I couldn't find a previous MFO topic link on this (I believe linked by @Ted), but here it is from the horse's mouth (or the other end if this strategy doesn't work out):
https://researchaffiliates.com/documents/586-The-Emerging-Markets-Hat-Trick.pdf

I am sorry to hear about your health. There are lots of good suggestions already. My 2 cents. I think it is possible to put together a 4% yielding portfolio without stretching. An early retiree usually needs to have more equities to get a little growth to make sure you don't outlive your money and to provide inflation protection. Think definitely more than 50%. If you can offer up how many years we should plan for it will be easier to offer an allocation suggestion as some early retirees will want 75% stocks. If you have an interest in managing it yourself, I'd recommend some individual issues to complement some funds. Here's an example that is 50/50 stock bonds that will yield about 4.2%:
Individual stocks (with 4% in each):
SO
WEC
JNJ
PG
MMM
UL
REIT's (with 4% in each)::
WPC
O
HCN
Utility ETF (with 4% allocation):
XLU
Baby Bonds (held to maturity; with 4% in each):
CCV
GEH
Preferred Stocks (with 4% in each):
PSA.T
NNN-E
Open Ended Mutual Funds:
TILDX (with a 4% allocation)
AVEDX (with a 4% allocation)
FFRHX (with a 14% allocation)
Vanguard intermediate term bond ETF BIV with a 14% allocation
CEF's (with a 4% allocation to each):
ETB
NSL
(Note, I am long many of these.)

@Zoneblitz More Options and Homework Nice table in SA article
BDC Buzz, from Seeking Alpha
Dividend investing, high income, BDCs, portfolio strategy
Baby Bonds for business development companies are finally starting to deliver attractive yields to investors.
Most of these bonds have maturities of 2-7 years and offer stable yields of around 7%.
I am expecting higher yields in the coming weeks and will likely be making purchases.
http://seekingalpha.com/article/4025080-rising-yields-bdc-baby-bonds
As mentioned by @Edmond. Good source for research and tax status of interest/dividends
http://www.quantumonline.com/search.cfm

Hi Crash. This is a stimulating topic which I find very interesting. But rarely if ever do I attempt to forecast where markets will go. I've been surprised too many times in the past to trust my instincts in that regard. What I do try to do (sometimes successfully) is add or remove risk in the portfolio by raising or lowering my cash and short duration bond position. On that score, I'm not bullish now - but not bearish either. Have been pretty much sitting on my hands with a slightly elevated cash/short bond position for several months. (It wouldn't take much more of this market rally to convince me to raise that a bit higher).
Re: RPIHX - Like you I'm locked out of PRHYX. But I'm not eager to own high yield now anyway. Mark Vaselkiv who has run the very successful RPHYX for many years is co-manager of RPIHX. So that's good. If I wanted a substitute for PRHYX, I'd probably buy it trusting in Vaselkiv and T. Rowe's management in general. But I think everyone looking at high yield now needs to realize that these securities tend to have risk characteristics typical of both bonds and equities. In the case of very low grade junk bonds, the risks are even more closely aligned with equities. Be very worried about these if the stock market takes a deep dive. They're not imune to carnage.
Re RPSIX (which you don't like): I like it as a stabilizing influence in my portfolio. You are correct that it's not a bond fund. It's multi-sector Income, even holding 12% + - in their Equity Income stock fund.
"Do I need a U.S. domestic core-plus bond fund, after all?" - Heavens no. I've never felt that need. That's been especially true the past 5 or 10 years with 10-year Treasuries yielding under 5%. That's not to say bonds can't serve a purpose in many portfolios. But it depends on your other holdings and your style. Does everyone need a dedicated bond fund? No.

Thanks, guys. The portf. is spread out like this: 44% US equities, 8% foreign equities. 39% bonds, and 2% "other", probably convertibles and shorts.
> Yes, there's a big amount in my two balanced funds: 35.48% in PRWCX and 16.02% in MAPOX, which I'm deliberately growing.
>Among equities: 14% small-cap. 23% mid-cap. 62% large-cap.
>PREMX is 14.14% of portfolio. The monthly dividend is over $100.00, now. Being re-invested.
PRSNX: 10.54% of portf. Divs are re-invested.
DLFNX = 2.51%, as mentioned above. Divs reinvested, but it's just $8.00/month or so. And the share price is up against a wall.
I'm already at my own personal limit in terms of the number of funds owned. I must shed one if I'm going to add one. Here are the others: MSCFX SFGIX TRGRX PRIDX and PRDSX. My wife's 403b fund is in the overall mix, too: VSCIX. Still just 1.94% of the Big Picture. I do not like to make frequent TACTICAL movements. I want to keep it stodgy, but PRODUCTIVE. ...@Ted mentioned that 5% is his lower limit. I could simply add to DLFNX to get to 5%, and that's not a radical decision.
But bonds will only be paying me to "wait for the next time it comes around on the guitar." (Arlo Guthrie.) We are in for a protracted cold-spell for bonds.
@JohnChisum: yes, I've crossed a threshold with TRP and can use PREMIUM tools at Morningstar. They also tell me I can use a dedicated phone line for those who hold more than X dollars with them.
@MikeM: If I grow DLFNX for stability, then 5% of portf. would be more stable, I suppose, than 2.51%, eh? Glad for the replies. But why would EM bonds be advantageous, right now, JohnChisum? I won't be adding any more to my current EM stake. And PRSNX has not been bad to me. It's "global" bonds, but does not include EM.

Thanks @Junkster
Day after your post of 12/04 bought a cef loan fund TSLF.
http://fwcapitaladvisors.com/wp-content/uploads/2016/12/TSLF_Brochure_2016_Q3.pdf
Also own RIMOX Mix of Hi-Yield/Bank Loans /Alts in EM/Euro/Domestic http://www.citynationalrochdalefunds.com/Content/pdfs/2016/8427/FIOF Portfolio Holdings by Sub-Adviser Nov 30 v1 12-07-16.pdf
I would sure like to know the whos that are so down on bank loans.
Gundlach's webby If you must own fixed inc.-floating rates
Note to @Crash Gundlach's Dec webby: Trump not good for Bond prices.DBLTX always a lower duration than AGG makes the fund a good choice in a rising interest environment.
Bond Market Fascinations: An Interview
Acropolis Investment Management LLCPosted on December 19, 2016 by David Ott
I..don’t think that the shift in rates is entirely explained by the election. The other factors include a reversal of the ‘fear trade,’ which has been going on for years where investors flock to safer assets such as US Treasury bonds to avoid uncertainty. This, along with central bank policies, took yields around the world into negative territory and it came to a paramount this summer with the uncertainty surrounding the Brexit vote.
Over the summer, you can see that everything was locked up and that there was a lot of sideways movement. Once the election hit, yields just broke free. And, of course, the Fed reducing monetary stimulus is a part of it too.
In the short-term, you could see spikes, but I’m not sure that the economy can take substantially higher interest rates. There’s research now that shows that if the yield on the 10-year Treasury gets up to 2.65 or 2.75 percent that it would negatively affect the economy.
I wrote an article for ALM Insights about the debt level in our country (that you can read by clicking here: the article starts on page six). The last time the Fed was raising short-term interest rates in 2004, the total-debt-to-GDP was 180 percent.
When you look at public and private balance sheets today, we’re almost at 260 percent, meaning that our total debt, both public and private, are much higher relative to the size of our economy. Small changes in interest rates will be magnified today because the economy is more tied to borrowing costs. It’s like anything with leverage.The Fed’s forecast for next year that just came out last week calls for three hikes to the overnight rate. They’re the most aggressive forecaster in the market right now – the market only thinks that there is one or two more coming.
The Fed has consistently had much greater expectations than the market. This time last year, they projected four increases and we got one. The year before that, they said four and we got zero. Their track record is not very good.
I like (the) old argument that moving bond duration around is akin to trying to time the stock market since duration is essentially the main beta for bonds. Forecasting changes in interest rates is an impossible task.(we try )not to gamble on the direction that rates will move next.
http://acrinv.com/bond-market-fascinations-interview/

A good suggestion. Since I've been pointing out risks, some of the risks in individual bonds include:
- issue selection - lack of diversification. The most aggressive rules of thumb I've read are that one should have at least $50K (muni) or $100K (corporate), so that one can own bonds from at least 10 different issuers. Here's Fidelity's page recommending a $100K-$200K min, depending on type of bonds.
- inflation risk - locking in a fixed rate of return for many years, even if inflation rises. (WF - CUSIP 94974BFY1 - is 10 year, noncallable)
Nominal interest rate is not a risk, because by hypothesis one is accepting a 4% total return (holding to maturity), regardless of how high market rates go.
Note that the ARES bond (CUSIP 04010LAR4) is a discount bond, so while its total return is about 4.4%, its current yield is about 3.75%, based on a coupon of 3.625 and a current price of about 96.5. The rest of the yield come from the price rising to par (similar to a zero coupon bond, with similar tax treatment).
Nice sampling of bonds with different attributes.
I like the idea of a build-your-own portfolio. It does take a substantial commitment to make it work.

If goal really is 4%, what about individual investment grade corporate bonds ?
WELLS FARGO CO MTN BE 4.10000% 06/03/2026 FR ... yield to worst 4.047%
ARES CAP CORP NOTE CALL MAKE WHOLE3.62500% 01/19/2022 ... yield to worst 4.391%
Are couple examples ... c

ZB, I think your initial choices (VWINX, etc) are all fine/good candidates.
You may also wish to consider, for some, limited portion of your portfolio, closed-end funds. CEFs are focused on delivering what you stated was your goal: income. Right now -- year-end -- may be a good time to identify/take positions in CEFs. Generally, any current CEF holders who are "underwater", sell out late in the year. That surfeit of selling generally abates come the new year -- sometimes leading to price appreciation or at least stabilization.
Specifically, muni-CEFs and preferred CEFs have declined and 'may' offer value. Muni income is of course tax-free. Most preferreds -- generally those NOT issued by REITs -- offer favorable (lower) tax treatment than bond income.
Purchasing individual preferreds might also be an option, especially in light of their recent sell-offs. 6% yields are now available at/near/below par, in many cases from VERY credit-worthy issuers. The downside is their prices are subject to interest-rate risk -- which generally will NOT impact the issuer's ability to pay their preferred coupon.
dividendyieldhunter.com and quantumonline are both good resources for identifying income vehicles.
I generally limit CEFs and pfds to an overall 20% of my portfolio -- and I do trade (rather than hold them) --- so that for some periods of time, I will hold none. The price swings generally make them conducive to pruning positions when prices get too rich. Presently, I've approximately 15% in CEFs, all from recent (post-election) purchases.
Good luck.

Thank you for this. I researched many cefs/pfds last night and think your approach makes a lot of sense.

@Crash: I recommend 5% for any single investment to be meaningful.
Regards,
Ted

At 2 1/2% of total portfolio, I don't think it will change anything if moving from one Total Return bond fund to another. If Total Return funds drop say 10% next year, that only moves your portfolio 0.25%. Do you need a domestic core bond fund. Certainly not for growth, but it probably adds stability to the portfolio. But your portfolio may already have a good mix of bonds since I believe you own a couple good balanced funds.
For myself, I've been following the trends, both real and speculative. As you said, the changing environment is predicted interest rate increases. I've moved more into TIPS which so far have dragged and into Floating Rate Bank Loan funds which are doing great. PFIDX is a Pimco fund I'm using in this environment.

2.51% is not much of your portfolio. Do you have 97.5% in equities?
I think in general bonds are going to struggle for the foreseeable future. Rising rates are guaranteed per Janet Yellen. With that said, there are some good places to check out in the fixed income arena. EM bonds, inflation adjusted bonds are two to look at.
It sounds like you might have six figure in TRP. Does that give you any preference or perks?

DLFNX is my only core (core-plus) dedicated US bond fund. It's just 2.51% of portfolio. But I think I can make better use of the $3,700.00 that's in there, particularly after the seismic shift following the election. I make few changes to my portfolio along the way because I do a lot of digging before choosing a fund. Originally, I wanted Gundlach's know-how at the helm, and I also did not yet have a domestic bond position at all. But such a fund as DLFNX, though respectable and reliable, will not help to get me where I want to go, in this changed landscape in 2017 and beyond.
Three-quarters of my stuff is with TRP, and if any change resulted in consolidating (and ergo simplifying) by putting more $$$ into TRP, that suits me. PRHYX is closed to new investors. What about RPIHX? I also see a very new fund: PTTFX which charges investors $20.00 above and beyond the ER if the balance is below $10,000.00--- but I could manage to initiate a starting position with $10K. ..... Seems to me that PTTFX is ostensibly the same sort of fund as MWTRX. "Total Return." But I can't even find a portfolio within that fund anywhere, even at the TRP website. ... I don't like RPSIX because it's a fund of funds.
.......Or, shall I just liquidate DLFNX? It's one of just 2 funds I own that are in a regular, taxable, investment account, rather than IRA. I could use the proceeds to step-up the size of my stake in PNM, an electric utility. PNM is in a transition, shedding nuclear and coal-fired plants but everything I look at tells me I should definitely commit more money to it. (It's less than 1% of portf. right now.)
Do I NEED a US domestic core-plus bond fund, after all? I am otherwise very well diversified. No question about THAT. Thanks for your responses. They are always helpful.

In the low volatility space, SPHD continues to work and the underlying index has had excellent backtested returns:
S&P 500 LOW VOLATILITY HIGH DIVIDEND
Kevin

Through Friday over the past three months Morningstar's 16 taxable bond fund categories show 12 with negative returns. Two have small positive returns under 0.75% The two real winners have been bank loans at 2.20% and high yield corporates at 2.15%. However in those two categories it's not hard to find many with returns in the 3.5% to 4%+ range. And at least with the bank loans, with very little volatility along the way. Munis in the non taxable category have all been taken to the cleaners the past three months because of their tendency to follow Treasuries. Will be interesting to see if these trends persist into January. When Januaries are trend changers be very wary.

Now the Fed has raised rate by 25 basis points. There are more to come next year. So bond fund would face more headwind going into 2017. As msf pointed out, it would be challenging to generate 4% yield without incurring additional risk in terms of credit quality (junk bonds) and currency (EM debts). EM bond funds had a sizable decline recently as USD strengths. Investment grade and intermediate term bond funds saw a meaningful decline since October. Surprisingly, several junk bonds did okay. For example,
OSITX - invested in short term junk bonds. Skillful managers.
VWEHX - invested in the "less junkier" end of junk bonds. Vanguard low expense ratio.

Generating 4% yield will take some risk, although if interest rates rise as treasuries will yield 3+% and it will be easier.. but that will be due to inflation so your target may move.
You need to consider the loss of principle risk you run reaching for yield as there is no such thing as a free lunch.
there are multiple advisory services available for stocks and mutual funds but few for income investors. Most of the equity advisors have an "income portfolio" that is loaded with equities and if you look carefully, lost 20% (vs 45% for SP500) in 2008. This would destroy anyone needing current income.
VWINX is everybody's suggestion here, but M* discusses the impact of their bond portfolio ( which has a duration of over 5 years) on their recent returns. In funds like this you have to take what they give you.
I think traditional open end mutual funds are a bit limited here, but there are some good choices in other posts like ZEOIX and RPSIX
Look at Kiplinger's Income newsletter. He has a lot of ideas, doesn't trade much at all ( too little in my opinion), but points to ideas most of us haven't thought of . Most of these are individual stocks, REITS, MLPs, BDCs etc. However, he seems to believe that riding a position down 50 to 75% is Ok if it is still paying a good dividend.
You can also set up your own dividend stock portfolio if you like to do the background work. There are a lot of ideas in Barron's for example, or M* dividend investor.
Doing it on your own will save you 0.8 to 1.25% in an actively manged fund, but you have to be knowledgeable, spend a fair amount of time reading and run some risks
The other thing that has not been mentioned is to assemble your own bond ladder with increasing maturities. you can roll over the shorter maturies as they mature and re-invest at higher interest rates. There are several ETFs that mature at specific dates that would work for this. Look at Guggenheim Bullet shares
You can do alright if you assemble a collection of dividend growth stocks, high yield bonds with short maturities and watch them carefully, but 4% will be difficult

The most interesting development so far, in the short story of Seafarer Value: in the week following the US presidential election (11/8-11/15), SFGIX and Morningstar's EM peer group dropped a bit under 6%. SFVLX, which is fully invested, dropped about 0.85%. In the three days following the election, the EMs dropped about 4% and SFVLX about 0.1%.
Seafarer says "cash and other" is 16% of the portfolio; Morningstar says cash is de minimis and "other" is about a third. Hmmm ... Seafarer's portfolio report is 9/30, Morningstar's is 7/30. Not sure why they haven't updated. I've been trying not to pester Seafarer so Paul can focus on getting things running, but perhaps after the 12/30 portfolio update I might ask to talk.
David

Hi @msf
Excellent points, too often outside of considerations; and needs to be studied/analyzed properly relative to bonds. For many investments, the past chart confirms history, the current chart confirms only the day and a future chart may be as good as blind faith.
NOTE: trends do exist, and trends come and go when we aren't paying attention.
msf noted:
"IMHO, there's no way to get a 4% yield without a good amount of risk. Not that that isn't okay, just that one should be aware of the risks assumed. There are the most obvious ones - interest rate risk (loss of value due to increasing rates) and credit risk (delayed payments, defaults, loss of principal).
But there are some others as well embedded in several of the suggestions. One is declining value of your portfolio, not due to interest rate risk or even inflation (though that one's omnipresent). Rather it is using principal to get higher current yield.
If you buy a bond with above market interest (current yield, coupon), you'll be paying above face value (premium bond). For instance, you might pay $110 for a bond with a $100 face (par) value, you'll get that higher stream of payments, but you're gradually losing value, beyond inflation. Same thing with bond funds. This is why I prefer to look at SEC yield, which incorporates this loss (or gain) in bond value in calculating an effective yield. "PONDX's trailing yield is 7%+, but its SEC yield is 3.35%. Conversely, DVY's trailing yield is 3.09%, but its SEC yield is 3.46%.
Regards,
Catch

Hi ZoneBlitz!
You have some great picks. I own VWINX, PONDX, DLTNX. I sold DLTNX a while back but will buy again when this rate thing is over. I will add VWELX.....higher in stocks. But 30% stocks might not be enough in the long run. Also, I will say PTIAX is also very good. Maybe drop small amount in the S&P 500.
God bless
the Pudd

PTIAX looks very promising. Thanks!