. 1) Independence is crucial. When Marketfield was bought by Mainstay, it was a boutique fund with strong performance record. Mainstay made it their marquee fund, and assets ballooned from $4B to almost $16B in less than a year. No management team with a unique strategy, no matter how smart and talented, can handle this inflow. 2) Our observation is that the team let their risk parameters widen to accomodate the massive flow of cash. That resulted in a 12% loss in 2014, something from which they have not recovered. 3) No longer a boutique fund used by RIAs, hot cash fled the fund, even faster than it went in, with assets dropping to only $3B now. Once the run starts, it feeds on itself. Do not try to stand in the doorway. Interesting to note that the best record in the Equity Long-Short sector belongs to Schwab Hedged Equity SWHEX, that also happens to have one of the smallest asset bases. I am not suggesting folks buy this fund, but if I did own it, I would watch fund flows very carefully. Another strong performer is Gateway GTEYX, which has been around a very long time and now has by far the largest asset base. It has remained independent, though it is part of the Natixis group (Oakmark, Loomis, Vaughn Nelson, et al), and just keeps plugging along. Nothing fancy and has by far the lowest expenses of the group.
As for Hussman, it just boggles the mind to think that HSGFX has lost money in going on 6 of the last 8 years. Shareholders have fled, but there are still some who have stayed (maybe Hussman and his relatives?).

HI David,
I was reading your August commentary and was interested in your strategy about thinning out the ranks relative to the number of holdings in your portfolio. I believe you indicated that you have started the process. I was curious about one conundrum that I'm sure you've encountered: selling funds that have built up capital gains. If you are like me and have held funds for several years, chances are that you have a considerable amount of capital appreciation sitting in those funds. Selling those funds would trigger capital gains taxes (mostly long-term). Do you have a particular strategy regarding these funds? For example, are you choosing to sell certain ones this year and others in subsequent years based on the amount of capital gains or some other strategy? I'm trying to whittle down the number of funds that I own, but find myself looking at funds that have considerable capital gains waiting to be taxed.
Excellent job on the commentary as always !
Will

The total stock market funds are generally tax efficient.ETFs are often tax efficient Vanguard has tax managed funds. I like Tax manged capital appreciation . Owned it 20 years with NO capital gain distributions It invests in roughly the largest 10000 growth stocks (so no Exxon for example

Hi @Sven
I'm puzzled with this other statement in Mr. Studzinski's commentary:
" most people investing in a balanced (or equity fund for that matter) investment, do not have a sufficiently long time horizon, ten years perhaps being the minimum commitment."
My "presumption", per the above; would have to center to the possibility of only those close to or in retirement would use a balanced fund (conservative or moderate). Perhaps an explanation will arrive.
IMO, there remains many folks who should be invested in some fashion but are still afraid of the "nasty Wall St. thing". Balanced funds allow these folks to have market exposure with perhaps limited portfolio destruction, eh?
Take care,
Catch