Looking at this chart below, when the fed funds rate moved up from 2.25 in 2004 to 5.25 in 2006, HY Municipals did really well. Shouldn't we see the same behavior this time when the fed funds rate move up?
https://ipro.americancentury.com/content/dam/americancentury/ipro/pdfs/flyer/Periodic_Table.pdf

VTI and VBMFX, just for the heck of it, U.S. centric, buy and hold for the past 15 years = 7.12% annualized.
At the below chart, right click on the "200 day" icon in the slider bar and select "all" for the period back to July, 1999.
Insert tickers (separated by a comma) of your choice, for your own checks.
http://stockcharts.com/freecharts/perf.php?Vti,vbmfx#
Just my own humble opinion, with charting for the fun of it.....; of which, saved our monetary bacon in July of 2008.
Have fun,
Catch

Gah, have we not been over this many times? Think about it unaggregated. Chart GABEX, AMANX, PRBLX, YACKX, and FLPSX against SP500 from August 08 to August 2012. All different outfits and approaches. Pay attention to dip depth and then time to recovery. SP500 is the laggard --- by far.
You can always plead selection bias, 'Well, someone has to outperform'. But the point is that all of the managers of those prudent funds were bruited bigtime well before 2008, well before, some of them for the 20 or more years preceding. I did not get into these funds or recommend them to my wife and parents and children and friends in 2009 or whenever; I did it in 2003, or 1997, or some of them 1990. Based on reading and research and backtesting such as it was possible to do back then. I have no gift for this kind of thing, but these managers certainly do. And I stuck with them except for Gabelli, when I switched all of those holdings over to Ahlsten, based solely on dip protection.
Most of this holds for Danoff/FCNTX too.
So either stick with indexing and all it entails, or do your due diligence and look for active managers who demonstrate smidgens of prudence and foresight and protective behaviors. I (overly diversified like so many here) used to be in D&C, Fairholme, and Weitz also, but over time came to see that they did not show the judgment I valued.

To avoid index funds because of a bear market one would have to find a manger good at market timing .Do they exist? It is my understanding that index funds did ok in 2008. Not by doing well but by outperforming more than half the active funds.

@jerry, looks like you are right. The Vanguard Total Stock Market index fund did outperform more than half the active large blend funds in 2008. As well as every year from 2004-Year to Date.

FYI: A four-day rally for U.S. stocks carried the S&P 500 to a fresh intraday record on Thursday after a series of upbeat economic reports.
Regards,
Ted
http://online.wsj.com/articles/stock-futures-rise-ahead-of-jobs-data-yellen-speech-1408623995#printMode
Markets At A Glance: http://markets.wsj.com/us

Hi Charles,
Congratulations! You are asking the right questions before making a portfolio adjustment decision. Do the candidate funds really provide diversification benefits? If so, how much? What are the opportunity costs? A few numbers might help answer those issues and guide that decision.
Of course, much depends on your targets, both in terms of goal portfolio growth rates and timeframe. Defining the target is a preliminary necessary opening task. As Lucius Annaeus Seneca recorded: “When a man does not know what harbor he is heading for, no wind is the right wind”.
The Portfolio Visualizer website that I referenced earlier offers some nice tools that you might want to exercise to generate a guideline data set.
Just enter your current portfolio mutual fund symbols and the PIMCO All Asset, All Authority Institutional fund symbol (PAUIX) into the correlation coefficient calculator to generally assess any diversification pluses. You might want to test the stability of the correlations by repeating the computation for several timeframes of differing lengths.
I did a few calculations, and as usual, there are tradeoffs to consider. Indeed, Rob Arnott’s PAUIX responds to a different lead drummer. He is a smart active fund manager who is supported by an excellent research staff. These guys are superior number crunchers.
The PAUIX correlation coefficients offer significant diversification. But there is a price for it. Arnott’s approach has delivered reduced returns at higher volatility levels over the last 3 and 5 year periods relative to Balanced mutual funds (DODBX, VWELX, VWINX) during this same timeframe. Only you can judge if the diversification benefit is worth the implied risk.
Another deeper level of analysis is needed to help provide guidance when addressing these tradeoffs. The Monte Carlo option on the Portfolio Visualizer site might be deployed to advantage on this problem.
In this instance, the Visualizer Monte Carlo code can only provide generic trend-lines since it does not do specific mutual funds; it only does its analysis using investment fund categories. But even with that compromise, the tool can be useful in the decision process,
Do a simplified baseline simulation without emerging market or commodities components. Select an appropriate time-span. Next, for several simulations, input different percentages of more complex Emerging Market, Precious Metal, etc, elements.
These calculations will allow you to develop a feeling for the impact of further diversification in terms of a probable end wealth and a minimum portfolio value that measure risk. By adjusting the input portfolio percentages you will experimentally test how much is needed to significantly influence the end game outcomes. These informative sensitivity studies will improve your decision making. Numbers help.
Best Wishes for a Successful Decision.

FYI: The Linkster repeats, S&P 500 to finish up 15% in 2014
Regards,
Ted

I'll be very happy if the Linkster's S&P 500 forecast for end of year comes true.
Ted, if you're right on that, we're going to have to get you onto the Barron's Roundtable and CNBC, to forecast the 2015 outlook for the stock market.

Today, the Federal Reserve released the minutes from the FOMC meeting that concluded July 30. The post-meeting statement, as you may recall, was rather benign and did not indicate much change in the Fed’s thinking. The newly released minutes give us a different view. - See more at: http://investwithanedge.com/newsletter-archives/082014-fed-awaiting-liftoff#sthash.g592Bmjn.dpuf

FYI: The S&P 500 jumped 0.3 percent to a record 1,991.72 at 10:28 a.m. in New York. The Dow Jones Industrial Average gained 73.91 points, or 0.4 percent, to 17,053.04, climbing above 17,000 for the first time since July 29. The Russell 2000 Index slid 0.4 percent for a second day of losses. Trading in S&P 500 companies was 17 percent below the 30-day average for this time of the day. The Linkster repeats, S&P 500 to finish up 15% in 2014
Regards,
Ted
http://www.bloomberg.com/news/print/2014-08-21/u-s-stock-index-futures-rise-with-s-p-500-near-record.html
The 5th Dimension: Up Up And Away
:

As a respondant who wishes to edit more than just text the format buttons are no longer available...here's what I see:

Wondering if the (formatting) buttons can be maintained when a poster wishes to later edit their post and wants to add a link, image, etc.
I find these buttons disappear and the only way for me to accomplish an edit is go into an additional comment box and then cut and paste these "edits" into my original post that I wish to edit.
This doen't happen if I start a post and then wish to edit, only is I am a respondant and then wish to edit.
Here's what the two boxes look like:

Now if I want to come back and edit as a respondant there are no format buttons limiting my editting to text only (spelling errors, etc.)

We have no problem using funds to build income portfolios. Aside from the many bond funds that are well-run and offer acceptable yields (and that are not loaded with long-term junk), there are a number of low-octane, diversified stock funds and what we would call alternative or dynamic allocation funds that fit the bill.
Preferred stocks are a b.... to buy individually, as witnessed by my post to a thread on that topic earlier. While we recognize the overall premium prices for most preferred stocks, KIFYX has done an ok job, and they have actually reduced the dividend to account for lower yields rather than load up the portfolio with holdings that are too risky. It bears watching, however. PAUIX provides a very generous dividend while maintaining a very reasonable risk profile.
Stock funds that seem appropriate include Schwab's SCHF, with a 2.54% yield. Hennessey GASFX comes in at 2.41%. SPDR's SDY is 2.27%. Wasatch WASIX is 2.8%. If MLPs are part of your income strategy, Oppenheimer Steel Path is attractive. Matthews MAPIX has always had a decent dividend, last 12 months has been 2.84%. Federated Intl IVFIX is at 4.71%.
An investor can be as conservative or aggressive as they want and still find decent yield. And it is possible to construct a diversified mix of funds that provide an attractive yield. Of course, one can go the individual stock route. For most folks, however, using ETFs or MFs can be a lot easier. No method is foolproof. One should consider, however, where the underlying positions' gains have been and perhaps weight the mix of portfolio holdings accordingly. Some folks just want to do better than a money market or short-term CD, and there are a lot of options available, but buyer beware in terms of risk they might be buying.

Like her one-time mentor, Dan Fuss, Kathleen Gaffney apparently thinks all of the sweet bond fruit is picked over and the market is ripe for a correction.
As of 6.30.14, EVBAX looks to have 20% cash reserves, about 25% of its assets in non-US bonds (developed/EM), almost 18% in common stocks,12% convertibles, nearly 10% HY and less than 8% investment grade corporate bonds. 0.0% in US government-related bonds.

Good morning John and others,
I sold off three funds, of my fifty two, awhile back and parked the proceeds in cash. Thus far I have only deployed about 25% of these proceeds back into the market. Although, I have done a little buying, thus far, I still have a good amount of cash targeted to go back into the market. Let's see we still have September & October to transverse. Perhaps a good dip, or better, will present itself by then.
A good number of investors hate to see the dips, and pull backs, when they arrive ... but, I take them as opportunity. For if one has rolled out of some stuff they no longer wish to own then the dips, and pull backs, present themselves as buying opportunity to roll back into other more productive areas. I look at some of my positions as crops in the field. If they are not harvested then they stand a good chance to wither.
Old_Skeet

Here is how Morningstar’s Market Valuation is seeing the market … Overbought by about three percent.
http://www.morningstar.com/market-valuation/market-fair-value-graph.aspx
And, here is one trader’s perspective …
The NYSE McClellan Oscillator worked a tiny bit of its near term overbought condition off but is still quite high. Remember, when we are in bull market mode often these overbought conditions are not worked off by any serious selling – instead we get mild down days or small flattish type action.
http://www.stocktradingtogo.com/2014/08/20/sttg-market-recap-august-20-2014/?
And, another trader’s perspective.
The S&P is the index to watch tomorrow. It has reached an inflection point: either it breaks 1,990 or it bounces off it. A bounce off may be nothing more than a delay, particularly if the Nasdaq continues to push higher. Note, technicals for this index are net bullish.
http://www.markets.fallondpicks.com/2014/08/daily-market-commentary-semiconductor.html?
A look at the futures ...
http://finviz.com/futures.ashx
Score me as just looking while I await another good dip (3% to 5%) in the market.
I wish all a grand day … and, most of all … “Good Investing.”
I am … Old_Skeet

@Crash
How about this one?
http://m.asia.wsj.com/articles/asian-borrowers-gaining-upper-hand-in-bond-sales-1406716576?mobile=y

Yup. Excerpt: "Last week alone, $2.6 billion in Asian junk bonds were issued—making it the busiest week for issuance of debt below investment-grade this year, pushing the total so far this year to US$17.8 billion, according to Dealogic, a data provider. Issuers last week included Indian energy company Greenko Group PLC and Chinese developer Modern Land (China) Co.
The surge contrasts with events in the U.S. There, junk bonds have been sold off as investors reconsider following a rally, spurred by rising geopolitical risks and concerns that eventual interest-rate increases by the Federal Reserve could dent the attraction of fixed-income assets."
(Dated 30th July, '14.)

There's this from Aug 14, here at MFO.
During the sell-down, none of our active managed HY funds moved below a -2% retreat for the time frame. The return, on average for these funds for the past month is about +.5%.

@Crash
How about this one?
http://m.asia.wsj.com/articles/asian-borrowers-gaining-upper-hand-in-bond-sales-1406716576?mobile=y

Try this @JohnChisum,
Click on Ted's link, then click on comments...scroll back up and the article appeared for me...weird, but effective.