The only reason I see to differentiate between income (dividends) and appreciation is sequence of return risk.
If you invest in a bond, you know that you will receive that same interest payment, month after month, regardless of how the price of the bond fluctuates before maturity. When it matures, you can roll it over and continue on.
If you invest in something that doesn't pay enough interest/dividends to meet your cash needs, then you'll have to sell assets to make up the shortfall. Investing for income and investing for total return may have the same long term performance, but with an equity investment you may be forced to sell at an inopportune time. (You may also wind up selling at a fortuitous time when the market is soaring.)

If you assume long term performance is the same then you would always choose the less volatile option, wouldn't you? If you're time horizon is less than long term then its a very different question. The thing with an actual bond, though, is that it may provide the certainty of a fixed income stream until maturity but rolling it over at maturity is subject to all the point in time risks of higher/lower interest rates. That could be better or worse than the timing risk of needing to sell equities along the way to meet your needs except all your risk is associated with one point in time rather than having the flexibility to manage the timing of your risk depending on how you feel about the market.
If you just consider mutual funds you should, in theory, expect a higher return over time from a more volatile asset, but the question of which you prefer seems just like any other investment decision- what return do you need, what's your risk tolerance and what's your time horizon? KCMTX has been almost as volatile as the S&P 500 over the last 3 years, more volatile over the last 5 and the returns are lower while its mostly been a risk-on environment and invested in equities. PRWCX has been a good amount less volatile so you've been getting something for the cost of lower returns.
As a general rule I'm a believer that funds like KCMTX are intended to outperform when there's a significant downturn that lasts long enough for the portfolio to move away from equities and into other asset classes that will do far better. The last 8 years has been pretty difficult because most of the downturns, even the more painful ones, have been relatively quick and that causes whipsaws rather than advantage. One day that's going to change and when it does then we'll really see how good KCMTX's process is. If it performs really well during a big market downturn its volatility and risk-adjusted returns will also look a lot different. At this point, though, I think you have to be really happy if it captures a good portion of the upside and doesn't get whipsawed too often. I don't think it should be a big surprise that it has more volatility and lower returns.

FYI: Wall Street may not be paved with gold, but sometimes it sure feels that way. Amazon was recently trading at almost $1,200, versus a split-adjusted $1.50 when it went public in 1997. Apple’s stock is at $170, compared with $12.19 at year-end 2008. Bitcoin soared toward $18,000 in December, up from less than $1,000 a year ago. Getting rich—and outperforming the market averages—has rarely seemed easier.
Regards,
Ted
http://creativeplanning.com/news-article/easy-money/

FYI: Who wouldn’t want to invest like Warren Buffett? His investments have long beaten the performance of the S&P 500. Plenty of mutual fund and hedge fund managers have tried to do the same. But most fail. That’s why mere mortals should stick to low-cost index funds.
Some people, however, enjoy the added risk of trying to beat the market. If you’re one of them, let me offer a suggestion: There is a simple method with a market-beating record. It doesn’t win every year or even every decade. But its long-term record has beaten the U.S. market index. It takes about ten minutes a year, combining two investment styles from Warren Buffett’s biggest mentors.
Regards,
Ted
https://assetbuilder.com/knowledge-center/articles/the-closest-you-might-get-to-investing-like-warren-buffett

The only reason I see to differentiate between income (dividends) and appreciation is sequence of return risk.
If you invest in a bond, you know that you will receive that same interest payment, month after month, regardless of how the price of the bond fluctuates before maturity. When it matures, you can roll it over and continue on.
If you invest in something that doesn't pay enough interest/dividends to meet your cash needs, then you'll have to sell assets to make up the shortfall. Investing for income and investing for total return may have the same long term performance, but with an equity investment you may be forced to sell at an inopportune time. (You may also wind up selling at a fortuitous time when the market is soaring.)
Investing in income producing securities is one of many ways to manage this risk. If you're really set on a fixed income stream, especially for your base level expenses, annuities can also provide that comfort level.
Regarding IRMAA (Medicare surcharges for higher incomes): 2007 was a significant year, as Junkster mentioned. But that's because IRMAA began in 2007 as part of the Medicare Modernization Act. The thresholds were initially tied to inflation, and rose through 2010. For example, in 2008, the thresholds were $82K (single) and $164K (couple), lower than today's $85K/$170K.
https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2007-Fact-sheets-items/2007-10-01.html
The IRMAA thresholds were frozen at the 2010 levels for 2011-2019 by the ACA. Perhaps we should have more discussions about ACA ramifications. (Oh noooooo!)
https://www.kff.org/health-reform/fact-sheet/summary-of-the-affordable-care-act/

A little weekend food for thought...
"Be brave. It is only at extreme times like this that asset allocation can earn
its keep with non-traditional behavior. I believe a conventional diversified approach
is nearly certain to fail."
"In mid-December last year, I told my colleagues in asset allocation
that I was putting up to 50% of my sister’s and children’s pension funds into Emerging....My sister and children are at about 55% today. Why it was not 100% back then, however, is a
good and very difficult question to answer. Failure of nerve, I suspect."
From: https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=48
Here are a few EM funds and ETFs that have a value tilt: SIVLX, BEMAX, PRIJX, PZVEX, TFMAX, AZMAX, MAEMX, TLTE, EDIV, and DEM. I own SIVLX and recently added to it and might be drawn to PRIJX but its not available thru Fido. After some more ruminating on the contents of the article, I may decide to add to MEASX as part of a year-end portfolio update.

Junkster,
Your are correct $85,000 or less for single and $170,000 or less joint. Glad to know the caps have have been increased.
My apologies.
Skeet

This is why I wish this forum had more retirement discussions. Old_Skeet you are still a youngster and apparently haven’t been hit by RMDs yet. It’s under $85,000 and $170,000 for couples with the next bracket being 85,000 to 107,000 and 170,000 to 214,000 for couples. That lowest 85,000 and 170,000 bracket has been that way since at least 2007. Unfortunately beginning in 2018 the next and third bracket changes for the worst meaning it is lowered than from what it had been.
And more than likely most of your social security benefits will be includied when computing your (modified) adjusted gross income which your Medicare income brackets are based on. Going from the lowest bracket to the next will cost an additional $53.50 in Medicare Part B premiums of whatever you had been paying and an additional $133.90 if you slip into the third. There is also an increase of your Part D premiums when you go into a higher income bracket. Unfortunately nothing some of us can do and will have to pay more onerous Medicare premiums based on rising income due to RMDs. One of the few times it doesn’t pay to be single - at least for me.

Almost everybody on Wall Street mocks forecasts, yet almost everybody makes them:
wsj.com/video/barry-ritholtz-outlook-for-2012/D57E6C7E-67C9-43A6-8C28-CEE5CCDAD340.html

Hi Guys,
Forecasting is a fool's game. "..... "economists had failed to predict 148 of the past 150 recessions."
I extracted that striking statistic from a recent article in The Guardian. Here is the reference:
https://www.theguardian.com/money/2017/sep/02/economic-forecasting-flawed-science-data
So called expert political and economic judgment simply does not exist. In general, the expert's batting average is dismal.
Yet we often seek it. That doesn't speak well of our judgment criteria. These experts are often called Hedgehogs because of their depth of knowledge in a limited, semi-technical area. That considerable depth of knowledge does not necessarily translate into a more formidable prediction record. Your guesstimate is as good as mine, which is as good as that from any Expert.
Best wishes and although it is not an easy assignment, please stay the course.

Hi @Ted, Are you not window dressing?
Skeet

I always assume in posts like that that the author also indicated earlier the date of purchase(s). So I would be fairly confident @Ted has done that somewhere along the way. He’s obviously a lot more aggressively positioned than most investors in their 70s or 80s are. I’m happy for his good fortune.
Personally, I’ve strived to leave visible documented “tracks” in the What Are You Buying, Selling, Pondering? threads as to my purchases and sales of a tactical nature. That’s only fair to readers. Some of those tactical moves reported over the past 3-4 years involved funds like: PRLAX, PRNEX, OPGSX, OREAX, QRAAX (closed) and PIEQX. Not perfect, but at least I’ve tried to be transparent. By that, I mean that if you’re going to write about how much a fund you hold has gained, you should also have noted your purchase at/about the time you bought.
Early this week I reported a small purchase of a gold and precious metals fund (OPGSX). Anyone following the “tracks” would find that I sold it in early September at/near a yearly high. And that it dropped more than 15% in the 3.5 months I was out of it. And, obviously, readers can note how it pans out in the coming months. IMHO these “buying and selling” threads have pretty much run their course. So I probably won’t share future buys and sells. Thanks to those who have contributed and continue to contribute to them.
Regards

Hi @Ted,
The critical measure(s) of a total portfolio related to performance is:
--- what is the percentage holding of a particular investment, relative to the total portfolio, which obviously gives or takes away a % from total portfolio performance.
--- though one can provide a year over year, or YTD performance return, is this indeed an investors return? Surely, one's return in an investment has its basis in purchase price, yes?
If I purchased MSOPX 3 months ago and the holding was 5% of my portfolio, the YTD return would be interesting to show to my B.I.L., but that is about it, eh?

@MFO Members: Update on the returns of the Linkster's six fund boring pedestrian portfolio.
Regards,
Ted
Equity:
MSOPX: 46.29%
TRBCX: 37.56%
QQQ: 34.01%
SPY: 21.54%
Bond:
PONCX: 7.29%
PBDCX: 6.80%

The barometer report week ending Friday December 15, 2017
This week Old_Skeet's market barometer finished the week with a reading of 136 which falls into the overbought area on the barometer's scale. Last week, the barometer reading was 139. So, by the barometer's metrics there is currently less investment value in the S&P 500 Index over the week before. Should the barometer reach a reading below 135 then the Index will be considered extremely overbought on the barometer's scale.
In viewing the technical score reading for the major sectors of the 500 Index I am finding that none are presently undervalued or oversold. Everything is at fairvalue and above. With this, Old_Skeet is still with his cash build mode as a good number of my mutal funds have began to make their yearend distributions. Last week, I added to my muni fund while this week I sat on the sidelines.
This coming week I'll probally add to my convertible securities fund as convertibles have a bond like floor with an equity like upside. Being very conserative presently as to how I approach the market. Remember, for me, building cash this time of the year is much like an automatic rebalance, of sorts, as it reduces my equity allocation while building my cash as my mutal funds make their yearend distributions.
Once I can see how my portfolio bubbles, from an asset allocation basis, I may do some select asset buying as I feel it warranted.
I wish all ... "Good Investing."
Old_Skeet

@MikeM,
Thanks for making comment.
What I favor about KCMTX is not it's total return although it is a leader in it's classificaton; but, its ability to generate income. This comes form it being actively engaged in the markets making a good number of buy and sell transactions (turnover 318%) thus generating capital gains. When you fully retire ... I'm thinking you will start to look for some more income generation over what your present portfolio generates. If my memory is correct it was in the 1.56% range when I Xrayed it.
One of the great things about investing is that we can each configure our portfolio to fit our own desires. You seek more growth while I'm seeking income along with some growth. From a 2017 distribution yield perspective I compute PRWCX at 6.4% and KCMTX at 11.5%.
Indeed, both are great funds with each carrying 5*'s from Morningstar.
Thanks again for making comment.

I can also update a prior discussion to confirm both the institutional and R-1 share classes are now available at E*Trade. The R-1 shares are NTF with $100 minimum while the institutional shares require $250K and carry a transaction fee but the expense ratio is 25 basis points lower.
I wonder if Parker would comment on what they think is a reasonable level of assets to manage with this strategy so they don't end up in the same situation as Marketfield or Ivy.

Hi @LLJB
We manage less than $100M in the fund currently. I don't know the exact level when capacity would would start to effect performance, but it's a LONG way off (i.e. billions). If we ever got there, I can't say what we'd do. Closing the fund to new investment would be one option.

Thanks Old_Skeet, you build a nice positive case for the fund. But for me only, I don't like to own a lot of funds so I don't see it as a replacement for what I have. I tend to measure all these alternative funds against a good, no make that great balanced fund like PRWCX which I'm lucky enough to own and can add too. PRWCX has a better upside/downside capture ratio, less volatility, a better Sortino ratio, better Sharp ratio, higher Alpha, less risk per M*. I'm not down grading KCMTX 's attributes or return record because they are quite impressive. Just saying I already have something better.
And I'll bring up again. I, and probably many if not most here at MFO have been burnt by the lure of alternative funds before (I didn't own Marketfield or Ivy but you made my point). This one could be different, but I'm sticking with by George Bush quote:
“There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again.”
:) love that one.

OMG - one of my favorite Bush-isms @MikeM!
PRWCX is a great fund! I'm proud that anyone would compare us to that fund.

http://www.etf.com/sections/features-and-news/one-strategists-etf-playbook-2018-0?nopaging=1
John Davi is known in the fund industry for his research, and now at the helm of New York-based Astoria Portfolio Advisors, he is managing some $115 million in ETF portfolios. For five years, he has been putting out an annual ETF Playbook, and he shares here what he likes and doesn’t like when it comes to ETFs for 2018.

FYI: It is that time of year, when the financial industry engages in its annual ritual of making forecasts, which is usually little more than the prelude to looking foolish. Titles like “Outlook for 2018, “What to expect in the new year,” or some variation thereof litter the landscape. Over the years, it has been my distinct privilege (and truth be told, pleasure) to point out how silly this process is.
Regards,
Ted
https://www.bloomberg.com/view/articles/2017-12-15/wall-street-wises-up-to-the-folly-of-forecasting

I can also update a prior discussion to confirm both the institutional and R-1 share classes are now available at E*Trade. The R-1 shares are NTF with $100 minimum while the institutional shares require $250K and carry a transaction fee but the expense ratio is 25 basis points lower. I also checked Fidelity, where the R-1 shares are available NTF with a $5K minimum and Schwab where the availability, minimums and existence of transaction fees are the same as E*Trade.
I wonder if Parker would comment on what they think is a reasonable level of assets to manage with this strategy so they don't end up in the same situation as Marketfield or Ivy.

True, but I've heard that valuations don't matter line before:
https://washingtonpost.com/archive/business/2000/01/01/tech-mutual-funds-led-the-way-in-90s/94a23caf-8230-40e4-bde7-d45840cd42f8/?utm_term=.91974dcba493

FYI: Mark Schmehl flouts Warren Buffett, thinks valuation is overrated and says most other rules of investing are “total baloney.”
The portfolio manager, who just completed Fidelity Investments’ most successful Canadian fund launch ever, eschews investing obsessions such as earnings, cash flow and price-earnings ratios and invests at the extremes of the market instead, including Canadian cryptocurrency stocks.
Regards,
Ted
https://www.fa-mag.com/news/fidelity-manager-rips-up-buffett-playbook--goes-all-in-on-crypto-36170.html?print
M* Snapshot Fidelity Situations Fund:
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN0719I&region=can&culture=en-CA
Fidelity Canada: Fidelity special Situations Fund
https://www.fidelity.ca/fidca/en/products/ss?gclid=EAIaIQobChMI5Zjm3teL2AIVTLXACh0ppwehEAAYAiAAEgIHzPD_BwE