@MJG,
Do you invest only in US-centric (CAPE) investments? I would think a diversified portfolio should also have a good slug of non - US investments. A globally diversified portfolio might fair quite well over the next ten years.
Maybe the next ten years will be less about US - CAPE weightings and more about being diversified globally.
Is there Global CAPE data available to compare Schiller's CAPE?
Thanks for your thread.

Hi Guys,
The saying that “Everything should be made as simple as possible, but not simpler” is often but not universally attributed to Albert Einstein.
Regardless of who actually made that pithy proclamation, it is especially applicable when making investment forecasts. Uncertainty dominates any forecasting, and complexity only increases the odds of introducing extraneous and erroneous factors.
I particularly favor a short and simple set of rules when forecasting longer-term market returns. I am not in any way motivated to travel to Chicago to attend a Morningstar convention where invited experts offer no more illuminating projections than I can painlessly glean from these simple rules.
What is my simple rule set? For the equity portion of my portfolio, I use a 10-year equity returns correlation that deploys the Bob Shiller Cyclically Adjusted Price to Earnings ratio (CAPE) as the entry parameter. Its current value is about 26; its historical mean value is roughly 17. So, today, the equity marketplace has a cautionary higher than normal risk level.
Future equity returns are negatively correlated with CAPE. A correlation that I like projects the following 10-year annual real returns (inflation subtracted) of 11%, 8%, 5%, 3%, and 1% as CAPE groupings increase from below10, 10 to 15, 15 to 20, 20 to 25, and greater than 25, respectively. These 5 groupings project a sad story for the current CAPE level. Please take note: This table is the primary insight and tool.
Above a CAPE of 30, equity returns have been historically negative for the upcoming 10 year period. One reason I like the above correlation is the timeframe balance of its components. Both CAPE and the equity market returns forecast are for a 10-year time horizon.
Projecting the next 10-year bond return likelihood is an even easier task. Simply use the current yield of the 10-year treasury bond. If you are a more aggressive corporate bond holder, you might consider adding 0.8% to the government value.
Given today’s market conditions and the S&P 500 CAPE valuation, I anticipate an equity annual real return of 1.0%, and a bond return of 2.5% (mix of treasury and corporate holdings) over the next 10-year time horizon.
Add another 2.5% for inflation. I presently expect a 60/40 equity/bond mixed portfolio to generate an actual return of 0.6 X 1.0 + 0.4 X 2.5 + 2..5 (inflation) = 4.1% annual average actual return for the next 10 years. Given the crudeness of the analyses, the projection is 4% annually. Quoting anything more accurate is misleading.
If you are a neophyte investor and expecting a portfolio return that is north of 8% annually over the upcoming 10 years, forget-about-it. It is not now in the cards given the present high value of CAPE. Naturally, these forecasts change as the input parameters get revised.
Well, this forecast is not rocket science and it did not need a visit to the Morningstar clambake. It has taken a complex forecasting problem and has simplified to allow a rapid and respectable estimate that does not depart too radically from those made by the professionals with their complex computer models. That complexity adds little.
Returning to the Einstein quote, I hope my approach has not crossed the overly simplified boundary. I also hope that a few MFO members find this simple forecasting tool useful. I realize that many MFO members use similar simplified methods in making their own projections. I thank these members for their patience with this submittal.
Best Regards.

Safeco was located in Seattle and they had some funds. I think they were bought out by Liberty Mutual some years ago.
Also the Benham Group was located in San Francisco. A well respected bond group, I bought in their GNMA fund way back when. They were absorbed by Twentieth Century now American Century.
I had the great fortune to speak with Jim Benham on the phone once. I had a simple question and as a small investor I was shocked to be speaking to the head. I have never forgotten the five minutes he took to answer my question.

@MJG
Twas not that I don't know how to do the ballpark math; as I do this all of the time for our portfolio. I was curious as to Old_Skeets number and what brought him to this conclusion.
Easy case for what Ted mentioned would be to pick 5 balanced/moderate allocation funds and discover the average down for the day in question. Magico-Presto, eh?
I've always been very good with head math........
Each week at our house for the true numbers, I use a handy-dandy and most reliable, HP-12C.
I'm sure your example may have been of benefit to someone here; but I am surprised that you would choose to explain your method to me.......my being in the game of life for so many years.

Kaufman's only fund management experience from what I can find on M* has only been the Thornburg Developing World fund starting in December 2009, so to @VintageFreak 's point we don't know much about how he'll do in a "real" down market. The downside capture ratio for THDIX over the last 5 years is only 81%. so at least he did well when the market was down without having a bear market.

@MFO Members: The Linkster's general rule wait three years. That's called winner, winner not quite a chicken dinner.
Regards,
Ted

FYI: Some of the top-performing municipal bond funds over the past five years have held huge stakes in Puerto Rican debt. Now that Puerto Rico's governor has said the island's roughly $72 billion in debts are "not payable" and asked for U.S. bankruptcy protection for the commonwealth, investors in those funds may take a big hit.
Regards,
Ted
http://www.cnbc.com/id/102798839
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2015-06-30/puerto-rico-bonds-fall-by-most-on-record-as-debt-crisis-worsens

I am surprised that anyone follows these anymore. With all the information that is available online, and the fact that Forbes readership, like all print media, is shrinking, this ends up being just another of hundreds of MF lists. 25-30 years ago, before online data was available, these had some value. Sort of like the lists in Kiplinger and Money magazines, this is just not worth the time. Like other lists, the rankings, grades, stars have different calculations from each other. I question a lot of the list that I quickly scanned, just like I disagree with most of what the other publications tour as "The Best", and "What to Buy NOW."

1998 WSJ article: Mutual Funds Take Steps to Ready for Redemptions (link is google search)

"Currently [1998] only four fund firms have permission from the US SEC to make such "interfund" loans. But several other fund companies [are moving in that direction] in light of the global economic turmoil.
"The first firm ... was Fidelity ... in 1990. Two other fund companies, Stein Roe .. and Janus also received interfund-loan authority in 1996 and late 1997 respectively.
"Vanguard ... applied ... two years ago .... T. Rowe Price has an application [pending]. Franklin Resources ... say[s] they are considering [applying].
"Earlier this month ... Fidelity made an interfund loan after one of its funds had an unexpectedly large withdrawal of cash."

What about next time ? Will it act the same. Probably not !
Derf

Thanks for baiting me. Lets look at this fund (YACKX) over the last two bubble drops:
Allow me to "cherry pick" a moment in time that would have been unfavorable for YACKX if mentioned at a cocktail party held back in March of 2008.
March 1998:
"So Bee, What the "buzz" on your hot tech stocks these days?"
"Buy Value, not growth"
Two years later the same acquaintance at a much swankier cocktail party asks in
March 2000:
"So Bee, how's that YACKX working out for you?"

Fast forward to 2015:
(If I hadn't fallen off the cocktail party list for this spring's soiree) I'd say,
"Pretty good"
My Take:
Value often falls out of favor because it's not considered "hot" or "flashy".
Value really fell out of favor in (March 1998) as (Tech Growth) continued to elevate for another two years (May 2000). Even with that under performance, value has held up better than growth long term.
YACKX has had a value matrix that has worked,
"But what about next time?"
I'll fall asleep thinking,
"Probably."

FYI: (Unfortunately the printer-friendly version won't link, you need to click on pages 2 &3 at bottom of thje first page)
How well is your fund doing? You can get a straight-line performance number—past five years or past ten—out of the annual report. But if this is all you look at you are getting a warped view. The winners on this simplistic scorecard are simply the funds whose style matches whatever kind of market prevailed in the recent past.
Regards,
Ted
http://www.forbes.com/sites/baldwin/2015/06/26/ratings-for-1471-mutual-funds/print/

FYI: Mutual funds that invest in stocks that pay dividends ran a little ahead or a little behind the S&P 500 for much of the past 10 years. But dividend mutual funds started a pronounced trend of underperformance in the fall of 2013 and have yet to recover.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTk3Njk5MTQ=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=webLV0625_1K.jpg&docId=758935&xmpSource=&width=1000&height=1109&caption=&id=758936

I notice that M* recently has stopped listing "rank in category" and some other otherwise standard statistics for TRAMX on its snapshot page. WAFMX gets great marks. The E.R. keeps me away. I still own TRAMX. Over 3 years, it beats WAFMX, but WAFMX is too young for a 5-year performance stat. I don't see it...
http://www.morningstar.com/funds/XNAS/TRAMX/quote.html

Point taken about turnover, but I would much much rather have some smart former analyst kid spend two years doing that, picking individual stocks in a given area based on his and his team's researches, than trust myself to do it.

Is this mostly due to constraining healthcare cost with mergers? Or a buying opportunity? Are there any HC reits with long term dividend growth over at least 10 years?

@Ted, congratulation to your fund pick - 70%! Unlike the late 90's, many biotech firms are actually producing products cannot be manufactured by traditional drug companies while making good profits. Like you I also invest with T. Rowe Price Health Science and it has doing very well over the last decade.
I tend to shy away from Fidelity sector funds due to the rapid change of fund managers. Many have tenure less than 2 years of experience that implies that is the training ground of young and inexperience managers. If I wish to play in that space I would pick individual stocks similar to what Scott is doing.

I agree on FB. As for Google, I think there is a great deal of potential in a lot of what Google is doing and the Google of 5-10 years from now I think may look very different than the Google of today (nothing against the Google of today, which is a very solid company.) That said, I do think there's a point here where Wall Street is losing patience with Google and the calls for returning money to shareholders via an Apple-like dividend have grown louder.
The other point of interest about Google is that the spread between GOOG (no vote) and GOOGL (voting rights) shares has widened noticeably since the company paid out the price for the spread between the two share classes that was agreed upon after the C class shares were distributed. It was generally around $5, then started widening as the date approached. Now the spread is $20-25 +/-. Kinda interesting.

These funds have their plusses and minuses.
On the plus side, they make donating assets much easier than donating directly to your favorite charity (especially if the charity is small and not set up to handle donations other than cash).
The main benefit IMHO is the ability to time-shift, i.e. donate one year and get the money to your designated charity (or charities) in later years. Good if you want extra deductions up front but want to spread out the actual donations, or if you don't know right now exactly where you want your contributions to go.
A minus is the cost. Typically 60 basis points (T. Rowe Price is 50 basis points). Many people complain about VA wrapper fees, which with these same providers (T. Rowe Price, Fidelity, Vanguard) are well below 60 basis points. So a 60 basis point cost for DAFs is not insignificant.
Another minus is the limited investment options offered for the money in the DAF before it is disbursed to your designated charities.
Disclosure: I have contributed to a DAF.
I liked one of the comments - about donating NUA stock. A similar idea I've been toying with is donating insurance stock obtained via demutualization. (That's when a formerly mutual insurance company converts to a stock company, and as part of that conversion grants stock to its policy holders).
The IRS still claims that the cost basis of this stock is zero. So donating this stock is "better" than donating other stock that you purchased (since that other stock will have a non-zero cost basis and thus less unrealized capital gains to give away). Court rulings are all over the map, ranging from saying that the gain is the full value of the stock to recognizing no gain, to points in between. This muddle is another good reason to consider donating this stock.

Craig Israelsen made a convincing case for cash as a beneficial asset class in a diversified portfolio in this 2007 Article.
In our household, we have an emergency cash fund which earns very little but is very liquid. In our taxable and retirement investment accounts, I try my best to keep a low cash balance, at most 5-10% at any given time, as I am about 20 years from retirement and I want to maximize our wealth creation despite increased volatility. If I have extra cash with no specific target, I dump the funds in my PRWCX position.
As for the question of how many funds to own, we own a total of 9 funds/stocks, but I see no problem with folks who own more funds, as long as they are excellent, relatively low cost and outperform their respective indices. Live and let live. As I will likely die before my fetching wife (not "partner"), I am focused on wealth creation, and I continually remind my wife that there is only one thing worse than being old, and that is being old and poor.
Kevin

Cash is an invest few talk about.

After nearly 35 years of declining interest rates, is it any wonder?
I guess we're all a product of our times. My first mutual fund was a money market fund. A nice cool 20% a year nearly risk free. What's not to like?
I understand where Ted is coming from. But in more volatile markets than we've witnessed recently, cash can also = leverage.