The author writes that the Trinity Study was updated in 2009 (it was updated in 2011 using data through 2009), says he conducted his own "research" over a 23 year period covering the years 1988-2011 (that's 24 years, from Jan 1 1988 to Dec 31 2011), and uses a single 23 24 year period (a curiously odd number) rather than rolling 30 year periods as Trinity did.
If one is going to use a single time period, then instead of his choice of 1988-2011, one might look at 1973-2002 (a true 30 year period). Eyeballing suggests this is the worst postwar 30 year span - starting with the dreadful 1973-1974 bear market (-48%), 1980-82, 1987 (a quick 3 mo. loss of 33.5%), and ending with the 2000-2002 loss of 49.1%.
(I really don't know how bad this would come out; it is left as an exercise for the reader.)
Bear market data: http://www.nbcnews.com/id/37740147/ns/business-stocks_and_economy/t/historic-bear-markets/
Annual Returns on Stock, T.Bonds and T.Bills: 1928 - Current
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

American Funds
https://www.americanfunds.com/resources/tax/capital-gains/index.html
Aquila Funds
http://aquilafunds.com/wp-content/uploads/2013/12/CapGainEst-9-15-2014.pdf
Diamond Hill Funds
http://www.diamond-hill.com/wp-content/uploads/DHF-year-to-date-capital-gains-as-of-9-30-14.pdf
SunAmerica Funds
https://www.safunds.com/pdf/Tax-Center/Cap-Gains-Estimate/asset_upload_file222_7170.pdf
Sentinel Investments
https://www.sentinelinvestments.com/pdf/capgainsdist-est2014.pdf

"It seems I delay in taking the profit & or gain. Does anyone care to chime in as to what they would do ?" Derf
On all my profitable holdings(losers are a different question) I set a STOP PROFIT figure:
For example: if I want/need 8% yr from my investments, and I am up 30-40% after 3yrs, I set a figure of 25% profit as a SELL figure, then if the investment goes down I have a good sale, If the investment goes up later, I don't care, I got my 8% a yr., that's what I wanted it the first place...easy peasy
GREAT for current market as we all have Good/great gains for the last few years, WHY give them back? Take your 8% yr (or whatever) and run with what you have or wanted to make...tb

I think its a difficult question to answer because, in my case, the exit strategy would be based on the underlying beliefs that lead to the investment in the first place. If its only poor relative performance for some period of time, then my exit strategy would be based on achieving superior relative performance and normally I would exit a portion at a time based on what I believed the ultimate potential was. So for instance, if I achieved 60% of the objective I might take some or all of the profits.
Even if it achieved what I thought the potential was, I'd still keep 25-40% of my position in case that sector overshoots what I think is reasonable. And I would always have a stop loss in mind or in place, because if I'm wrong I wouldn't want to lose too much. Especially after achieving what I thought the full potential was, I'd be less and less willing to accept downside before closing the position.

Howdy @Dex,
The article didn't go into the fact that the TIPs also reflect movement towards quality when, "the band is on the run".
TIP and TIPs fund were up an average of 1.1% the past week; with the exception being the short duration stuff, which is only about +.5 for the year. On the other hand, long duration TIPs, as with LTPZ are +2.3% for the week and + 17% YTD.
One will likely find a mix of holdings with an active managed TIPs fund; with ranges of duration, as well as a mix of IG corp bonds.
We have held a few TIPs funds since February of this year; and held through the recent selloff mentioned in the article.
I note the above, that TIPs are interesting; as these will have ups and downs for a variety of reasons; and not necessarily related strictly to deflation/inflation expectations.
We hold this sector; in spite of the fact that we continue to find deflation a continued circumstance to monitor.
Take care,
Catch

Hi Guys,
“Yet, many clients continue to believe that their managers can and will outperform. (The triumph of hope over experience is clearly not confined to repetitive matrimony.) Even though no major manager has done so, the average US institutional client somehow expects its chosen group of active investment managers to outperform annually, after fees, by a cool 100 bps.”
So too do individual investors although I suspect their outperformance expectations vastly exceed the 100 basis points that institutional agencies seek.
This extended quote is from Charles Ellis’ paper “The Rise and Fall of Performance investing”. That paper was the primary reference that supported the article by Scott Burns that Ted linked earlier today. I always prefer to examine the primary source directly whenever possible. Here is a repost of the Ellis link:
http://www.cfapubs.org/doi/pdf/10.2469/faj.v70.n4.4
Ellis concluded that “ Often blinded by optimism, clients continued to see the fault as somehow theirs and so gamely continued to try to find Mr. Right Manager, presumably believing there were no valid alternatives. ………. And active managers continue to fail to outperform. Table 1 shows the grim reality of how few funds have outperformed their indices after adjusting for survivorship bias over the 15 years to year-end 2011.”
This article motivated me to explore the potential return penalties that might be coupled to our search for superior active fund managers. I used the data reported in various parts of the Ellis paper.
Roughly one-third of active managers outdo their benchmarks by about 1.0 % annually. Two-thirds of active managers underperform their benchmarks by about 1.5% annually. These asymmetric outcomes are based on a recent 10-year summary period. Cost drag is a major factor.
Therefore, simply put, the average net Excess Returns for a single actively managed mutual fund is: (1/3 X 0.010) – (2/3 X 0.015) = -0.00667 or -0.667% annually.
To illustrate the impact of this average negative Excess Return on a portfolio consider a few scenarios like 1 or 3 active fund positions on a totally active portfolio or on a portfolio with a 50/50 split between active and Index holdings.
If an all Index equity portfolio delivers an 8.00% annual reward, the 1 and 3 unit active fund components for an all actively managed portfolio will generate 7.33% and 6.00% annually on average. For the 50/50 mixed active/passive portfolio, the annual returns would be 7.67% and 7.00%, respectively. On average, such is the price for seeking positive Excess Returns from risky actively managed mutual funds.
To overcome this penalty, the investor must seek and find active managers who reliably and persistently generate positive Alpha. That’s a tough task. As Ellis highlights, such winners most often do not repeat.
In doing this analysis, another question surfaced. Picking an average active fund manager is a losing tactic. How much better does the selection screen have to be to secure a positive Excess Return? What are odds? Using the same data and the same net Excess Returns equation, it appears that the screen must eliminate almost two-thirds of all active fund managers (60% by calculation). That seems like a workable task. But again, performance persistency remains a dubious challenge.
Thank you Ted for posting the primary reference. I encourage all MFOers to read the Ellis document. It rings a bell. Active mutual fund investing is an uphill battle.
Best Regards.

As always, RTFM - read the fine manual (prospectus). Here are a couple of samples from bond funds (equity funds will clearly be trading):
Vanguard Short Term Bond Index Fund (p. 43): "A fund also may use fair-value pricing on bond market holidays when the fund is open for business (such as Columbus Day and Veterans Day)."
Everybody's "favorite" bond fund (or punching bag, as the case may be) Pimco Total Return:

The Trust is "open for business" on each day the NYSE is open for trading, which excludes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, the Trust reserves the right to treat such day as a Business Day and accept purchase and redemption orders and calculate a Fund's NAV, in accordance with applicable law. A Fund reserves the right to close if the primary trading markets of the Fund's portfolio instruments are closed and the Fund's management believes that there is not an adequate market to meet purchase, redemption or exchange requests.

That last part is interesting. Given the rate of redemptions from this fund, and the fact that the "primary trading markets of the Fund's portfolio instruments are closed", it sounds like Pimco might choose not to trade tomorrow. Seems that the prospectus leaves the choice up to the fund, and you'd have to call to know for sure.

If one wants to discuss how people are adding risk by reaching for yield, that's fine - and that's basically the lead sentence in the article. But the writer seems to have an agenda, and has slanted graphs and omitted data to that end.
(Disclaimer: I am a fan of Core Plus bonds - in my view, Core is to Core Plus as S&P 500 is to Total US Equity Market. In each case, the latter provides broader and better exposure to their respective markets - US bond and US equity.)
Everyone "knows" that the US Aggregate Bond Index (tracked by AGG) is much too heavy into government securities. Even Bogle says so, and suggests the index is weighted about 70% in Treasuries and other government bonds.
So when I look at Chart 1 (correlation coefficients), what jumps out at me is not that Core Plus is (slightly) correlated with equities, but rather that a good chunk, if not all, of AGG's (slight) negative correlation with equities could be coming from its heavy slug of government bonds (which the chart shows have a much stronger negative correlation with equities).
What this suggests is that if we were to look at Core Bond funds' correlation with equities (since they rightfully tend to have much lower percentages of Treasury/government holdings than AGG) is that they would have virtually zero, or perhaps even a slight correlation with equities. To me it is telling that the writer provided a core plus bond composite, but not a core bond composite. That likely would have undercut his thesis that there's a lot of difference between core and core plus.
Take the data from that chart, and look at the R-squared values for Core Plus and Aggregate. They're about 10% - close to meaningless.
Look at Table 2. The writer implies, without justification, that because Core Plus bond funds contain some junk bonds, their volatility will be similar to junk bonds. Table 2 shows 14.5 year (curious choice) volatility (std deviation) figures US Agg, junk, and equities. But missing are core bond and core bond plus figures.
This is a suspicious omission, since Chart 1 provides data for core plus, and Chart 3 provides a graph for core bonds (using Wells Fargo Advantage Core Bond as a proxy).
I'll remedy that. Using M*'s figures for 15 years (14.5 is not a standard time range), we have

Std Dev	Sharpe
Core (MBFIX)	3.59	1.12
Core+ (WIPIX)	3.53	0.98
Agg Index	3.50	0.99
S&P 500 Indx	15.38	0.26

The naive idea that adding a modest amount of a volatile asset (junk bonds) to a portfolio will necessarily make it more volatile is wrong. The obvious (albeit contrived) counter example is to add to a portfolio an asset that is volatile and perfectly negatively correlated with the portfolio. Adding a small amount of that asset will reduce the portfolio's volatility.
What one sees here (between Core and Core Plus) is little difference. (I used WIPIX, since the writer selected to use MBFIX, so I simply used the Core Plus representative from the same family.)
I could skewer Chart 3 as misleading also, but you get the point.
If you're really concerned about Core Plus funds that are "too" aggressive, just avoid funds whose portfolios are rated low grade by M*. Lots aren't.

Hi John,
Thanks for posting this Seeking Alpha article. It is well written and the comments on the strategies discussed I found to be of good reading. My thoughts are that there is a good possibility of a 250 point drop in valuation for the S&P 500 Index from its recent high of 2020 but there is no certainity to this happening. This would put it in a downdraft spin by my defination. My thoughts are that I'll buy at every 50 point drop from the 2020 mark with a sum equal to about one percent of the cash held within my portfolio. Should the Index reach my targeted 1770 range then this will leave me with about 10% cash plus whatever my mutual funds hold and leave me at about a 15% cash level in the near term. Under my plan, I will have bought at 1970, 1920, 1870, 1820, and 1770 ranges which when averaged will average to a buy-in at the 1895 range. With the large year end cash distributions that I expect from my mutual funds to make then my cash levels could be restored pretty close to their current 20% level with no action on my part even after considering my most recent buys.
I like to average-in, in a market decline and average-out in a market bull run. Should the market decline to the 1770's as it might then once it has bottomed and turned then I'll start averaging-out, by about one percent of equity valuation, at every 25 point climb from the 1900 level until a full cash position has been obtained. This is what I did once the Index reached the 1600 level a while back.
I am by no means saying the market will perform to my thinking and others should goven by their own thinking and not mine. I am writting this only for information puropses as to how I manage my portfolio with respect to both bullish and bearish stock market movement.
Hopefully, 3rd quarter corporate earnings will be good and a fall stock market rally will be coming in the near term. As the article states the upcoming week will provide some insight as to how the 4th quarter might be looking.
I wish all ... "Good Investing."
Old_Skeet

Cashin has only been on the floor of the NYSE for something like 50+ years.

And no one has helped him off the floor yet!
"Help, I've fallen and can't get up"

This week might tell the story, technically.
http://m.seekingalpha.com/article/2555415-stocks-the-most-important-week-in-6-years?source=feed_all_articles

You're right about seeing the rate of return. And seeing a fund that is number one in performance, etc....these are very strong motivators

4.75% on a supposed bond fund? That hinges on being criminal. I didn't know that.
Sadly you are probably right about unsuspecting people getting put into this fund not knowing the details. They just see the rate of return. The brokers get a nice commission too.

Interestingly, I just went back through this thread and the early discussion regarding the stock portion. Gaffney has increased equities in the portfolio at a time when the markets started to turn south. Of course she couldn't have known this would have happened.
They need to change the name of the fund.

I agree John. Or do something so their clients know. There must be a lot of unsuspecting clients of Eaton Vance, a full service load company, who think they are in a plain vanilla bond fund to reduce stock market risk. They market their funds thru Broker Dealers. There's a lot of selling and marketing going on. Not sure how many people have taken apart the contents of this fund and really know what's in it. People who go to full service Brokers and pay loads are not generally going to do this with their investments. Hopefully the brokers who are collecting the loads are, and educating their clients. Wouldn't bet on it.
John, do you know this thing has a 4.75% load? I can't stand loads. I know we can get it load waived, but the full service clients are paying the load, and probably have no idea it is available without it.

Interesting, yes. Short version: overweight US stocks "as much as you can." He sees blue skies and sunshine, still, for years to come. Given current circumstances, retail, durables and services will do very well. He says interest rates could fall even further, from a mere 2.35% just recently.

These ETMFs sound like a natural progression in the products coming out.

I think so too John. I'm looking forward to them as a welcome advance.
Personally, I'd like to see actively managed ETFs expand in a big way. Right now, if you have an account at brokerage A, it costs too much to purchase a Vanguard mutual fund, or any mutual fund not in the no transaction fee platform. Often $50 just to buy or sell a mutual fund not on the NTF platform. Too much. Active ETFs will put away all that nonsense, and equal the playing field. And I want to continue to see ETFs as a whole expand, advance and improve. Sure, there's a lot of bad products coming out, but also good products. All of these make investing better for the little guy and tend to equal the playing field.

I looked up ACCNX which I own.
AAA. 45.88%
AA. 8.81%
A. 9.65%
BBB. 19.88%
BB. 8.38%
B. 4.10%
CCC. 1.28%
CC. 0.32%
C and below. 1.69%
Per the prospectus; at least 65% in investment grade. Up to 35% in high yield and or emerging market debt. No more than 10% in non-dollar debt.
I'm sure every fund will interpret the Plus differently. Some may be hinging on unconstrained.

@Mike_E, that is good info on the 11.32% convertibles, 6.1% preferred stocks.
So really 25.53% stocks as you mentioned above. How is one supposed to fit this into their asset allocation? Eaton Vance is a load firm. Wonder what advice they are giving all their dealers, about how to use this fund. Where does it fit into a portfolio?

Asset Allocation 7 More Information
AS OF 8/31/2014; MORNINGSTAR CATEGORY: MULTISECTOR BOND
Cash 19.12%
Convertibles 11.32%
Domestic Bond 19.41%
Preferred Stock 6.10%
Foreign Bond 21.02%
Foreign Stock 3.21%
Others 3.61%
Domestic Stock 16.22%
https://fundresearch.fidelity.com/mutual-funds/view-all/277905246?type=o-NavBar
Scroll halfway down the page.
Just summing the domestic, foreign, and preferred stocks = 25.53%
Add to that 11.32% in convertibles and you have a fund with a market beta approximately = 0.64 (per portfolio visualizer regression analysis). That's on the high side for me for a multi-sector bond fund.
http://www.portfoliovisualizer.com/factor-analysis
Mike_E

EVBAX is down nearly 3% more than it's (Lipper) category average in the last month (challenging market environment). I realize that one month is a very short period of time and will hold. Any thoughts?

Thanks for pointing this out. Had no idea. A very rough month and 3 months for the fund. Underperforming the total bond market index by 5.85% over 3 months. That's a lot for a bond fund over 3 months. Speaks to how 'unconventional' some of the unconstrained and multi-sector bond funds are, and how these funds may diversify or not diversify the stock portion of a portfolio.

Very eye-opening numbers over the past three months, I must say.