Several years ago (2009-2010 period) a discussion with a couple in their late-60's came into place. They were frugal with their expenses, had modest pension income, receiving SS and had been investors otherwise for many years. They were nominally smart about choices for their investment side of life, and had a good understanding of market movements.
They had decided to smooth the ride with the investment side and downsize the portfolio. They were not trying the "shoot out the lights" with oversized gains in the marketplace, but enough gains to offset inflation and have a decent return after taxation. The plus for them was ease of monitoring.
At the time, the discussion mostly revolved around the point at the time, that "economies" were still very much in a damaged zone from the market melt of 2007 & 2008. The likelyhood that low interest rates (central bank stimulus) would have to remain in place for an extended period of time, in particular from the damage done to the private sector budgets; the regular wage earners and their ability to spend into the economy.
The choice was made to maintain a U.S. centered, simple portfolio. One could place this portfolio into the consevative or moderate allocation, depending upon one's view of such a mix (50/50). At the very least, one can not argue that the E.R.'s are too high (.05%/.08%).
The results are listed below using VTI and BND; which will find this portfolio at age 5 years, this July.
--- 2010 averaged return = 11.89%
--- 2011 averaged return = 4.39% equity market melt in July
--- 2012 averaged return = 10.23%
--- 2013 averaged return = 15.69%
--- 2014 averaged return = 9.25%
--- 2015 averaged YTD = 1.76%
M* 5 year anualized to date = 10.31%
They remained pleased.
Take care,
Catch

Hi JohnChisum,
Thanks for stepping forward with your comment.
You are correct in your assumption that I Xray each sleeve to see how it is formulated and make changes within a sleeve, or sleeves, as I feel warranted.
Recently, I added another fund (#53) to my small/mid cap sleeve to get some foreign small/mid cap exposure that I felt was needed within this sleeve. I have found that it is easier to tweak changes by the sleeve over the portfolio as a whole. But, after I make changes within a sleeve I’ll then check the portfolio as a whole through Xray to see how the changes have blended.
While some may think that my high fund number count is way too high; it is what it is because it covers the holdings of five accounts not counting my bank accounts where a good deal of my cash is held. I have found my sleeve system to be a neat and cleaver way to combine it all together and know what one has. And, besides if one fund, or even a couple, fail to meet expectations then the impact is far less than one failing to meet expectations within a portfolio of say only a few funds. With my system if one fund in a sleeve falterns then there are the other two to five, perhaps six, to provide production and continue to propel the sleeve.
Although my performance for 2014 was not what I was seeking it boils down to my diversification. Sometimes diversification does that; but, my portfolio is designed to have something working most all the time. As a matter of fact I track it to see just how much of it is in the faster market current each week form a style, sector, and geographic orientation. Right now it is moving pretty well due to my foreign holdings as they seem to be moving faster than my domestic ones although domestic has had a few good weeks of late. In comparison, year-to-date I am up 2.7% while my bogey the Lipper Balanced Index (LBI) is up 2.3%. Last year I trailed my bogey but bettered it the three years prior. From my perspective, if I failed to better my bogey for a continued period of time and an on going basis then I'd be doing something wrong. With my system it is easy to make changes, monitor and measure against a benchmark. Most every sleeve has a benchmark with the exceptions being the cash and the specialty sleeves.
Where it has a rub, for a good number on the board, is that what I am doing is just not natural for those that seem to have issue with it.
It works for me; and, to me, that is what is of the upmost of importantance.
I wish all ... "Good Investing."
Old_Skeet

"I think that indeed could be part of it. For the past couple of years I have kept my bond funds within my own portfolio in funds that were either short duration or ones that leaned that way. One can easily see, at times, extended maturity bonds funds have done very well. And, with that, I missed a good part of the bond party."
I did the same as well. Live and learn I guess.

Hi JohnChisum:
I think that indeed could be part of it. For the past couple of years I have kept my bond funds within my own portfolio in funds that were either short duration or ones that leaned that way. One can easily see, at times, extended maturity bonds funds have done very well. And, with that, I missed a good part of the bond party.
And, I believe Morningstar is having problems. Currently, I am having a problem connecting to my portfolio. I surely hope they have not lost it as someone else reported a few weeks back.
It for sure, Dr. Tom is no slouch when it comes to investing and makes me wonder even more about Morningstar why they will no longer be adding his new newsletters to the historical of the others.
Old_Skeet

Hi Ted,
Thanks for you comment.
When I consider the number of accounts (five) that hold all these assets I think it is a neat and clever way to manage. Anyway, I have no desire to make changes at this time. The performance results on the overall package more than meet my objectives and fall within my risk tolerance plus the portfolio kicks off enough yield to more than meet my income needs.
I agree, it is not for everyone as my best friend runs with only two funds. A bond fund and a stock fund; and, he tweaks the percentage amount held in each from time-to-times as he reads the markets. Ocassionally, he will take a position in cash. Through the years it has worked well for him (but not me).
With this, I again say ... "To each their own."
Old_Skeet

Bought a bit of WOOD several years ago, I think about the time GMO recommended forests. Up 45+%, which is so-so, but it takes a while to make a tree. Don't know what I would do now. WY looks like it has a good dividend, but the rating services at TDA dislike it. The chart is steadily up, however. Will watch.
If Fido's New Markets Income counts, I was heavily in, but less so now. Out completely a year or so ago, but lightly in now and positive returns so far. Haven't had the nerve to plunge as I age.
VGHCX for > 10 yr; FBIOX has been good; peaking, but probably safe with Republicans controlling Congress. Looking around the sidewalks, health care funds have to do fairly well. The services can't be moved off-shore; the demographics can't be ignored; and cost controls won't be placed to any great extent.

There are a few CEF's on the London AIM exchange, but it looks like they haven't been run well (large discount due to poor earnings and risky assets). Forex is also a headwind. Operations are proving too costly and there are some legal issues. I think both are available at Fido. They provide more direct access to timber rather than paper products or mills. Okay, maybe I shouldn't have brought these up, but paper/wood manufacturing is different than timber.
Cambium Global Timberland (TREE.L)
Phaunos Timber Fund Limited (PTF.L)

I owned a little of the Cambium fund for a while a few years ago (there is a pink sheet share in the US). Would be nice to have a solid pure play on timber, but unfortunately, this just wasn't it. I can't believe it's down as much as it is since I sold it. I thought there was an activist shareholder in this at one point but I guess nothing came of it.
The best option I can think of in terms of something resembling a pure play is Acadian Timber (ACAZF.pk), which is owned by Brookfield Asset Management.

not going back. Had JATTX later morphed into JANIX for about 6-7 years and moved to vsmax @vanguard last year- after 1 year of change of guard

Hi @golub1
You noted: "Reversion to the mean works over the long term, but momentum works over shorter terms. How soon it fails and when to switch to another strategy is the great puzzler."
This statement pretty much sums the whole picture.
We are long term??? investors until we are not..... Some of long term holdings have been years (since the crash) and others sections have had a months time frame.
More than 25% of our current equity holdings are related to healthcare. This works until it does not, eh?
Thanks and take care,
Catch

Here's a study that indicates that when stocks are especially expensive, they tend to keep rising rapidly for a few years more... but then over 10 and 20 years periods the return is subpar.
http://seekingalpha.com/article/2934926-are-stocks-most-expensive-on-record#comment-48503146
I think the takeaway here is that mean reversion happens, eventually, but if you expect it to happen right now just because assets are overpriced right now you risk losing a big chunk of upside.
I'd bet junkster's techniques are far better for figuring out what to do right now.

@MFO Members: If you believe in GMO's 7-Year Real Return Forecast, I have a bridge for sale.
Regards,
Ted

Not just that but if you listen to *anyone's* forecast, 7 years or whatever. There are no "experts" in the forecasting or prediction business.
Edit: I played that game long ago when I was a losing investor/trader. The game that there is someone out there that knows where the markets are heading. So like so many I read all I could about the forecasts and predictions of the self proclaimed experts thinking I could somehow come up with an my own opinion based on the opinions of all those experts.

FYI: Small-cap value stock mutual funds have outperformed their core and growth counterparts over the past 15 years.
Their strength can be seen in what would happen to a $10,000 investment begun on Dec. 31, 1999. The average small-cap value mutual fundwould have turned that investment into $58,417 by Feb. 18 this year, according to Morningstar Inc. data.
The same sum placed in the average small-cap core fund, which invests in both growth and value stocks, would have increased to $49,822. Those investing in the average small-cap growth fund would be looking at $19,511. The S&P 500's result? $19,071.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTg5OTk3Njg=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=webLVpent.jpg&docId=740140&xmpSource=&width=847&height=899&caption=&id=740125

Hi all,
Seems my below comment will fit well in several threads.
This is how I played the low yield cash environment.
I closed out my money market and CD's years back after the yield's of each went next to nothing; and, I took up positions in a few short term bond funds with some of this money which is a part of my fixed income sleeve. You might say, that short term bond funds have now become high risk cash positions with me.
The low return on cash has effected my portfolio's overall return greatly as I use to be able to get a four to five percent retrun on my cash ... and, well, now next to nothing ... and cash usually makes up about 15% to 20% of my overall portfolio.
This has forced me to make some special spiff positions within the markets, form time-to-time, to help make some of my cash more productive. Thus far it has ... but, has not fully covered the prior yields of four to five percent once had. And, last year the spiffs were few and far between. I am still with the October 2014 Spiff with an average cost of 1905 on the S&P 500 Index. This puts this spiff thus far at about a 10.2% return. But, it would take a number of these to cover the full four to five percent yield I was earning on all of my cash since these spiff positions are much smaller in size than my total cash position.
I am wondering what you might have done to deal with this low return on cash environment?
Old_Skeet

Hi all,
This is how I played the low yield cash environment.
I closed out my money market and CD's years back after the yield's of each went next to nothing; and, I took up positions in a few short term bond funds with some of this money which is a part of my fixed income sleeve. You might say, that short term bond funds have now become high risk cash positions with me.
The low return on cash has effected my portfolio's overall return greatly as I use to be able to get a four to five percent retrun on my cash ... and, well, now next to nothing ... and cash usually makes up about 15% to 20% of my overall portfolio.
This has forced me to make some special spiff positions within the markets, form time-to-time, to help make some of my cash more productive. Thus far it has ... but, has not fully covered the prior yields of four to five percent once had. And, last year the spiffs were few and far between. I am still with the October 2014 Spiff with an average cost of 1905 on the S&P 500 Index. This puts this spiff thus far at about a 10.2% return. But, it would take a good number of these to cover the full four to five percent yield I was earning on all of my cash since these spiff positions are much smaller in size than my total cash position.
I am wondering what you might have done to deal with this low return on cash environment?
Old_Skeet

As mentioned in another thread, Gundlach is right more than he is wrong. I would take his word over a WSJ article that waffles on the question.
Output is increasing so that is good. The Saudi's hate it though. Too bad.

Oh I absolutely agree re: Gundlach. I wish he'd have a fund where he could invest in a broader manner than bonds, as he's actually made a number of good non-bond calls in recent years.
Perhaps Doubleline Global Macro is in order?

Doubleline has a multi-asset fund which invests globally. Gundlach is one of its managers, I'd presume he's handling fixed income. There's also a Doubleline growth fund run by another manager.

As mentioned in another thread, Gundlach is right more than he is wrong. I would take his word over a WSJ article that waffles on the question.
Output is increasing so that is good. The Saudi's hate it though. Too bad.

Oh I absolutely agree re: Gundlach. I wish he'd have a fund where he could invest in a broader manner than bonds, as he's actually made a number of good non-bond calls in recent years.
Perhaps Doubleline Global Macro is in order?

He sold JNJ couple years ago...its been up ever since and Hit over $100, again today,
Thanks warren

I never take the rental insurance. We were in a string of cars rear-ended by a freight truck while waiting at a stop light in Florida several years ago. Our rented Ford Focus was one of 3 totaled. Driver got a ticket for failure to stop in time - nothing more. Florida law is no-fault. Can't even sue unless you die or are permantly disabled. We were shaken but walked away.
Budget rental was great. Had another vehicle at the accident scene in half an hour. Sent us a bill month later for well over $20K. Our Michigan insurer negotiated price and than paid off claim. No separate rental coverage on policy - but agent had previously assured us we were covered. Also waived the deductible.
Policy only includes this protection as long as we maintain full coverage on one vehicle. Were we to discontinue collision (just carry PLPD), would not have rental coverage. There may also be a limitation on that coverage up to the value of our insured auto. Can't seem to get a straight answer from agent on that one. We learned our Visa card at the time also carried rental car protection - as long as we rented with it. Not sure if that's still true.

Yes, I remember those small stall-stores all over the place, with those names there even fifty years ago.

Question: Perhaps I'm wrong, but I was under the impression that Buffet no longer personally made the decisions for the stock holdings of Berkshire. He still works directly on Berkshire's acquisitions of whole companies as well as other special situations, but he's assigned other people to work the stock market for him. Is this so or am I hallucinating again?

Buffett definitely makes decisions, but I believe a fairly significant amount of money has been farmed out to the two newer managers. It remains to be seen who is next in line to replace Buffett, although possibly some hints of that will be in the "next 50 years" letter (which I think was supposed to come this month?)