I have been advised to go with 20% equity, 50% bonds, 30% short term. Age are 80+78.
Assets are suitable in retirement to cover all estimated expenses to age 95.

I own a little in my Roth IRA. It's basically a bond fund plus a derivative to give you value-tilted stock market exposure, if I understand it right. If you think Bill Gross's bond fund can earn enough return to overcome the management fee, and if you believe in a value tilt, it makes sense as a slightly riskier alternative to an index fund. But it is extraordinarily un-tax efficient, so hold it only in a tax-advantaged account, and the super excess returns of the last 5 years won't be repeated since the glory days for bonds are almost certainly over.

Having chosen to be bonded at the hip to FIDO in my 403b, and facing 0.01% money market returns in the third year of a presidential cycle, with a US stock market that seems fairly to over-valued, and Ukraine, Iran, and China posing concerns, I wondered what others might choose from the following options: FNMIX (are emerging market bonds coming back?) which might offer more return; FFRHX (lower return with some experts claiming these funds aren't as safe as they seem - but FIDO has good bond analysts); FAGIX (high yield, an area which has usually done better than predicted).
These funds have redemption fees of 1% for 60 to 90 days, which shouldn't matter, since funds would only be moved to equities if there were a precipitous decline (and I'd be late to the party anyway). All lost varying amounts in 2008-9, and less in 2011; and I am retiring probably in 3 years, so income would be nice, but I can tolerate some volatility, if I am made whole in 5 to 7 years.
If you feel I have abused the site, keep the castigations brief. I can tolerate more risk than short-term bond funds offer. I'm about 65% in equities across my various retirement accounts, if that colors your answer. My wife and I can probably survive for a year or two on SS income, but she'd be complaining (I actually like beans and rice - with enough spices).

Thanks Old Skeet,
The main criticism I've fallen victim to for referencing this site is the fact that it's "play money". "Show me the money...where are the receipts".
O.K, fair enough.
Call me clueless, but to me this site is no different than any other data point to consider and personally I like the small investor feel the site has. I naturally take it with a grain of skeptism, but I hope everyone does this throughout Internet Investing Land.
Judging by the bold text in the Moosistory section of the site these "calls" are profitable about 50% of the time. To me, Long Term Treasuries (EDV or BTTRX) in a portfolio serve three purposes:
- They provide a coupon return better than cash so long a interest rates remain unchanged.
- They have the potential to be "bid up" as a result of a market correction when other market participants seek a "flight to safety" investment.
- They provide a coupon plus capital appreciation when interest rates fall. Remember Japan...rates could fall further here in the US if deflationary pressures reemerge.
EDV seem like a counter intuitive place to park money right now from a rising interest rate standoint, but as I mentioned above that is not the only scenario to consider. I don't subscribe to The Moose so I can't help paraphase the Moose's decisionmaking process for this switch.
Recently I posted a 5 year chart of BTTRX (Zero Coupon Long Duration Treasuries) and VTSMX (Total Stock Market Index). It appeared to me that a significant divergance exists between these two positions right now. It could go on for awhile, but for no other reason than to rebalance a portfoio I would be selling some of my equity winners (your outperforming equities funds) and buying some fix income (your underperforming fixed income funds).
Nothing wrong with employing basic periodic rebalancing.
Here the chart I was referring to that I created:

FYI:
Regards,
Ted
http://www.marketwatch.com/story/sp-500-marks-longest-win-streak-since-october-2014-04-21/print?guid=22D5B811-BD8D-4774-B163-C607BC77B2F6
Major Stock Indexes: http://markets.wsj.com/us

Hi Guys,
I am pleased that Jonathan Clements has come home to the WSJ. I missed his commonsense columns that were much more than just investment advice. Welcome back Jonathan.
His reintroductory article to his WSJ audience clearly shows that he will continue exploring life style issues in addition to investment topics. Clements has always believed that financial success is about more than money. In fact that’s the title of Chapter 21 in his most recent book.
The title of that book is “The Little Book of Main Street Money”. I’ve owned a copy for several years. Typical of all Clements writings, it is an informative, breezy and easy read.
I’ve hesitated to recommend it to the MFO membership because it devotes only a minor portion to investment advice. It is not sophisticated in that it covers many broad financial matters in a simplified format. It is a great introductory-like tutorial that might well satisfy the needs of very financially illiterate folks. In closing each brief chapter, Clements provides a short “street Smarts” tips section.
Clements is the only notable financial writer that I have personally met. At least 15 years ago he lived in Metuchen, New Jersey; so did my sister. On a visit, our paths accidentally crossed while walking around a lake in a State park. I believe he initiated a conversation.
We talked a little about investing. The discussion turned to decision making, and the errors that even professionals are guilty of. That allowed me to introduce my favorite sports example of faulty decisions because of not understanding the odds. I’ve told this story on earlier MFO posts, but I’ll repeat it now.
A basketball team is two points behind with seconds remaining when the coach calls a timeout. The question: Should the team try for a 2 or 3 point basket? Given typical shooting percentages, the answer is to go for the 3-pointer. Many coaches do the opposite. Here’s why.
Most teams successfully execute a 2-point shot with 50% likelihood. Given the closeness of the game, the probability of winning in overtime is also 50%. To register a win, both events must happen. Therefore the odds of winning the game are 25% (0.5 times 0.5).
Most teams have shooters who convert 3-pointers at about the 33% level. Therefore, a well-informed coach should always try for an immediate victory given those odds.
Clements really liked that story. Later, it appeared in his columns. Although I can never be 100% sure, I like to assume I influenced his writing in that singular instance.
Best Regards.

@Dex: Rather the buy REM, I suggest you buy it's biggest holding Annaly Mortgage common with a 10.70% yield and the preferred NLY-PC selling slightly below par, with a 7.625% yield. I hold large positions in both.
Regards,
Ted

Good for momentum trades only, not for core holding. Significant risk of capital.
If you are not sure what mortgage REITs are, you may find this article useful (search for REM on Yahoo finance and click through the M* link there if you have problems with the direct link below)
Capital Destruction, Inc.
Not to be confused with regular REIT funds like VNQ, RWR, etc., which don't concentrate in mREITs.
All Real Estate funds should be looked at for total return than just yield because they tend to be volatile with potential loss of capital like equities. They can provide diversification benefits in small amounts to an equity portfolio with low correlations to equities but shouldn't be considered as a fixed income asset because of the yield.

What are you thoughts on REM at this point? Down from its 52 week high and approaching its 52 week lows. The yield is tempting.
Are there other similar yielding funds I should look at.
Thanks

There are a couple of different things mixed up in this reporting.
Fidelity ventures is an entity in the family that invests primarily in Series B or later and is not associated with any mutual fund. The money for this venture fund comes from the high net worth individuals working for Fidelity such as fund managers. There are no mutual fund investors involved here.
The investing by some mutual funds in late stage companies with large sums of money at very high valuations has very little to do with venture capital in terms of risk profile and is more like convertible bond/preferred stock investing and it is somewhat of a game being played. It works like this.
Say, you are a fund manager with hundreds of millions of dollars that needs to be put to work and is dragging down your performance sitting in cash. Cash instruments pay very little. Buying more equities in your asset class may increase your Value At Risk more than your limit. You can use part of that money without liquidity needs to get about 8% annual returns with very little risk and a potential to gain 50-100% more with no additional risk. The catch is you need very large sums of money ($150M-$200M per investment).
You find a late stage company that already has established a market (in revenue or users) but needs a large cash infusion to scale up and prepare the company for an exit. Part of this preparation is to create huge valuations for the company to give the impression that it is worth a lot and a huge pool of money to ensure it doesn't run out of money while positioning itself for an exit (acquisition or IPO).
Traditional VCs won't provide this funding because the expected returns for this money in an exit is very low (1x-2x) rather than the 10x-20x VCs invest for. And it ties up a large amount of money in one company. Enter money funds that have large pools of capital and are happy with a 8-10% annual return and an option to realize 50-100% with a few years.
The key for the money fund is to find late stage companies that are not going to go down because they already have a market although they are not ready for an exit in terms of recenue or buyer interest. Even a fire sale exit for the company will likely result in a $100M-$200M transaction which is considered a huge failure these days.
So, you agree to put in money in that range in a late stage financing round with preferred shares that typically have 8% dividends that add on to your equity each year. These shares also have liquidation preferences that put your shares ahead of all others in a sale. So, unless the company goes down or sells for less than the amount of money you put in (but you have selected the company to have at least that much real valuation in worst case scenario), the return of capital is pretty much guaranteed. So, in the worst expected case, you get your money back probably with the 8% returns.
You let the company decide whatever non-sensical valuation it wants which is typically $1B+ at this stage of the company. This high valuation is great marketing for the company to look like it is worth a lot, does not dilute existing investors as you typically get 10% or less equity in that round, and the huge valuation prevents any further rounds which might dilute you or have liquidation preference over you. It is understood by all that this will be the final round of funding for that company. Hence, the huge amount of funding at that stage.
The expected exit us in 2-3 years. So you have a preferred stock that will let you get 8% annual returns with very little risk of losing capital and if the company has a huge exit, you may realize anywhere from 10%-100% returns on that money with your equity stake.
Not a bad investment for a fund with a lot of cash in its hands. You just need a lot of money that doesn't need to be liquid for 3-4 years (you can pool with other funds). The other catch is that there aren't a lot of companies to invest in at this stage and real valuation to guarantee return of capital so there aren't too many of these deals being made but they make headlines when they do because of the funny money valuations.
Yes, there are bubble deflating risks.But this is not really venture investing as people understand it to be.

BobC I apprecaite your comments. I guess my biggest concern is around asset bloat, recognizing that the liquidity in Frontier Markets is a limitation. I am youngish (35) and have no problem holding onto this for decades and look at it as a long term investing theme. However given the size of WAFMX I wish they would at least institute a soft close. Thanks for your thoughts and I do appreciate the focus on middle east and oil with the associated concerns.

I'm not a M* premium member, but I do have an account at TRP.
Here is TRP information page of their tools and resources.
individual.troweprice.com/public/Retail/Planning-&-Research/Tools-&-Resources
It looks like a visitor (once registered) would have access to some of the following tools (M* portfolio manager):
individual.troweprice.com/public/Retail/Planning-&-Research/Tools-&-Resources/Investment-Planning/Portfolio-Manager

FYI:
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=643589

@John Chisum: As the biggest producer of hot air he filled each balloon himself.
Regards,
Ted
Up,Up and Away: The 5th Dimension:

@heezsafe & Other MFO Members:
4/18/14 Copy & Paste: Kirsten Grind WSJ
(Mutual Funds Moonlight As Venture Capitalist)
That mutual fund in your retirement plan may be moonlighting as a venture capitalist.
BlackRock Inc., BLK -0.57% T. Rowe Price Group Inc. TROW +0.36% and Fidelity Investments are among the mutual-fund firms pushing into Silicon Valley at a record pace, snapping up stakes in high-profile startup companies including Airbnb Inc., Dropbox Inc. and Pinterest Inc.
The investments could pay off big if the companies go public or are sold, helping boost fund returns. But, as the recent turmoil in the market for technology stocks and initial public offerings has shown, such deals also carry major risks not typically associated with mutual funds.
"These are unproven companies that could very well fail," says Todd Rosenbluth, director of mutual fund research at S&P Capital IQ. If things go badly for a startup, "there may not be an exit strategy" for the fund fir
Last year, BlackRock, T. Rowe, Fidelity and Janus Capital Group Inc. JNS +1.58% together were involved in 16 private funding deals—up from nine in 2012 and six in 2011, according to CB Insights, a venture-capital tracking firm.
This year, the four firms already have participated in 13 closed deals, putting 2014 on track to be a banner year for participation by mutual funds in startup funding. On Friday, T. Rowe was part of an investor group that finished a deal to pour $450 million into Airbnb, said people familiar with the matter.
Last week, peer-to-peer financing company LendingClub Corp. raised $115 million in equity and debt, the bulk of which came from fund firms including T. Rowe, BlackRock and Wellington Management Co.
Investors put money into venture-capital funds knowing it is a bet that a few untested companies will become big winners, making up for many losers. But mutual funds, the mainstay of the U.S. retirement market with $15 trillion in assets, aren't typically supposed to swing for the fences. Instead, they put most of their money into established companies with the aim of making steady, not spectacular gains.
The risks of putting money into unproven startups were highlighted by the recent slump in technology stocks, which aggravated worries that valuations for pre-IPO companies may be inflated as well.
"We are not at the beginning of the cycle and that's probably the most diplomatic way to put it," says Chris Bartel, senior vice president of global equity research at Fidelity, noting his firm is cautious about investments.
Like other fund executives, he said startup investments represent a small portion of overall assets and that his firm targets companies that are likely to go public or be sold in the near future.
Nothing prevents mutual funds from buying pieces of startups, though the Securities and Exchange Commission limits them to keeping less than 15% of their portfolios in illiquid securities.
Mutual funds have turned to private technology companies as a way to boost investor returns while growth has stalled at larger, more well-known firms, says Mr. Rosenbluth of S&P Capital IQ.
But these deals are more opaque than most fund investments: Fund firms aren't required to immediately disclose such investment decisions to investors, and privately held companies are also more challenging to value, making it more difficult to gauge how a stake is performing.
For startups, fund companies are attractive because they have a longer-term investing horizon than venture capitalists.
Bellevue, Wash.-based startup Apptio has received funding from three mutual-fund companies. T. Rowe was an early investor and Janus participated in the company's recent funding round of $45 million last May, as did Fidelity, according to people familiar with the matter.
Sunny Gupta, co-founder and chief executive of the startup, which helps businesses manage their technology spending, said he was interested in having the fund companies on board in part because he "wanted a different style of investor" that also brought in-depth financial expertise.
Having mutual funds on board also helps on the road to an initial public offering because big-name investors can provide peace of mind to others thinking about taking a stake. With T. Rowe, for example, Mr. Gupta said "there is an incredible amount of brand recognition" on Wall Street.
Similarly, Bill Harris, the chief executive of Personal Capital, a personal-finance and wealth-management website in Redwood City, Calif., said BlackRock's knowledge of the financial world has benefited the startup since the fund company took part in a $25 million funding round last June. Mr. Harris said he hadn't sought out a fund company and that BlackRock had approached him.
The competition among fund companies is driving up valuations of recent deals, said one person with direct knowledge of startups' funding rounds.
The bellwether for the industry is T. Rowe Price, the Baltimore-based fund family that has backed 30 private tech deals since 2009, according to CB Insights.
Henry Ellenbogen, manager of T. Rowe's $16.2 billion New Horizons Fund, put money into Twitter Inc. TWTR +1.33% before it went public, and has since bought shares in other big names including LivingSocial Inc., a daily deals site, and GrubHub Inc., GRUB -4.18% a food-delivery service, according to T. Rowe.
Mr. Ellenbogen's fund returned 49.1% last year, beating its benchmark, the S&P 500, which returned 32.4%, according to fund-research firm Morningstar Inc. He invests only a small percentage of the funds' assets in any one startup and holds about 260 stocks in the fund, realizing that some of the startups might fail, according to a person familiar with his thinking.
BlackRock, never a big player in Silicon Valley in the past, has funded 10 deals in the past two years, including four this year: software company Hortonworks Inc. in March and Dropbox in January. BlackRock doesn't disclose which of its mutual funds have invested, and declined to say how much the firm put into each company. The deals generally "represent a small portion of the total portfolio of a fund, but with the intent of adding incremental returns," a spokesman said.
Fidelity, likewise, has stepped up. The Boston-based fund firm has participated in 14 privately held tech-company rounds of funding since 2010, including six last year and four this year that have closed, including One Kings Lane, a home-décor website.
Another fear among some analysts is that this rush into pre-IPO stocks has echoes of the 1990s dot-com bubble, when many fund managers got badly burned by ill-timed moves into technology shares. Janus and Fidelity had funds that suffered large losses in the dot-com crash.
A spokesman for Janus declined to comment.
Mr. Bartel of Fidelity conceded the firm is seeing valuations that "aren't as compelling," as they used to be but also said it is seeing more pitches than ever.
.

Hi Dex,
I copied and pasted below how the straegy works.
"The Market Leadership Strategy always has two holdings with nominal weighting of 50% each. Based on the rankings, one of the positions can be a money market fund. This strategy will buy the top two (2) ranked funds and hold them as long as they are ranked as a top-5 fund. If a holding drops below #5, the strategy will sell it and purchase the highest ranked style not already owned."
In addition, it is best that the strategy only make up a small part of your overall portfolio.
The way I use the strategy is to make sure I have an ample weighting in the favored assets within my portfolio. If I feel I am light in the favored assets then I'll reconfigure my holdings to better reflect more of the favored holdings.
Hope this helps.
Old_Skeet

2) So go ahead and go with indexes only? Or stick with those two (:)).

That is exactly the kind of conclusion one might make if one doesn't look at studies like this carefully. I have recommended both index funds and active funds for different situation so don't have a bone to pick in this debate. But the conclusion this study supports logically (without a confirmation bias) is that if you pick your actively managed funds by throwing a dart at all available (and defunct) funds, you have good odds of doing better than index funds in 4 out of 6 classes before fees and in some classes even after fees. Nothing more, nothing less.
But this isn't reality of how people pick funds, so the question to ask is whether any of the common criterion used to select funds change these odds and the performance measurement significantly.
Curiously, none of these people interested in accuracy and precision seem to go ahead and do this simple study. Or perhaps they have and don't like the results that don't fit the narrative. I don't know the reason but it is very odd. This might also explain the apparent contradiction between studies like this and the experience of people where they find most of their active funds handily outperforming. That explains your comment related to (1).
The counterargument to the above is to claim that even if you were able to select well, there is no persistency of performance and so futile leading to false conclusions such as your (3). Perhaps, one might think, the outperformance is only short term.
This does not follow from this study because of the artificial definition of persistence used. I will leave it as an exercise to the reader to show how an actively managed fund can handily beat the index over the long term and yet completely and consistently fail the persistence as defined in this study. Just taking your favorite fund and looking at its performance over the last 15 years in 5 year chunks will likely expose the problem with that definition.
The problem "junk science" studies like this persist is that people either don't have the critical thinking abilities or the patience to wade through details. Same reason why global warming skeptic "science" exists. All long prose is mistaken for correctness. For the choir, the confirmation bias doesn't allow them to subject such studies to the same level of critical analysis they would subject opposing studies (assuming they were capable of doing so).
As an exercise in critical thinking, I leave it to the reader to figure out the following flaws from the content in this study all of which are used to support religiously held views. These are the kinds of objections that would throw such papers out of any peer reviewed publication unless the peers were of similar ideological view.
1.

Kenneth French suggested in a 2008 paper that actively managed funds, in aggregate, are equal to the sum of the market, making active management a zero sum game, before trading costs and fees are applied. This implies that in aggregate, active managers will underperform the market by an amount equal to fees and expenses.

Think of a reason this implication is incorrect. Hint: Total market?
2.

Finally, through the process of researching this paper, a large amount of “noise” could be observed which was caused by the mismatch between funds’ strategies and their benchmarks.

The study includes an increasing number of funds with strategies for whom the performance criterion selection is irrelevant but skews the results for others. Can you think of which? Hint: Risk
3.

Another important metric to consider is the dispersion of manager performance. We measure this dispersion by interquartile spreads which is the top quartile subtracted by the bottom quartile. For example, if 100 managers were ranked by performance and 1 was the highest rank, the interquartile spread would be the 25th manager minus the 75th...... The size of this spread is a good indicator of how much value a “skilled” (or lucky) manager can add relative to an “unskilled” (or unlucky) manager. Another way to interpret these results is to think of the size of the spread as an indicator of how much potential value lies in selecting a superior active manager within these asset classes.

The metric chosen compares the spread between performance of the worst of the best and the best of the worst.
Can you think of a measure available in that data that would make this spread a poor measure of that difference in skills to draw any conclusions? Hint: A intra-quartile measure
4.

“Have markets become more efficient through time?”
The supporting argument for this thesis is that, as time passes, successful investment strategies become more widely known. As more managers adopt and execute the strategy, the informational advantages of the strategy decrease as more information is reflected in market prices, thus reducing arbitrage opportunities and mispricings.

Can you think of a characteristic of the evolution of the fund industry where the use of the specific statistical measure of this study alone can explain the change in measured value than any reduction in opportunities? Hint: sample space and spread.
5.

It shows that, across the board, median manager alpha declined over the past ten years relative to the period that came before. This supports the theory that markets have continued to become more efficient through time within every major asset class.

Given 4 above, can you spot the fallacy in the conclusion above? Hint: garbage in, garbage out.
6.

Examining the possibility of increased market efficiency further, the following chart shows the spread between the top and bottom quartile of Domestic Large Cap Core managers through time. Although the interquartile spread did increase during recession periods like 2001 and 2008, the general trend has been one of decline. In other words, the trend since 1979 has been a decreasing amount of difference between the best and worst performing U.S. equity managers.

Can you see what might happen to the trend line in that chart if the measuring period started from 1983 after the extreme overperformance of active managers in the couple of years before it? Can you think of the most obvious market condition that determines this measure and hence its efficacy in supporting market efficiency theories? Hint: Markets go up and they go down.
7.

To further clarify this point, the following chart shows the trend of the top and bottom quartile managers in the large cap core asset class. As before, we see that the distance between these two lines has been decreasing (i.e., the spread has shrunk), but perhaps more interestingly, the chart shows that this decrease has not been perfectly symmetrical. The trend in the bottom quartile managers has increased by 2 bps per year, but the trend of the top quartile managers has decreased by 6 bps per year. This indicates that the majority of the decrease in interquartile spreads came from a reduction in the potential upside rather than from a decrease in potential downside.

Same as 6 above. If the measuring period started from extreme underperformance, the results would be opposite.
8.

This analysis indicates that managers who outperformed over a five-year period were no more likely to outperform over the next five-year period than any other manager selected at random.

Can you see why there will be a lack of correlation between this measure and the ability of the manager to outperform over that entire period? Hint: Look at the results of several of your funds over the last 10 years.
9.

Although this paper has provided strong evidence against persistence within manager performance, it is important to note that we have not controlled for any other factors and therefore do not make any statement about manager skill. These factors include but are not limited to Macroeconomic Timing, Style, Sector, or Industry concentrations and variation, and overall active risk.15 It is possible that, after controlling for these factors, an investor may be able to identify managers who possess skill but exhibit a lack of persistent outperformance due to the cyclicality of these factors or the market rather than any cyclicality of the manager’s skill.

Can you spot the logical fallacy in the above statement regarding skills and market conditions?:Hint: dependent vs independent variables.
The point of this post is not to get into this debate from one side or the other. It is futile to do so with junk science and people who follow them because there are infinite ways to come up with logical fallacies and bad math. That is not even considering obfuscation via tangential arguments and appeal to emotion via prose. So, one lands up with an interminable debate knocking down fallacies only to face more. Life is too short for that.
What is more valuable in this nondeterministic activity called investing is practical and constructive advice, suggestions and experiences even if you don't necessarily agree with it without resorting to such junk science which is not worth the time (and not falling for confirmation bias on what you ignore). That should prevent a lot of the unpleasant exchanges and attacks whether direct or passive aggressive, authoritative or disguised in false humility.

Hi mrdarcy,
I appreciate your extra effort to secure a copy of Professor Kaushik’s report.
I suspect you and I are in substantial agreement that study findings are always tightly coupled to its methodology. Details just don’t simply matter, they matter greatly, and can reverse conclusions. In reviewing all research work, one conundrum is to identify which studies are of sufficiently high quality to accurately reflect the real world marketplace.
Even with our current shortfall with regard to some details of Kaushik’s procedures and data qualifying techniques, it is clear that his data preferences depart from those used by S&P and by the MIG organization.
For example, Kaushik used Morningstar as his primary data source for the small cap category; MIG used the Russell 1000 Value category benchmark. S&P typically accesses the University of Chicago CRSP data. By itself, the data source benchmark can invert conclusions. Here is a Link to a fine summary paper, “Lessons Learned from SPIVA”, generated by the Journal of Indexes that supports that observation:
http://www.etf.com/publications/journalofindexes/joi-articles/11140-lessons-learned-from-spiva.html
I direct your attention specifically to Lesson 6, Benchmark Choice Matters in the Active-Passive Debate. In this instance for Small Caps, the active managers outperformed its Russell 2000 benchmark by a smidgen for the time period considered, but active managers underperformed when measured against the S&P Small Cap 600 standard.
The referenced article has a wealth of actionable conclusions. Please access it.
The S&P summary review and the earlier mentioned MIG report both document that any active fund management excess returns is very time dependent, and erode as the timeframe expands. Managers enjoy momentary success, but that success crumbles to negative integrated outcomes relative to a benchmark. The referenced S&P paper also addresses this issue.
Persistent positive Alpha performance escapes all but a few active managers. The most devastating illustration of that overarching conclusion is provided as the Manager 5-year Persistence graph near the end of the MIG report. No trend-line, no pattern is discernable; it is a shotgun blast.
As stressed previously, the MIG release provides superb charting evidence of active managers volatile performance relative to their benchmarks. Indeed, active management can enhance outcomes, but they also can substantially detract. Subtraction is hard to take. This time dependent data is included as Appendix C in the MIG paper.
Since we are focusing on Small Cap results, please examine the chart titled “Russell 1000 Value”; it is located on page 20 of the report. It depicts aggregate SCV active manager outcomes measured against their benchmark. The data is displayed from 1979 to 2012. Note the random and spiky nature of the curve, and that it shows mostly negative relative performance years.
Also note that the SCV curve had a respectable positive bump in the 1999-2002 and the 2007-2009 timeframes. These were the glory years for active managers in that fund category. That glory has faded recently. The persistency handicap strikes once again. It’s a tough marketplace for active fund management.
I find the empirical evidence undeniable. Sure some active managers will outdistance their benchmark during short periods. But that advantage is ephemeral for almost all survivors.
In their 2012 SPIVA report, S&P concludes that “The annual league tables over the past 10 years demonstrate that short-term outcomes (such as one-year performance figures) of the index versus active debate are less consistent than longer-term outcomes.” Some things remain fairly stable. For completeness, here is the Link to that S&P document:
http://www.spindices.com/documents/spiva/spiva-us-year-end-2012.pdf
I never tell folks how to invest; that’s always their personal choice. However, I have no qualms about presenting them with the relevant statistics. It is their job to weigh the odds and the expected excess Alpha potential.
It is a daunting task to identify consistent fund manager winners. Perhaps dedicated and well informed mutual fund buyers can discover a glittering gem in the treacherous terrain. Good luck to them, and even to myself since I plan to do a little of that dubious exploration.
Best Wishes and Happy Easter.

NHMAX: 8.55%
DFE: About 7%
WAFMX: about 5%
HDV: About 4.5%
PONDX: about 3.5%
The only significant (more than 5% of portfolio) position is HDV.

Thanks for your reply mrdarcey. I was unable to find that info. that you provided on their website. According to Morningstar, each fund had a different top holding as of 1/31/14 and only 1 common stock among their top 5 holdings. WSCVX had 56.45% invested in small market cap and WSVRX had 55.45% invested in small market cap. I appreciate the info you provided, but we still don't have an answer. Thank's also to JimJ for bringing WSVRX to my attention.