I would be cautious about owning core bond funds when we are in a period of rising interest rates. Flat-to-lower rates are ideal for core bonds, ... Then again, the definition of what a core bond fund is. VBMFX, for example, has not lived through a period of rising rates. It has been stellar in the past, but none of us knows what will happen.

Bob, I think you might be a bit too literal here. While John (and jerry) referred to "core bond", they (or at least John) were speaking in terms of their portfolio (i.e. their "main" or "anchor" holding), and not literally in terms of the type of fund ("core bond fund").
ACCNX is a core plus fund - it can hold junk bonds and vary the portfolio attributes considerably. According to M*, it went big into junk this year, now sporting an average credit rating of BB. Further, nearly half its bonds are securitized (generally MBS) vs. a quarter for its typical peer, placing it about midway between DLTNX and VBMFX.
While I'm not necessarily advocating ACCNX (don't know enough about it), I do think that core plus funds (with the right managers) can serve one well even in this environment.

Duration is one way to measure potential risk, with this fund having a probability of losing 5.6% of its value for every 1% increase in interest rates.

This brings us to another point, and one which makes me less sanguine about funds that tilt toward MBSs.
A duration of 5.6 years means that if interest rates go up by a basis point, then the portfolio may expect to lose 5.6 basis points. But the next basis point in rate change will (usually) bring a lesser shift in NAV. That's because the price/yield curve is concave up (like a y=1/x curve) - equivalently, that it has positive convexity, or its second derivative is positive. So the further you go out on the curve (the higher rates go), the shallower the slope, and the less the price changes for each additional basis point of interest.
But MBSs are different. They can even have negative convexity, meaning that the higher rates go, the faster the NAV changes. MBSs tend to be good in a slowly changing interest rate environment (as we seem to have now), but can misbehave when rates change quickly.
Just another reason why choice of managers is important, and why even core plus bond funds have a lot flexibility that they can use to good advantage or to hang themselves.

FYI: Vanguard Group’s chief executive, F. William McNabb III, runs the largest mutual-fund company in the U.S.—just how large was highlighted last month, when the firm said it had surpassed $3 trillion in assets under management.
Regards,
Ted
http://online.wsj.com/articles/how-vanguard-hit-3-trillion-1412539983

If you are going to own actively-managed funds, it would seem to me that concentrated portfolios and investment flexibility make a lot of sense. For example, why would I pay for active management in a fund that has 200+ holdings and is essentially a closet index fund?
On the other hand, owning a mix of 5-6 'dynamic' funds, like FPA Crescent, Oakmark Equity & Income, Price Capital Appreciation, Thornburg Income Builder, BlackRock Global Allocation, etc. over the last 20 years would have provided investors with better long-term returns than the S&P 500 and much less volatility. So there is more than one way to look at this.

I would be cautious about owning core bond funds when we are in a period of rising interest rates. Flat-to-lower rates are ideal for core bonds, but when times are less sure, hiring experienced, unconstrained bond managers seems to make sense. Even in times when core bonds should shine, some unconstrained managers out-perform. Consider Carl Kaufman, Dan Fuss/Elaine Stokes/Matt Eagon, Kathleen Gaffney, Jason Brady, and others. This does not mean unconstrained funds won't have a bad year along the way. Most investors have never experienced a long period of rising interest rates, and will find out the hard way that some core funds (and some unconstrained funds, too) will be sorely tested in the years ahead. Then again, the definition of what a core bond fund is. VBMFX, for example, has not lived through a period of rising rates. It has been stellar in the past, but none of us knows what will happen. Duration is one way to measure potential risk, with this fund having a probability of losing 5.6% of its value for every 1% increase in interest rates. If that is something one can live with, ok. But I would much rather reduce overall risk by owning a group of actively-managed, non-core funds. Different strokes for different folks.

FYI: Now that rising interest rates are looking increasingly likely for 2015, now is the time to start structuring your portfolio accordingly to maximize returns and minimize losses. Even if the Federal Reserve doesn’t start monetary tightening by raising borrowing costs well into next year, it is wise to begin making your moves before the Fed makes theirs.
Regards,
Ted
http://investorplace.com/2014/10/best-funds-worst-funds-rising-interest-rates/print

I think at least 50% of ones bond holdings should be indexed to core holdings like Vanguard total bond Once that is taken care of the issue is how you should invest because the bond market looks challenging. I see two possibilities First consider deciding how much to invest in high yield , international bonds, emerging markets , short term bonds etc. The trouble with this is a multiplicity of funds which makes it hard to rebalance and monitor but also your allocation will be based on your own knowledge which might or might not be better than Gundlach, Gross, Fuss etc.
A reasonable alternative is to pick one of the Gurus for the 50% going to strategic. Which one? : I would go with the smallest fund you can fund headed by a manager you respect.You could also use expense ratio as a major criteria,

Mf take a summer break?
http://www.denverpost.com/business/ci_26660256/third-quarter-review-mutual-funds-take-summer-break?source=rss

http://online.barrons.com/news/articles/SB51517841841143733463604580184431505935738?mod=djemb_mag_h
sorry if this is a repost
https://www.google.com/?gws_rd=ssl#q=Fidelity’s+Bright+Stars
when bondholders sell who will buy
http://www.northjersey.com/news/business/when-bondholders-sell-who-will-buy-1.1102690

IMHO, target date funds are one of the most misunderstood/misused categories of funds around. Their fundamental conceit is that they manage the bulk of your portfolio for you, based on "typical" progression through time. Though one would likely set aside funds for specific future purchases (e.g. that "trip around the world" you've always wanted to take), most of one's holdings should be in the target fund.
Doing otherwise defeats the purpose of the fund - to deal with asset allocation as "time marches on". If you don't like a fund's flight path, don't mix and match to get your own - you'll only have to monitor and tweak it as each fund adjusts at a different rate. Rather than simplifying the task of managing your portfolio, you can wind up complicating it.
TRP recognizes that not all glide paths, or people's needs, are created equal. So it offers two separate families of target date funds, Retirement Funds (with a higher percentage in equity), and Target Retirement Funds.
CB is asking for target date tax-managed funds, not asset allocation tax-managed funds (of which VTMFX - Vanguard Tax Managed Balanced Fund is another example). With respect to USBLX, it appears to have a unique approach to fixing its stock/bond ratio. While it happens to be 50/50 now, I expect it to tilt toward stock as interest rates rise. This is because it is supposed to generate at least half its income as tax-free income. As the income generated from tax-free bonds increases (due to rate increases) it will have the flexibility to allocate a greater percentage of the portfolio to equity.
Since I don't use target date funds (I feel I can deal with my own asset allocation), I'm not really looking for a target date tax-managed fund. The suggestion that holds the most appeal for me is the managed payout fund. That's an attempt by fund companies to offer something between an annuity (where you pay up front for a guaranteed stream of income) and funds where you're on your own in managing your income stream. I'd like to see a lot more experience with these funds before buying one, but I think it's an interesting approach.

FYI: Here Are Some Areas of the Bond Market That Experts Say Have a Chance of Prospering.
Regards,
Ted
http://online.wsj.com/articles/how-to-buy-bonds-in-a-rising-rate-world-1412540437?ru=yahoo?mod=yahoo_itp

From my wild side ... as I am no expert!
For me stocks, in general, are not cheap by any means ... however, when compared to bonds, in general, they seem like a bargain by my thinking.
For me, I have been lately buying based upon the following rational …
I anticipate full year 2015 earnings on a TTM basis for the S&P 500 Index will be somewhere around the $120 range. If one is willing to pay $16.00 for a dollars worth of prospective earnings at the anticipated earnings of $120 (share) then this puts a value on the Index somewhere around 1920. With this stocks are still trading, by my thinking and measure, at a slight premium even by looking out to their 2015 prospective earnings at $120.00 range.
Oh well, I guess I over paid when I just recently bought in the 1960 range.
Sometime investors, me included, just get carried away with what they are willing to pay for an anticipated reasonable return.
Old_Skeet

Sorry folks, but the government has this in the bag. Simply no way out. They tried, they lost. Best just get on with it. Cant win 'em all.
I would rather, berkowitz focus on his next 10 bagger. In fact, if he incessantly focuses on this loss is when i would consider selling fairx. Buy the manager they say, and ni-ot the fund. Well, a distracted manager we dont want.

Quote from B. Ritholtz piece linked by Ted here.
Everyone is wrong in this field (investing), and quite frequently. I find it helpful to think of investing and trading as more akin to being a hitter in Major League Baseball than being the captain of an oil tanker. You can bat .300 and be thought of as a strong player. Hit .350 and you are an all-star; break .400 and you are one of the all-time greats.
In finance, your job isn't to bat 1.000, but rather to manage those times when you don’t get a hit. How you handle those incidents when you are wrong will have enormous impact not only on your on-base average, but on your win-loss record. Understanding your own errors and acknowledging them is an extremely important part of this process. It is why I do my mea culpas in public every year.
There is a fine art to being wrong, one that all investors should master. As we have written before, however, those who are never wrong find disaster in the markets. Avoid these people and their money-losing philosophy at all costs.

CB mentioned tax managed funds. USBLX holds both tax free munis and the S&P Index both allocated at about 50% each. What I don't like about the fund is the 1% fee it charges. If I were to create a tax managed portfolio myself I would own these two sectors separately and attempt to learn the tax management techniques myself.
Also, I would like to see more "target death funds". Retiring today with 100% of my portfolio in a heavily laden bond allocation (in say a 2015 target retirement fund) might not get you into the grave as the last check bounces.
Investors and especially retirees in target date funds should ladder these out to their expected "date of death". I would own these in 5 year increments.
In this way, there is always a portion of a retirees portfolio available for income as they reach each of these 5 year milestones while at the same time a portion is still dedicated to continued potential growth out to the gravestone.

Maybe Bill Gross wants to do celebrity endorsements (like Koby and Lebron). He does yoga and could endorse for LuluLemon.

Great, thanks. Now I have an image of Gross wearing "defective" yoga pants seered into my mind...

FYI: The mutual fund and ETF industry is awash with new investment types, but there's a shortage of solution-based funds that address real investors' needs, says Morningstar's Christine Benz.
Regards,
Ted
http://www.morningstar.com/Cover/videoCenter.aspx?id=665559

FYI: Both the media and a wide array of financial advisers preach owning a diversified portfolio. Below, I have created a hypothetical asset mix that a moderate growth investor might employ:
Regards,
Ted
http://investorplace.com/2014/10/sp-500-now-safer-diversifed-portfolio/print

Very classy Bill and even classier of Gundlach to tell the press about it. Worth a good laugh though. The next line was (according to what Reuters says Gundlach said that Bill told him):
"I have five rings, you have two rings - probably going to five,” a reference to the number of NBA championships the two players have each won.
and one more line from Gundlach:
"I did think there could be some kind of 'Dream Team' concept," Gundlach said.

This thread will too quickly degenerate to a battle of opinions on whether or not the market is overvalued.
I find these arguments and attendant disagreements as bad as those on passive versus active. They tend to go nowhere. Each side defending its position based on past data and/or perception.
Maybe the valuation argument is even worse, since it is always about correlating past data to help predict future performance. A premise impossible to know until it plays out.
So, it's Hussman vs Arnott vs Akre. Or, Shiller vs Siegel vs Fama. Forever, seemingly. Each steadfastly holding their position.
Thinking about it...a little less hubris in their arguments (Akre seems most moderate here) would go a long way.
Clements helps fuel the fire in this debate...

Share prices have almost tripled since the March 2009 low, as measured by the S&P 500 index, and are now richly valued.

Selectively pick a metric that supports your position, then state your conclusion. QED.
I would probably have reacted better if he just came out and stated that he believes the market is overheated. And, his advice to those that believe the same way should...
@hank. Thanks man. I will read through, see if I can get better appreciation.

You can measure the valuations at bear market lows by a variety of stats; p/e is common, but Leuthold tracks four others. For p/e, bear market lows tend to be at the 25th percentile of their historic means; that is, the market returns to fair value (the 50th percentile) and proceeds to overshoot on the downside but typically bottoms at the 25th percentile. Getting there from here would require something like a 33% decline. (I'll check the exact number later this evening when I'm in my study.)
David

Will be interesting to see what you come up with, David. Appreciate if you will also include your methodology, some of the details of how you came up with it.
The following website has a lot of data and appears to be very useful in this regard:
http://www.multpl.com/
It has the trailing twelve months' P/E for every month from 1871 to the present. As well as a great deal of other info.

The stats that strike me as more interesting come from Leuthold, who simply asks "well, how bad could it get?" That is, they're not currently predicting a meltdown but they are tracking the magnitude of "normal" bears from here. You can measure the valuations at bear market lows by a variety of stats; p/e is common, but Leuthold tracks four others. For p/e, bear market lows tend to be at the 25th percentile of their historic means; that is, the market returns to fair value (the 50th percentile) and proceeds to overshoot on the downside but typically bottoms at the 25th percentile. Getting there from here would require something like a 33% decline. (I'll check the exact number later this evening when I'm in my study.)
Perhaps the question might be, if the equity portion of your portfolio declined by a third between now and year's end, what would be (a) your reaction and (b) your action plan?
David