Over the years I have been using a high % in one of the following funds NHMAX ORNAX OPTAX PHMIX by using momentum.

My HY Munis fund opened the year with a bang (already 0.7+% in just a week). All my taxable is invested in that fund. Time for me to add more money to HY Munis in IRAs, just like I did last year because it's better than Multisector funds.
See YTD (chart)

Both have loads which rules them out on principle for me. The Alger fund is closed. I like them both but prefer WAMCX because it has 15% in micro caps.

By Tom Nations, CFP 1/7/2020
"The United States-China trade conflict roiled global supply chains and equities, but a de-escalation in the latter half of the year spurred optimism. Dovish central banks drove global interest rates to low-to-negative levels, making equities look good relative to fixed income. As investors grew more sanguine about macroeconomic and geopolitical issues, the MSCI All Country World Index ex USA rose 21.5%. Developed equities outperformed their emerging counterparts, with the MSCI EAFE Index's 22.0% gain besting the MSCI Emerging Markets Index's 18.4%."
More Here

The Section 199A income shows up in box 5 of your 1099-DIV. Add these all up, take 20%, and enter it in 1040 line 9 as the qualified business deduction (QBI).
There are worksheets for doing this calculation, but if all your QBI is from REITs, that's about all there is to it.

That would enter into a discussion of whether index funds are really transparent (many track proprietary indexes), whether this matters, etc. See, e.g. M*, The Most Over- and Undersold Benefits of ETFs, and Swedroe, The Problems with Index Funds.
I was simply addressing the comment that the fund is opaque. Its practices and use of derivatives seem rather transparent (IMHO moreso than many funds); its bond holdings and the equity index it is tracking are not. Why those aspects are opaque is a different question. One worth asking, just different.

See below. For those of us that happen to own REIT mutual funds in non-retirement accounts, how exactly does this 'advantage' work, when we file our taxes? Thanks.
https://www.fa-mag.com/news/tax-reform-makes-real-estate-investment-trusts-more-attractive-53448.html
FAMag: Tax Reform Makes Real Estate Investment Trusts More Attractive
January 6, 2020 • Jeff Stimpson

... According to the IRS, income from a REIT in a mutual fund will be considered QBI, Cordes said, adding that this deduction is available for all shareholders regardless of their income level or whether they itemize or take the standard deduction.
REITs once had a worse reputation regarding taxes—a bias that lingers even after tax reform. “Most high-net-worth clients are not aware of the additional tax benefits afforded to them for REIT investments created by the TCJA,” said Davin Carey, senior wealth advisor of Carey & Hanna Tax & Wealth Planners in Oxnard, Calif., and a representative of Avantax Investment Services.

DSENX seems like a pretty straightforward fund. It has 200% exposure to "the market", or if you prefer, 100% exposure to the US equity market and 100% exposure to the bond market.
IMHO the major risk is that it is effectively 100% leveraged. How it achieves that leverage (which happens to be via total return swaps) is secondary. In essence, the swaps give it 100% (notional) exposure to the CAPE index for virtually no cash. So it is free to deploy its full NAV investing in bonds.
The aspects of this fund that I find opaque are not its use of derivatives, but rather that:
- I can't find what four sectors it is effectively invested in until after the fact; is there a real-time source of what's in the CAPE index?
- the bond portfolio is actively managed in a way I haven't discerned.
It behaved in the 4th quarter of 2018 about the way one would expect. It didn't deviate much from CAPE, so you can figure that the small differences were due to its bond exposure moving in small but mysterious ways. From M*, comparing DESNX to CAPE (NAV):
Oct 2018: -8.38% vs. -8.17%
Nov 2018: 1.42% vs. 1.53%
Dec 2018: -9.00% vs. -8.62%
Aside from overhead, it looks like the bond portfolio dragged down the return by about ½% over the quarter. Given the opacity of that part of the portfolio, a small drop while AGG was rising 1.62% shouldn't come as a shock. For example, PIGIX dropped 0.17% in that quarter.
As to the risk in total return swaps, it depends on how they're used and for what purpose (defensive or to enhance returns). VWELX, hardly an aggressive fund, may use these swaps:
"[VWELX] may also invest, to a limited extent, in derivatives. ... The Fund’s derivative investments may include ... total return swaps, and other types of derivatives. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns."
DESNX uses derivatives for the purpose of leveraging (magnifying) investment returns. Again, it's not the derivative per se that is the source of much of the risk so much as how it is used. Regardless, DoubleLine makes it pretty clear how the swaps are being used. In this sense, it's a fairly straighforward fund.

I understand the methodology DSENX uses but I can't figure out what percentage it holds in fixed income as ballast. With a yield of almost 2% it must be some, but if so why did it drop almost 20% fall of 2018? I tracked the SP500 almost point by point

not following your last thought (underlined by me) --- if its goal is to mimic SP500 but w consistently added value, is this behavior not a good sign and what we want?

I understand the methodology DSENX uses but I can't figure out what percentage it holds in fixed income as ballast. With a yield of almost 2% it must be some, but if so why did it drop almost 20% fall of 2018? I tracked the SP500 almost point by point

This list is close to David's January commentary review of funds downside deviation. I looked at that in some detail and have the following two cents
1) AKREX concentration in several industries (20% MA and V) is concerning. A lot of it's outperformance was in the early years and it is similar recently to another fund that just missed the 10 year cutoff (see below), POLRX. Still AKREX seems to have accomplished this with a large chunk of cash onboard ( at least now)
2) FVD has six times the utility exposure of the larger market. Utilities have been o a tear but should they really be at 20 times earnings?
3) For folks who are willing to accept less upside for half the downside risk, MOATX and VWINX are stellar alternatives. Especially VWINX but I worry now that it’s 70 % bond position will not provide the ballast that allowed it to sail though 2008 with a maximum DD of only 18%. What happens when we get inflationary pressures and the bond market collapses? If it is because of increased growth the equities will make up but if it is due to our debt bomb…
5) I got scared off by DSENX opaqueness. A fund that just missed David’s 10 year cut off for his commentary is POLRX and it beats DSENX in almost every category, Upside/Downside ratio 1.24 vs 1.08, DSDEV 6.3 vs 7.4, APR 15.2 vs 15.1, MaxDD 12.8 vs 15.4. Ulcer Index 3.1 vs 3.3 Martin Ratio 4.6 vs 4.2. POLRX investment philosophy is clear and understandable although it has had the wind very much at it’s back in the last several years. Even so POLRX lost less than DSENX (14% vs 18%) in the fall 2018

https://www.fool.com/investing/2020/01/05/oil-stocks-3-bold-predictions-for-2020.aspx
Oil Stocks: 3 Bold Predictions for 2020
After another challenging year in 2019, this could finally be the year that the oil market breaks out.

Thanks for the article, John.
Some of their figures seem incorrect, though. I'm dollar cost averaging into PRHSX and the 1, 3, and 5 year returns in the article are way off as of Nov. 12, 2019 (which was about half way through the big run up since October). From 01-01 to 11-12-2019 PRHSX had actually returned 18.03% . I wonder if it's an old article and they hadn't updated the figures?

David, regarding Yacktman's $100,000 minimum purchase at Fidelity Investments, for an IRA account, although it says $100K min purchase, when you actually make the trade it states $25K min purchase.

Right. Sequence of returns risk is greatest at year 1 of retirement, generally the first 10 years or so of retirement have the major risk (decreasing yearly). The 5 or so years before retirement is also very significant in determining amount of portfolio available for withdrawal. During this 15-year period, be very diversified and if you don't maintain a consistent asset allocation (say, 60/40), be more conservative in this period.

MikeM "I don't know if <10 is the correct number or if it is 15 or even 20. But at some point you do dilute good managers or funds with not so good ones. And what typically goes with fund collecting is fund switching, translated, buy high and sell low. Just adding 2 more cents to what you said."
+1, more funds generally means more trades and more trades usually mean lower performance.
1995-2000 I invested mostly in one fund, US total index after I read Random walk
Since 2000 and after I started my best risk/reward funds, the max is 8 funds.
In the last several years it's 5 but many times just 3-4 funds. There is no reason for me to own my second best ideas but I also trade more often than others by being invested most times at 99+% and playing momentum. I don't recommend or promote it for anybody.
Over the years I helped many and I usually use 5-6 funds with 1-2 changes annually.
For investors who really want to be buy and hold investors, I would recommend indexes and/or Wellington funds (VWIAX,VWENX,VWEAX) because who knows what will happen 10-20 years from now, the expense ratio is very low and these are unique conservative funds that are managed by a group and not star managers.

Hi, David. Shiller had an article in today's (1/5/20) New York Times, if you're interested. He explains the rationale for the Shiller CAPE, notes that it's at its 3rd highest level in history (1929, 1999) and talks a bit about "animal spirits" as an explanation for it.
He makes the old-guy-with-a-PhD (my people!) argument that we increasingly devalue evidence in favor of "trusting our gut." Maybe. I was intrigued to learn that phrases like "gut reaction" only date to the 1960s and 1970s but I'm not sure that the underlying idea is as new as Dr. Shiller assumes.
Hi, gmarceau. "There are 11 industry sectors in the S&P 500. The CAPE index ranks them from most expensive to least expensive, based on their 10 year earnings history, and invests in the five least expensive sectors." It's certainly a bit more complex than that, and DoubleLine implements the strategy with derivatives rather than direct investment, but it doesn't strike me as terribly complex. Some critics think the bigger question is whether there's useful information in a sector's 10 year CAPE. I haven't much looked at the question, though perhaps the other David has?
David

I like your comments @FD1000, especially this one:

7) Don't collect funds, the max funds you own should be under 10 and your best ideas

I don't know if <10 is the correct number or if it is 15 or even 20. But at some point you do dilute good managers or funds with not so good ones. And what typically goes with fund collecting is fund switching, translated, buy high and sell low. Just adding 2 more cents to what you said.

@Mark
FBALX - Asset Allocation
Rel Vol of 0.73
2019 - 2.4% in Dec 24.4% for year 11.6% for 3 yr. 8.4% for 5 yr 10.0% for 10 yr
I would call it a keeper - If I had a spot!
M* LISED AS 5 STARS
LISTED MANAGERS:
Douglas Simmons
since 9/9/2008
Pierre Sorel
since 9/9/2008
Robert E Stansky
since 9/9/2008
Steven Kaye
since 9/9/2008
Brian Lempel
since 4/10/2013
John Mirshekari
since 10/22/2016
Nicola Stafford
since 8/3/2017
Jody Simes
since 11/8/2019
Ashley Fernandes
since 1/1/2020
Melissa M Reilly
since 1/1/2020

several comments:
1) I believe and can prove it that in most cases you want to own stock funds + bond funds because bond funds is where you find managers who can add performance + better risk attributes.
2) Stocks are simpler, you must own US LC and VTI/VOO is just a great, very cheap and will beat most managed fund longer term. This index also gets over 40% of its revenues from abroad
3) For about 20 years now my specialty has been to find the exceptions
PRWCX-this is the only allocation fund I would use. The managers use a flexible mandate + use several categories + making the right decisions for many years and why performance is in the top 1-3% for 1-3-5-10-15 years.
DSEEX-First, managers invest in global bonds then, they look at 11 US stock sectors and select 5 undervalued sectors, then take 4 sectors out of 5 with the best momentum. They don't invest directly in the index but in a derivative that is similar to the index.
Basically, you get 200% investments for the price of 100%. You get real bonds + derivative of stock indexes.
To make even simpler, let's assume they invest in just one sector SPY and assume the bond portion makes 3-4% annually. It means, the performance will be SPY + 3-4% - (paying for derivatives).
USMV/SPLV-low volatility funds work. PV(link) shows that you get similar performance with better risk attributes
4) For over 40 years high tech is where you will find the best opportunities and growth and now they own the world and this is the biggest category in the SP5500. So, why not just own QQQ which BTW gets over 50% of its revenue from abroad.
5) If you want to diversify abroad I don't like generic indexes. I like to make a bet that EM is where I want to be but not in Europe.
6) For bond funds, I have many great options and I mentioned many of them at my thread (https://www.mutualfundobserver.com/discuss/discussion/54803/bond-mutual-funds-analysis#latest)
7) Don't collect funds, the max funds you own should be under 10 and your best ideas.
Putting it all together and I can see VOO,PRWCX,DSEEX,QQQ + IISIX,VCFIX,IOFIX,PUCZX (you may need higher rated bond funds as ballast). Depending on goals I can make adjustments.

A thickhead query -- where are these data coming from?
I am scrutinizing MFOP and not seeing anything capture when you click a fund and get its individual sheet, and then when you compare three funds and side-scroll to capture metrics I see up cap % sp500 and ditto for down, 80 and 64.9 for YACKX, say, but no
Yacktman (YACKX ... )
Capture 1.22
Downside capture 0.71

visible, and nothing when searching for .71.
(Am trying to see how bad downside for DSEEX is, why it gets to little attention in these respects.)

David, DEESX is a ticking time bomb. Just like the Pimco Stocksplus funds, I’m not sure anyone can explain in plain English how these portfolios are constructed.