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

Duration was one of the factors I went into ASDVX. It's a new fund but American Century brought in Marge Karner who is not as well known as Gundlach or Fuss but nonetheless has experience. She heads a team of four other managers. Currently the duration is 1.9 years. There is another fund with the same concept, ASIEX and that one has a duration of 4 years.
I do like these unconstrained bond funds but as with most questions, you will get differing answers. It depends on the funds themselves. This is new territory we are heading into so who knows what will happen.
Thanks @jerry and @BobC for your responses.

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

Entirely welcome.
Some advisers avoid Yackts and Romick et alia because they cannot abide such decision freedom. 'We pay them to invest, not hold cash, ever.' Etc. I remember reading articles on this in the late 1990s, actually.

According to the WSJ snapshot, YAFFX is holding a fair chunk of cash at 14%.

I wonder if that has anything to do with the fund's underperformance as of late.

According to the WSJ snapshot, YAFFX is holding a fair chunk of cash at 14%.

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

Well, one has three times the holdings of the other, one is a third the expense or less, one's average company size is half the other's, one has 13% foreign and the other none, etc. etc. So an apple and an orange or something, perhaps.

Yes, I've noticed some of the differences as well. So, you don't believe it's fair to compare the two?

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

Well, one has three times the holdings of the other, one is a third the expense or less, one's average company size is half the other's, one has 13% foreign and the other none, etc. etc. So an apple and an orange or something, perhaps.

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.

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. Fannie should not replace Fartiromo.

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.

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.

Hi Guys’
Since these discussions have taken a serious turn towards using P/E Ratio formulations as a prediction tool, I thought a repost of a Vanguard study might just be in order.
The Vanguard study is titled “ Forecasting Stock Returns: What Signals Matter, and What do They Say Now”. It was issued in October, 2012. Here is a Link to it:
https://personal.vanguard.com/pdf/s338.pdf
The study examined about a dozen candidate indicators including several forms of P/E ratios.
Using P/E ratio regression-to-the-mean concepts is not a novel idea. John Bogle addressed this issue in his classic “Common Sense on Mutual Funds” book. Bogle identified an Occam’s Razor approach to estimating long term (decade) equity returns.
His model included three elements: (1) current dividend yield, (2) subsequent rate of earnings growth (correlated with GDP growth rate projections), and (3) estimated changes in price to earnings ratios (like regressing to the mean). His work emphasized decade long rewards.
The referenced Vanguard study basically reinforced Bogle’s findings, All candidate forecasting parameters failed to adequately project future equity returns with high precision. The 10-year P/E ratio proved to be the most influential single parameter. Over the long haul it captured roughly 40% of equity returns.
Vanguard’s overarching conclusion was “Although valuations have been the most useful measure in this regard, even they have performed modestly, leaving nearly 60% of the variation in long-term returns unexplained.” And, “This underscores a key principle in Vanguard’s approach to investing: The future is difficult to predict.”
Please give the Vanguard report some of your valuable time. It just might better inform your market modeling and decision making. I hope it helps.
Best Wishes.

@bee, I agree, the gov't could have done much better here. To just come along in 2012 and say, "all profits now go to the government", of course is going to infuriate shareholders. They should have worked out a win win situation. I don't know all the details here, but if I were a shareholder in Fannie or Freddie, common stock or preferred, prior to the gov't claiming all profits, I would not be happy......
Of course anyone who bought after that fact is in a different position.
I think Berkowitz, Ackman and the others with lawsuits have a strong point.
As far as I know, Freddie and Fannie are supposed to "cease to exist" at some point in the future. But what will replace them? BB has pointed out how essential these companies are for Americans getting mortgages.