As MFO reports, Meridian Equity Income Fund is changing managers. Minyoung Sohn is taking the reins. He apparently earned a good but short record [3 years] with Janus Growth and Income.
I’ve been invested in this small Meridian fund since the day it opened. My investment has more than doubled, and I liked the conservative value approach of its experienced managers [the same people who manage Meridian Contrarian Fund, formerly Meridian Value Fund].
I’ve experienced many manager changes over the years [always an unsettling experience if you had confidence in the founding managers. The most distressing was when Michael Price sold his Mutual Series funds to Franklin Templeton].
The first result of this change at Meridian Equity Income is that the fund almost immediately issued a large capital gain. This occurred because the new manager sold a large number of holdings so he could invest in stocks that meet his different investing style. I suspect the distribution was made early [before December] to prevent existing shareholders from selling the fund in an effort to avoid the large capital gain distribution. [Fewer shareholders to share the taxable gain obligation] [Last year, Meridian Growth Fund also sold a large portion of its holdings as its new managers implemented their investment style].
The second result of this change of managers is that my money will now be invested in a more growth than value style.
I plan to keep my money in this small fund and give the new manager an opportunity to impress me. But these manager changes may be an argument in favor of investing in ETFs.
Does anyone have any thoughts about Minyoung Sohn?

Good stuff. Thanks Ted.
I think one reason my Roth has outdistanced my Traditional IRA over the past 5-6 years is that I leave it alone and seldom, if ever, "tinker" with it. I don't know if that strategy works under all market conditions, but it has worked since early '09.
One lesson from Hussman may be that the harder we work to get something "right", the more apt we are to get it wrong. I guess you could say this guy has "written the book" on screwing-up. So sad for all those investors who sent him their money over the years,

There was the article not that long ago that said that Fidelity found that some of the customers who performed best were the accounts that had not been touched for so long they were deemed forgotten.
http://www.businessinsider.com/forgetful-investors-performed-best-2014-9

Yikes! No thanks! Some years back, T Rowe Price started an African fund. Sounded interesting, lots of interesting sales literature, Price has conservative reputation, what could go wrong? So I invested. Lost more than 50% in the blink of an eye, until I was unable to sleep at night and couldn't digest my breakfast. Sold it and took the 50%+ loss. Too risky for me. [Please don't tell me the fund has gone up 10,000% since I sold, I can't stand the pain.]

Good stuff. Thanks Ted.
I think one reason my Roth has outdistanced my Traditional IRA over the past 5-6 years is that I leave it alone and seldom, if ever, "tinker" with it. I don't know if that strategy works under all market conditions, but it has worked since early '09.
One lesson from Hussman may be that the harder we work to get something "right", the more apt we are to get it wrong. I guess you could say this guy has "written the book" on screwing-up. So sad for all those investors who sent him their money over the years,

Nice post msf. It looks like neither the Vanguard 500 Index fund VFIAX nor the Vanguard Total Stock Market Index Fund VTSAX have had any capital gains distributions in the past 10 years
Source: https://advisors.vanguard.com/VGApp/iip/site/advisor/investments/price?fundId=0540#state=30
And the tax cost ratio and tax adjusted returns for VTI (Vanguard Total Stock Market Index ETF) and VTSAX (Admiral shares, Total Stock Market Index Fund) were just about identical over 1, 3, 5 and 10 years, per Morningstar.

They are clones now, since DuFour, the manager of Focused Stock, took over Fifty four years ago.
They weren't before, and Fifty has the poorer record. A record that will be lost to the ages.
Also, despite the somewhat lower AUM, Fifty has the lower ER, so shareholders will be losing a few basis points to higher costs. Some of that is likely due to Fidelity having performance-based management fees - the poorer performing fund will have the lower management fees. Another reason for merging Fifty into Focused Stock.
I'm not saying that any of this doesn't make sense - Focused Stock is the larger fund, the manager has been there longer, he's taken FIfty's fund and made it mirror that of Focused Stock. It's just curious how it always happens this way - the fund with the poorer record and/or lower ER gets merged into the other fund.

Sometimes ETFs are not more tax efficient.
Vanguard Admiral class shares and ETF class shares are identical in tax efficiency. Vanguard Investor class shares, which are a poorer choice, are inherently more tax efficient.
For example, for the Vanguard 500 fund, its admiral share class (VFIAX) and ETF share class (VOO) have 1 year tax cost ratios of 0.83%, and 3 year tax cost ratios of 0.57%. (VOO doesn't go out five years.)
VFINX, the investor share class, has corresponding tax cost ratios of 0.78% and 0.53%.
The reasons are twofold:
1) These are different share classes of the same (not merely identical) portfolio, so they share equally in the realized gains.
2) Interest and dividends of the underlying stocks are used to pay the ERs. So the higher the ER of a share class, the less that is distributed in the way of income dividends. That means that the higher the ER, the higher the tax efficiency (lower dividends).
It's the same idea as hoping a fund will have small distributions because it made little money. Not something to be hoped for.
Admiral shares and ETF shares currently have the same ERs, so they'll have the same tax efficiency. All else being equal, the ETF will lose a little bit on a round trip, because of the bid/ask spread that is absent from the other share classes.

QVAL is the subject of a big article in the December issue. As I've been an investor with Alpha Architect, the manager of QVAL, I wanted to take a moment to endorse the ETF. I've had a SMA with Alpha for close to two years. Due to regulations, I assume Alpha was not allowed to use the SMA figures in any QVAL documents but there is no prohibition against my doing so. The account I had that used the same approach that QVAL is using outperformed the S&P 500 after management fees by several percent during the period I was invested. I have transitioned my SMA to QVAL because of the superior tax efficiency of the ETF structure. If you really want to do a deep dive into the inner workings of the strategy, read Wes Gray's Quantitative Value book. AA are good people and I'm writing this as an MFO subscriber that wants to see QVAL succeed so that I'm not caught up in a fund liquidation if it were forced to close due to not enough AUM. I don't think that will be a problem because I believe in the long run it will outperform its benchmark and there are very few funds that actually do that. OTOH I wouldn't want it to get so successful that huge AUM interferes with their ability to execute the strategy! However, the inevitable stretches of underperformance will probably prevent that from happening. So I encourage you to look into QVAL unless you're looking to invest a billion dollars. If so, please don't ruin it for the rest of us!

M* Lizzie: "Thank you for your patience and understanding."
Nothing against Lizzie, but that's been M*'s plea for years. These problems persist at M* - sometimes fixed for a few weeks or months, but always returning, a la MacArthur - and are the reason I finally gave up portfolio tracking there in 2010. I hope folks posting here don't wear themselves out or get too frustrated, or think that they're the first to try to assist M* in fixing their broken feeds. They may patch them together for a short time yet again, but they always break, yet again.
Good luck, AJ

-Morningstar Reply referenced above
" I do really apologize for the inconvenience and that I do not have a resolution at this time, but I can assure you the problem is being worked on, and I will reach out as soon as I have some more information.
Thank you for your patience and understanding."
Best regards,
Lizzie
-------------------------------------------------------------------
SAME OLD - SAME OLD --- I have heard this tired old refrain from M* reps.
------FOR YEARS !!!!!!!!!
ralph

FYI: U.S. stocks closed higher on Tuesday as investors welcomed stronger-than-expected construction spending figures for October as well as robust car sales data. November car and light truck sales were second-highest in eight years, according to figures from Autodata.
Regards,
Ted
http://www.marketwatch.com/story/us-stocks-rise-dow-closes-at-record-2014-12-02/print
Bloomberg Slant: http://www.bloomberg.com/news/print/2014-12-02/u-s-stock-index-futures-are-little-changed-after-s-p-500-slips.html
Markets At A Glance: http://markets.wsj.com/us

Hi Davidrmoran,
Thank you for your reply. I originally thought that you indeed dropped a “not” in your opening statement.
Apparently that was not the case, and you provided 3 references that purportedly support your memory of their writings. As President Ronald Reagan said: “trust, but verify”. As a matter of personal policy, in most instances I do try to verify, even my own flawed memory.
In the financial universe, almost nothing is totally black or white, but rather varying shades of gray that change over time. Diversification mostly works well, but does suffer from shortfalls and application limitations. The market experts mostly rate it a net plus when scoring the advantages and the disadvantages.
The three articles that you referenced do discuss both the merits and the hazards of diversifying, especially in the International marketplace. But your choices were somewhat puzzling. Their bottom-lines strongly agree with the position that I presented; most recently, correlations, particularly International ones, have collapsed towards the perfect correlation One level. That tends to neutralize the benefits of holding international elements in a portfolio, but does not completely eliminate their advantages.
In the Michael Schmidt article, he concludes that: “There has, however, been a trend of increased correlation between the U.S. and non-U.S. markets.” That’s precisely the thrust of my comments.
In the first John Waggoner article, he says: In “The past five years, Lipper's large-cap core international and large-cap domestic core indexes have a 94% correlation.” The Vanguard study shows that was not the situation 10 and 20 years ago.
In the second John Waggoner article he asks and answers as follows: “Is it time to re-think diversification strategies? No. But it's a good time to make sure you're really diversifying your portfolio.” In another section, he says: “And diversification is a good strategy.” Still further in the reference: “Foreign stocks tend to move in lockstep with U.S. stocks these days — particularly when the markets are down.” Again, this column really reinforces the arguments that I offered.
Enough! Your references added depth to the Harry Markowitz academic findings that diversification is important when assembling an efficient and effective portfolio. Any correlation coefficient between two components below “One” helps to lower the portfolio’s overall volatility (standard deviation).
That’s goodness to enhancing compound returns over the years, dampening negative market swings, lowering the odds for a losing annual return, and influencing an investor to control emotions to stay the course. Diversification does not eliminate risk from the marketplace; it does help to manage it.
Time to move ahead now. This is a minor matter that has likely wasted too much of both your valuable time and mine. Memory should never be fully trusted.
Have a great Holiday season. Best Wishes.

Hi Davidrmoran,
I too am not now a financial advisor client. I did use one in the early 1960s until I realized he had more incentives to churn my portfolio rather than increasing its value.
I recognize my personal experience is not universal, and the financial advisor industry can and does provide useful services for many customers. They educate and hold hands for those with weak stomachs or itchy trigger fingers. To paraphrase a Charlie Munger observation: As a money manager, he has experienced 50% drops 3 times in 50 years. The market is always 2 steps up and 1 step back. If you can't handle the 1 step back you shouldn't be in the market.
I suspect you suffered a dyslectic moment (it happens to me too) in your opening statement: “If you examine correlation history, and not just recent, global markets very often do not provide much diversification.” I remembered the data with just the opposite impact. So I checked to verify.
I used Vanguard as my primary historical data source, and updated their data summary and analysis with work I completed using Portfolio Visualizer.
Here is the Link to the Vanguard study titled “ Considerations for Investing in non-U.S. Equities”:
https://personal.vanguard.com/pdf/icriecr.pdf
The report was released in March, 2012. It concluded that although correlation coefficients have closed towards a perfect correlation of One value, diversification still mitigates individual investment class volatility and contributes towards end wealth. Vanguard concluded that a 20% to 40% foreign holding equity position had merit. Beyond the 40 % level the law of diminishing returns took hold, and in fact, acted to retard the portfolio.
Correlation coefficients are highly volatile entities. Just observe the noise like signal of the 1-year data and contrast that against the 10-year signal like data, both displayed in the Vanguard 15 page report. The data is given for many foreign Countries. It clearly demonstrates lower correlation coefficients in yesteryear with a definite tendency towards closure recently. In yesteryear, the correlations resided in the 0.4 to 0.6 range; today, those correlations are North of 0.8.
Since the Vanguard data ended a few years ago, I updated it with an analysis I made using the Portfolio Visualizer website source. Here is the Link to the Portfolio Visualizer Asset Correlation toolkit:
http://www.portfoliovisualizer.com/asset-correlations
When I said “global market diversification” I meant it in its most general sense to include all categories of asset class options. I updated the Vanguard study by examining the more recent correlation coefficients among the S&P 500 (VFINX), the total Bond market (BND), the FTSE (VEU), Emerging markets (VWO), and REITs (VNQ) as an incomplete set of primary holdings. I did mix mutual funds and ETFs since they reflect my current positions.
I had the Portfolio Visualizer compute correlation coefficients for 1, 3 and 5 years of the most recent data. Results bounced around, reflecting the unstable nature of correlations. The Bond asset retained a negative correlation against the equity holdings. The equity correlations were in the high range, very similar to the quoted Vanguard data sets with one exception. The 1-year Emerging markets correlation with the S&P 500 reverted backward to a 0.66 value.
Sorry for this detailed examination, but I felt your opening statement needed further clarification. Perhaps we are using different definitions for the short-term and the long-term. Timeframe disparities cause investment misunderstanding and need careful definition. Unfortunately, by selectively choosing timeframe, almost any position can be supported with a prudently screened data set. Statistics must always be fully scrutinized.
We agree that the article could have been more meticulously researched and more comprehensive. The cautionary “reader beware “ is warranted here.
Best Wishes.

@00BY: Here's what Steven Goldberg of Kiplinger has to say about Stephen McKee.
Regards,
Ted
http://www.kiplinger.com/printstory.php?pid=9293

That was 2 years ago. Old stuff and McKee hasn't done well past year. Waste of money.

"There is also another consideration in this as companies like GE have a healthcare component within them but they are classified differently. Toshiba is another company like that as well as Siemens. The latter two are not SP500 companies but I added them for examples. There may be others."
The problem - as you noted - they are classified differently and also, they trade like industrials rather than healthcare companies. I haven't looked at what % of GE's business is healthcare lately.
"The bigger question might be at what point does an investor have too much in healthcare?"
As noted above by Ted, healthcare makes up around 18% of GDP. Not only is that an enormous figure already, but - as noted above - it's predicted to grow faster than the economy for the next several years. With the idea that people have to buy health insurance or effectively pay a tax, certainly a tailwind for healthcare. You're seeing more in the way of organic growth with healthcare, as well, not all buyback/financial engineering a-la IBM.
The other aspect of healthcare is that there are a number of themes at work, including an aging population and unhealthy lifestyles that persist for many reasons (I mean, look at the chart of NVO.
http://finance.yahoo.com/echarts?s=NVO+Interactive#{"range":"max","scale":"linear"}
The question for me is when does government turn around and say, "enough is enough" and try to regulate costs that are spiraling out of control. If they crack down, then things change in a hurry. I just don't think that's going to happen as no actions from the government thus far would lead me to believe that they will. I mean, they're corporations, so for the last decade they're the ones who have increasingly been catered to and looked after by government in this country.
Until then, I think one has to have a good deal devoted to healthcare and preferably specifically healthcare. There is a point where it starts eating away at discretionary spending, as well - does health insurance start moving higher to the point where people skip that latte?
The question of how much do you need in healthcare - I dunno, for me, I think it's a broader focus on "needs" (which certainly includes healthcare) over "wants".

@catch22, and others;
I previously commented that the healthcare component comprised 12% of the S&P500 index. That is confirmed here, http://www.bespokeinvest.com/thinkbig/2013/3/11/historical-sp-500-sector-weightings.html although the data is two years old. I don't think there has been that much of a change.
As for returns, the healthcare sector within the index has returned 25% YTD. This from the Yardeni research. http://www.yardeni.com/pub/PEACOCKPERF.pdf
So anyone holding the SP500 index has a 12% exposure to healthcare already. The missing part of that is biotech. There might be a bit of that in the index but I think it is mostly comprised of big pharma etc. Is it still a good idea to throw an additional 5% of the portfolio into healthcare exclusively? I think so and with that you get the biotech components which are the big returners this year and I think for the future. As I have said before, I like "future stocks". There is also another consideration in this as companies like GE have a healthcare component within them but they are classified differently. Toshiba is another company like that as well as Siemens. The latter two are not SP500 companies but I added them for examples. There may be others.
Edit: Look at Fig.10 of the Yardeni link that breaks down the healthcare sector further into subsections and biotech is the leader at 35% return YTD. The others are not chopped liver either.
The bigger question might be at what point does an investor have too much in healthcare?

Hi @LLJB
You noted: "I have a question for you related to your points here and in another post about not investing less than 5% in "whatever" because it takes that to make any difference in your portfolio. I agree with you but I also realize it can depend on how you define your "whatevers". For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count? And if not, how do you decide which "whatever" things get allocated to?"
>>>What I posted in another thread: Our house remains U.S. centric in the equity area, gathering whatever international exposure from the fund holdings. The only direct exception being, GPROX; at this time.
A serious consideration going forward is to maintain VTI / ITOT or similar holding for 40% U.S. equity exposure and PIMIX (our largest bond holding) for bond exposure, also at 40%.
The remaining 20% would be allocated to "other", as determined by market observations. Currently, this would be the healthcare sector. Any of these holdings would be subject to change, not unlike June of 2008, as previously noted. None of the 20% floater money would hold less than 5% in any one area; as too little forward appreciation could likely be the result. This could mean, however; that more than one fund could result in a given market sector.....i.e.; energy; to provide the 5%.
Regarding the 5% consideration for the "whatever" money.
The 5% minimum I personally use is for investments I consider favorable for my risk/reward tolerance; and that present what appears to have a decent capital appreciation potential.
This is relative to what I noted above; with maintaining 40% in each for VTI and PIMIX. Healthcare holdings are about 14% of VTI. This would meet my needs, if I wanted at least 5% in healthcare (14% of 40% of the total portfolio).
Obviously, 40% each to VTI and PIMIX indicates a major part of a preference for an overall portfolio, and is U.S. centered with the exception of non-U.S. companies within VTI, or more so, the earnings of U.S. companies generated outside of the country. So, one could weakly argue some foreign exposure.
Now, what to do with the other 20%? Cash at this house has been some form of bond holding. If we want to buy something else, we always have to sell some of a bond fund for the transaction (at least as of today :) ).
This is the part that generally has the consideration for the 5% to make any difference; for the investment to be worthwhile to the overall portfolio. Usually the 5% is purchased at one time. Although, I think it is fine to average into a holding, too. But, I if averaged into a particular holding; it would likely be within a one month time frame.
Today, with 80% of a portfolio in the above two holdings; this would be the mix for the remaining 20% if split 4 ways: GPROX (although now closed), FRIFX (conservative, decent performing real estate), GASFX (utiliy/energy) and FSPHX. Or the whole 20% into FRIFX , GASFX or FSPHX.
This is obviously a lot of fiddling around with a portfolio. With enough choices, one may also consider 20% into 5 balanced/conservative allocation/moderate allocation funds or etfs to spread manager risk. I note this as one balanced fund with a very nice return record for several years is in the tank this year....... VILLX is running a negative return YTD. Lots of folks with this fund who are not happy. We do not hold this fund, thankfully.
>>>You also noted: "For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count?"
PRHSX is a sector fund and that is the only way I view such a holding. It is a special consideration; separate from a LC, MC, SC, growth or value equity. Such a fund could be a combination with tight restrictions from managers; such as a small cap healthcare fund, but it is still a dedicated sector.
>>>Also noted: " but when you think about your 5% threshold, do you double count?"
I will presume you mean overlap within holdings to form the 5% threshold. Yes.
I write singular here; but the portfolio is a household portfolio. At one time we both had several 401k/403b from investment vendor changes over the years. Early in 2009 we wanted a high percentage exposure to the HY bond area. We had about 45% of our portfolio invested in this area at one time, split among several investment houses within the retirement accounts. The same would apply to 1% from here and another 2% from somewhere else to meet the 5%.
I have not checked, but I suspect many broadbased equity funds have fairly high percentages of healthcare holdings. Depending upon your funds, you may have a fairly high overall percentage of healthcare.
In theory for some, is that diversification helps ease the pain when the markets are "mad". One could suppose finding 20 investment areas and givng 5% to each. I'm not convinced this method is of value.
I probably missed something with this long write; which was not intended to be this chatty.
Like me know about clarity; as it is too late at night for me, today.
Regards,
Catch

David,
Wasatch Funds, which provides granular detial were the first that came to mind, I have their WAGTX fund, here is a quote from their latest quarterly summary:
"We’re glad that despite a rough final quarter of the fiscal year, we were able to do a little better than preserve the exceptional returns that the Fund achieved over the prior several years. Today, while it could be argued that we’re winning based on the entirety of our performance, it clearly feels like we’re losing—mostly because we just finished a quarter and fiscal year in which the Fund underperformed the benchmark."
It certainly is no surprise Grandeur Park also provides detail, as they came from Wasatch.
For the rest of It:
https://secure.wasatchfunds.com/Our-Funds/Commentary.aspx?fund=WAGTX

@mcmarasco: Here's what Nellie Huany at Kiplinger had to say about health care funds back in September.
A revolution is under way in health care, and it’s not too late to cash in. Scientific advances are changing the way drugs are developed and creating a torrent of new treatments. By making insurance available to millions who previously couldn’t buy it, Obamacare is fueling demand for health care products and services. And, oh, by the way, we’re not getting any younger.
Put it all together, and this colossal sector is likely to keep growing faster than the overall economy. Health care spending in the U.S.—some $3 trillion a year—accounts for 18% of gross domestic product. The government predicts that the figure will rise by an average of 5.8% annually over the next eight years, slightly faster than the growth of the overall economy. That’s reason enough to make a long-term commitment to health stocks, but it’s not the only one. Three trends are dramatically changing the health care system, creating plenty of opportunities for investors.
Regards,
Ted

Howdy @mcmarasco
The below linked chart lets you look at about 3 years of numbers. You may move the days slider to the left or right for a different day span.
Review will likely find that most of the broadbased healthcare funds tend to move/track the biotech area. 'Course, all funds will have some variation as to the percentage of exposure to any of the health care sectors within that fund.
We added to the healthcare area in October when the market moved down a bit.
Others have noted, and I agree that it is an investment area that should sustain itself. Of course, this sector could cycle downward somewhat with a stronger selloff of broad equity areas.
Which decent funds your have access to, may be of some consequence; be they active managed or etfs.
M* health funds category list
bio etf & 3 active managed funds chart
Regards,
Catch