I am now 100% invested in 60-40 portfolio of mutual funds. The portfolio is down about 3.5% YTD.
I do not want to allow my total loses to exceed 10% (that is my risk tolerance). So I have to time the market.
Does anybody know any reasonable strategy how and when to reduce portfolio (probably in stages) and when to buy funds back ?
I would prefer not to speculate on future market direction and use automatic technical criteria.

FYI: As students of market-timing history all know, on this day in 1981, one of the world’s most heralded market timers made one of the world’s most egregious market calls. Today is the 35th anniversary of Joseph Granville’s "sell everything" missive to clients.
Regards,
Ted
http://www.bloombergview.com/articles/2016-01-07/be-smart-don-t-try-to-time-this-stock-market

@3yards nope, got out of it early in 2015. I have a toehold in RPHYX. PTIAX (mentioned here by someone) seems to be much steadier...that's where I've put my cash after selling all of RSIVX.

I sold ODMAX a while back and moved the proceeds into THDAX. Most all emerging market funds have suffered, of late, including one of my larger holdings in the growth area of my portfolio NEWFX. I also held and sold PASAX a while back because it was too heavily invested in emerging markets for me. Emerging markets now make up about five percent of Old_Skeet's overall holdings. Currently, my largest holding is cash at 25% of my overall portfolio.

I swapped FAIRX into FAAFX to avoid the capital gains distribution last year while staying with Berkowitz. I'll give him a couple more years, but if he doesn't recover, I think I'm abandoning active management altogether. If you take a fund which does amazingly for 15 years and has all the ingredients for continued success, then it underperforms and keeps underperforming, then there's just no way to pick a good active fund. SEQUX seems to be proving another example of that. But hey, I haven't lost hope yet!

Hi Alex,
I constructed my initial reply to your investment desires without challenging or questioning your stated objectives. Your goals and preferences are yours alone. Given your age and the steeply progressive RMD requirement, your bottomline objective is extremely bushytailed.
I agree with the several MFO contributors who suggested the difficulty, perhaps impossibility, of satisfying them. It is a tough nut to say the least.
Given the progressive character of the government RMD schedule, I believe the task is almost impossible using the historical returns of any major market investment categories.
Today, your RMD is 7.1%; 5 years from now that RMD grows to 9.3%; 10 years from now the RMD has escaladed to 12.3%. The number of investors who achieve this level of returns approaches zero. It might be a good idea to reconsider your objectives.
If you disliked my earlier post that recommended deployment of Monte Carlo codes, you’ll hate my following suggestion that statistically backstops the futility of your tentative plan. The tool that I used to reinforce my assessment uses market average return and standard deviation data. It is the Bell (Gaussian) curve.
Market rewards do not exactly follow a Gaussian distribution, especially because of fat-tails, but are close enough for modeling purposes. The fat-tails make the Bell curve too optimistic in terms of real as opposed to projected returns. By the way, some Monte Carlo codes adjust for the fat-tail effect.
Your problem is much more demanding than a simple negative market year. Your portfolio must not only accommodate that probability, but it must also generate a return that exceeds your escalading RMD. Market volatility (standard deviation) kills. Diversification can help here by reducing portfolio standard deviation, thus dropping the likelihood of not meeting your high target.
How much does reducing standard deviation help? The Bell curve tables yield an approximate answer. The good news is that these tables have been graphically programmed on the Internet. You can determine the cumulative likelihood (the probability) of any event by simply knowing its projected standard deviation. Here is a Link to one useful graphic presentation prepared by the Math is Fun website:
https://www.mathsisfun.com/data/standard-normal-distribution-table.html
Please give this site a test run. Since your main interest is the likely cumulative failure rate to satisfy your RMD target, please click on the “Up to Z” button on the graph. Now simply move the standard deviation marker to determine the cumulative probability of the event to the desired level of volatility.
For example, suppose your portfolio has a projected return of 8.5% with an anticipated standard deviation of 12%. That’s a realistic projection for a diversified portfolio that is heavy into equities. Now assume that your RMD is at the 7.1% level. That’s 0.12((8.5-7.1)/12) standard deviations below the expected annual return.
What is the likelihood of that happening? Place the moveable marker at the -0.12 level. The probability of that happening is about 45%. Not good news.
Alex, this type of analyses strongly suggests that a cash reserve is warranted if you do not want to sell funds from your proposed equity portfolio. You have many options. A low cost short term government bond fund is one such option. As suggested by other MFOers, you might want to reformulate your objectives. As always, the choice is yours.
Edit: I was too hasty in my initial posting here and made an error in my example problem. I've corrected it. Sorry about that.
Best Wishes.

Like greyhounds chasing the mechanical whabbit around the race track, until "hey, where'd the whabbit go?" [it's the end of the race, clueless canine] Fess up-- shameless muni momo traders is whatcha are, uh-huh. :)
@Junkster Yeah, corp junk might be alright and present a good opportunity soon. I mean, look at those spreads--- almost as high as 2008! Kind of absurd. Isn't that like pricing in a default rate of 8-9%, already, even though it still remains less than 2%.? Looks like an irrational selling overshot to me, usually a good time to "shift the gaze" and start formulating a plan of action.
http://www.institutionalinvestor.com/article/3518122/asset-management-fixed-income/what-it-feels-like-to-be-a-junk-bond-contrarian.html#/.VovgBTb70XM
@Dex Given how badly EM currencies have been beaten up (and a little more so on Monday), depreciation risk has gotta be largely eliminated, right? Mix it up here (there are several good funds that approach EM bonds differently), stay exclusively dollar-denominated, and I think EM bonds could be the contrarian play of the year in fixed income. I'm over-weighting.

FYI: Even Vanguard Group fund fees may be excessive when it comes to 401(k) plans.
A new class-action lawsuit is pitting participants in the Anthem Inc. 401(k) plan, a massive plan with more than $5 billion, against plan fiduciaries for an alleged fiduciary breach due to excessive investment management and administrative fees.
Anthem's fund lineup is predominantly made up of funds offered by Vanguard, widely recognized as a low-cost fund provider. Vanguard is also the plan's record keeper.
Regards,
Ted
http://www.investmentnews.com/article/20160105/FREE/160109974?template=printart

FYI: (This is a follow-up article)
Franklin Templeton Investments is the latest in a string of big asset managers looking to carve out a beachhead in the battle for “smart beta” exchange-traded funds.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2016/01/05/franklin-templeton-jumps-into-smart-beta-etf-pool/tab/print/

Here is a table of the so-called "lazy portfolios" (these should be familiar to most in this forum I suspect) that is kept updated. The 1-yr performance gives a rough idea of the order of returns for 2015.
http://www.marketwatch.com/lazyportfolio
Of course, unbalanced portfolios or portfolios with higher beta exposures can go much outside that and such deviations are worth taking a look at or thinking about.
Edit: Sorry, I take my assertion back as "kept updated" given the S&P 500 returns there so I would subtract about 1-2% from those returns to get an idea of what happened to typical buy and hold portfolios.

If one had exposure in these areas last year it was a definite drag on investment results and I'm speaking from experience.Even tried to catch some of those falling knives!
1 YR returns @ M*
Energy Limited Partnership ( M L P's ) -35.00
Diversified Emerging Mkts -15.71
Equity Precious Metals -23.69
http://news.morningstar.com/fund-category-returns/
Basket of Commodities

http://www.eia.gov/todayinenergy/detail.cfm?id=24392
Oilprice.com news
Market Movers in Energy
• Swift Energy Company, an independent oil and gas producer focusing on the Eagle Ford, became the 40th company to declare bankruptcy since the beginning of the oil price downturn.
.. Chesapeake Energy (NYSE: CHK), the second largest natural gas producer in the U.S., was downgraded by Raymond James due to low natural gas prices. The company has lost more than 75 percent of its value over the past year, although its share price jumped 10 percent on Monday (volatility anyone ? )
The instability in China adds to the growing body of evidence that the global economy is not faring well. Yet another way of looking at the problem is through trade activity. In 2015, container traffic at some of the busiest ports in the world grew at its slowest rate in a half decade. In fact, container traffic at the 30 largest ports actually shrank by 0.9 percent in the third quarter..Part of the problem is the strengthening U.S. dollar, .But tepid economic growth is raising concerns about the stability of the global economy.
http://oilprice.com/newsletters/free/opintel05012016
Divinity with my dividends.Opened small position today.
ETNMX
http://eventidefunds.com/news/eventide-launches-the-eventide-multi-asset-income-fund/
Elsewhere
Schwab expands commission-free E T F platform
Jan 5 2016, 12:12 ET | By: Stephen Alpher, SA News Editor
http://seekingalpha.com/news/3014066-schwab-expands-commission-free-etf-platform
With original members State Street (NYSE: STT), Guggenheim, Invesco’s (NYSE: IVZ) PowerShares, ETF Securities, U.S. Commodity Funds and Schwab’s own lineup of ETFs, OneSource now offers select E T Fs from 15 issuers on a commission-free basis. The entire list can be viewed here.
https://www.etftrends.com/2016/01/schwab-adds-six-deutsche-etfs-to-onesource-lineup/
Newly offered examples
JHMH (health)
https://etf.jhinvestments.com/etf/our-etfs/jhmh.htm
RVNU (muni rev bonds)
https://etfus.deutscheawm.com/US/EN/Product-Detail-Page/RVNUl

I'm afraid that I don't understand the specific need to replace the amount of the RMD, unless perhaps the RMD is being used for current expenditures. If that is the case, then a discussion would be warranted with respect to what the total income needs might be in consideration of all factors of income and expenditure. Presumably MJG's suggestions, above, consider all of those variables.
The RMD simply moves a specific amount between the tax-free to the taxable arenas. If the desire is to generate enough income to offset the newly-imposed taxes so as to maintain the accumulated savings level, that would be a substantially smaller amount than the RMD itself, let's say roughly 25 or 30% of the actual RMD, depending on the tax specifics.

Hi Alex,
Based on your advanced age, you impose a high target returns requirement, a high hurdle that gets higher each year as your RMD increases annually, on your portfolio.
I completely agree with MFOer msf with regard to scoping the problem by consulting the government RMD tables which are tied to life expectancy.
Numerous academic and industry retirement studies have concluded that a withdrawal rate of about one-half your RMD goal is a doable target that results in high portfolio survival odds over extended timeframes. The usual outcome from Monte Carlo simulations is that a 4% drawdown over a 30 year retirement period generates portfolio survival odds that are in the 95% and higher range.
Given your age, the anticipated portfolio survival timeframe is more like 15 years. This shortened period changes the calculus considerably. Some additional calculations are needed.
Nowadays, these calculations are easily and rapidly done with some simplifications that should not significantly impact any conclusions from the analyses. Since learning to fish is more useful than being gifted a fish, I suggest you do the analyses yourself.
One tool to do a respectable Monte Carlo analysis can be found on the MoneyChimp website. Here is a direct Link to the Monte Carlo calculator on the helpful site:
http://www.moneychimp.com/articles/volatility/montecarlo.htm
Please exercise it to get an informed feeling for the likelihood of a successful accomplishment of your goals.
For a representative portfolio with an 8.5% annual average return and a standard deviation of 12%, a survival likelihood of 98% is anticipated for a 15 year period. If that period is extended to 20 years, the portfolio survival likelihood decreases to 86%. If the portfolio volatility is increased from 12% to 15% annually, the portfolio survival probability is deceased from 98% to 93% for the 15 year timeframe.
Parametric analyses like these help an investor to get a feel for the soundness of his plan. These general cases seem like attractive potential outcomes from a portfolio survival perspective. However, note that MoneyChimp does not provide the end value of the portfolio. If a single dollar remains in the portfolio after the designated period, MoneyChimp scores that as a portfolio survival instance.
If you want more detail, please give the Portfolio Visualizer version of Monte Carlo a test run. Here is a Link to that site:
https://www.portfoliovisualizer.com/
This excellent website will allow you to back-test generic and specific portfolio asset allocations, and also to do a Monte Carlo simulation that outputs portfolio survival odds and average portfolio end wealth values.
For one test run, Portfolio Visualizer yields a 96% survival likelihood for the 15 year period with a 50% US Stocks, 25% Large Cap Value, and 25% International Stock portfolio allocation. A 37,000 dollar average annual drawdown rate was assumed.
The median portfolio end balance was 1.1 million dollars, and both the 25 percentile and 75 percentile end values were provided. Since these are Monte Carlo simulations, results will change a little with each running of the code.
These estimates were done using historical base rate returns. Given the current investment environment, you might want to do the simulations using slightly more muted market return projections. You can input your own predictions and do some sensitivity scenarios.
If you don’t like the specific outcomes, these Monte Carlo tools allow you to play endless what-if options to explore allocations that might improve the projected results. The work is easy and even fun. Enjoy.
I edited to convert my original post from MRD to RMD. Sorry for the nomenclature error.
Best Wishes.

Looks like I am in the basic ball park as many others for 2015, but a few of my highlights were
OSMYX 15.6%
MSEQX 11.9%
FBTIX 11.4%
PJP 11%
CMTFX 10.5%
POGRX 6.1%
A few stocks did ok, but my two MLP funds did a major drag on equity portfolio, since these funds were down over 30%. Im down about 6% on equity side, but my 35% bond and cash allocation saved my taxable portfolio, since I have individual bonds that did not fluctuate. Basically Im down about 4% for year. Since I regularly take money out of taxable portfolio, that equals my distribution level, so basically flat for year. I consider that a win for 2015 considering how it could have been had I taken out from equities.

You are going to go from all cash to 100% equities (I consider the preferred stock ETF fund to be equity-like in its behavior) after a seven-year bull market that has taken the S&P 500 from 666 to 2011 (as I type this) ??
Uh, no. Try again.

Hi @Ted.
I recall you were going to divest your equity holdings earlier in 2015.
Based upon your numbers, you have 20% in each of the above holdings for your total investment portfolio, eh?
Take care,
Catch

@MFO Members: The Linkster's five funds were up an average 7.624% in 2015
Regards,
Ted
PRHSX: 12.98%
FBTCX: 10.22%
QQQ 9.45%
PFF: 4.22%
SPY: 1.25%

Here is how I faired in 2015 according to Morningstar's Portfolio Manager. My three best funds were SPECX (+7.1%) ... AGTHX (+5.4%) ... & ANWPX (+5.3%). My three worst funds were THDAX (-15.3%) ... TOLLX (-14.4%) ... & PGUAX (-10.3%) My three worst hybrid funds were FKINX (-7.8%) ... HWIAX (-7.6%) ... and CAPAX (-6.2%) My three best hybrid funds were ABALX (+1.7%) ... FRINX (+1.5%) ...and BAICX (-0.9%). Overall I was down by -2.2%. I have not received my yearending brokerage statement which will reflect how I truly faired as I had a spiff that produced a good return and this would factor in 2015 performance. Plus, I had a loss in two funds I sold ... but, I had gains in some other funds that I trimmed my position in.

@Charles, it is only paper loss until you sell. You are not alone - 2015 was tough for many investors to have any meaningful gain. Let's hope 2016 is a better.

I thought that VBS, like nearly every clearing brokerage, used DTC. That's certainly implied by their fee schedule, where they charge $50 to process a foreign security that can't be held by DTC.
If the clearing broker works with DTC, it seems that all you need to do (for the security to be held by DTC) is have the security registered in street name (which is the default at brokerages). See DTC page:
http://www.dtcc.com/matching-settlement-and-asset-services/issuer-services/how-issuers-work-with-dtc
So the problem may not be that your security isn't held by DTC, but that VBS isn't actively taking advantage of the DRIP discount that is available. Just a thought based on the information here; I've no additional info on how CEF DRIPs are handled.