+1 to msf. I would leave well enough alone, suck it up in April, and certainly not bail on Danoff and Tillinghast based on the last few years, nor even necessarily switch from Fido to Vang (though the CG points are noted). But your position is popular among some, even in the 15% bracket, and I recognize that this might sound argumentative.

Hi David - I appreciate your comments even though I may not agree with all of them. Let's take FLPSX, for example. Tillinghast is very well respected as we all know. However, he is slowly easing away from managing this fund and will not be there forever. If you compared FLPSX with a Vanguard Mid Cap Index fund, say VIMAX, then Tillinghast's fund loses on tax adjusted returns over the 1, 3, 5 and 10 year time periods. Not bad for an index fund. FLPSX loses to VMVAX as well although the latter is a newer fund. Both index funds are more tax efficient as well. UMBMX doesn't come close to either index fund in terms of tax-adjusted returns.
I am in the 25% tax bracket, BTW.

+1 to msf. I would leave well enough alone, suck it up in April, and certainly not bail on Danoff and Tillinghast based on the last few years, nor even necessarily switch from Fido to Vang (though the CG points are noted). But your position is popular among some, even in the 15% bracket, and I recognize that this might sound argumentative.

Thanks for the reply, MSF. Some of the funds I've mentioned have had a record of paying out big distributions, such as FLPSX and UMBMX. Neither one of those funds have performed well over the past three years, either. FCNTX was particularly bad this year as well with a huge distribution. My point is that I would rather settle for slightly lower returns and not get hit with big distributions rather than the other way around. That's just my preference. With the size of my portfolio, I don't need to hit home runs with funds - singles or doubles will suffice. What I don't like is cutting a larger tax check than necessary every April 15.
Your points are well taken and I will certainly take a look at some of those Vanguard ETFs and indexes.

Keep in mind that this year is a bit unusual in terms of distributions.
2013 was a fantastic year. If funds were still sitting on realized but undistributed losses going back to 2008, they all but surely used them up that year. (Funds are required to distribute substantially all of their net gains each year, but if they have losses, they can't distribute them. Instead, they are allowed to use them against gains in future years - I believe for up to ten years.)
Follow that with an above average 2014 (domestically, anyway), and you've got the makings of disproportionately large distributions. It pays to keep things in perspective. For example, FMIJX (FMI Int'l) is in the 2nd percentile for 3 year after tax returns (excluding this year). And this is a very concentrated fund (29 stocks, plus some other securities) - do you want to replace it with a fund that has a gazillion holdings?
Don't overreact to one year's taxes and lose sight of the objective - net return, not minimizing taxes. The latter is easy - don't make money.
If you sell your shares, you'll wind up paying more taxes now (gains on the shares). If you want to make some moves, you might consider taking the distributions in cash, and investing them in newly selected funds.
I would be more inclined to use Vanguard than Fidelity for broad based stock index funds. They tend to have lower cap gains distributions (e.g. Spartan 500 made cap gains distributions this year and in 2007), Spartan Total Market made cap gains distributions in 2007-2010). You don't see these in the Vanguard funds. (Also, the Vanguard funds have ETF shares, so they have the tax advantages of an ETF, with no bid/ask spread.)

Take a look at Vanguard's Tax-Managed Balanced Fund (VTMFX). It is split 50/50 between U.S. stocks and municipal bonds. Good after-tax performance and low expense ratio (0.12%). I replaced VWIAX in my taxable account with VTMFX. Bear in mind, VTMFX is a bit riskier.
Mike_E

Thank you, Mike. Yes, VTMFX is on my radar for sure.

Avoid high turnover funds, funds with taxable bonds. This is about all I do. I have a few stocks that pay qualifed dividends. I am in 15 % tax bracket with most of investement in IRA and Roth. I have a small annuity with no tax issues.

Take a look at Vanguard's Tax-Managed Balanced Fund (VTMFX). It is split 50/50 between U.S. stocks and municipal bonds. Good after-tax performance and low expense ratio (0.12%). I replaced VWIAX in my taxable account with VTMFX. Bear in mind, VTMFX is a bit riskier.
Mike_E

Dear MJG,
As you know, I don’t practice traditional diversification. So, for me,
this has been a good year – just being long the market.
Recently I read some adviser’s comments regarding this year’s
market active that echoes this article. He said something like -
“If a portion of your portfolio is not losing value, you’re not diversified.”
(Since that’s not a direct quote, I don’t know if it needs parentheses.
One of these days, I’ll have to learn that.)
While this philosophy may satisfy the average low-information
retirement investor, to me it seems a bit like a circular
firing squad or antiperistalsis.
As to your previous posting regarding Rotholtz -
I don’t take exception to “universal rules” and don’t believe that
these congeries are wrong or irrelevant.
However, a summation of these rules and others like them always
proves to be the traditional advice - be a conservative, diversified,
long-term investor.
To me, diversification is like making an “exotic” wager at the
house track.
In this case, your portfolio is your bet.
“Exotic wagers allow you to make multiple bets on multiple horses
in a single wager. Exotic wagers are generally much more difficult
to win than straight wagers, require an advanced degree of skill
and knowledge in horse picking, and are more expensive.
However, the payoffs on exotic wagers are much greater
than straight ones.”
Yes, the potential rewards can be greater – but the odds are against you.
So, I prefer taking the odds rather than laying them.
Or, as my brother-in-law says, “You may have three balls in the air
at the same time, but that doesn’t mean that you’re juggling.”
As to the long-term, I prefer to manage the short term and
let the long term take care of itself.
All of which means that I’ve been touting indexing to my students
for nearly 20 years and ETFs for maybe 10 years. And, of course,
moving averages.
While I still have your attention, I want to thank you for your
high standard of comments over the years.
Best wishes,
Flack

FYI: Wall Street legend Art Cashin will ring the opening bell today to mark his 50th anniversary on the floor of the New York Stock Exchang
Happy New Year,
Ted
http://www.businessinsider.com/art-cashin-50th-anniversary-2014-12
http://video.cnbc.com/gallery/?video=3000342714&play=1
http://video.cnbc.com/gallery/?video=3000342713&play=1
http://video.cnbc.com/gallery/?video=3000341905&play=1

FYI: If you’re reasonably bullish on the global economy – or at least not in the Crash Camp – Europe may present you with a nice set-up.
Regards,
Ted
http://thereformedbroker.com/2014/12/29/buy-europe/
European Stocks Could Rise 10%: (Click On Article At Top Of Google Search)
https://www.google.com/search?newwindow=1&q=europe+shares+could+rise+10%+Barron's&oq=europe+shares+could+rise+10%+Barron's&gs_l=serp.3...9721.11081.0.12347.2.2.0.0.0.0.53.97.2.2.0.msedr...0...1c.1.60.serp..2.0.0.B2Kfo2sz2OE

Hi Guys,
In contrast to the main theme of the referenced article, I do not find that the active investment world has been turned topsy-turvy. The active fund management performance this year is just a slight outlier from its normal dismal record. It is part of the nominal statistical data scatter.
The historical data suggests that active fund managers outdistance their passive equivalent benchmarks only about 30% of the time on an average annual basis. This year, that statistic will likely degrade to a mere 15%. That’s mostly noise and not a seismic shift in the tide.
The 2014 performance of active fund managers is yet another data point that buttresses the wisdom of passive Index investing. Managers who believe they can project primary asset class yearly incremental return changes or, on a finer level, return distributions as a function of sector classification, are chasing a shadow.
By overweighting their forecasts, active managers add to the standard risk of broad market return variations. This is doubling-down in the risk dimension. It is unnecessary.
The evidence that strongly suggests that this is an unfathomable forecasting task is embedded within the historical data sets themselves. It is contained in the various Periodic Table of market Returns. Here is a Link to the famous Callan Periodic Table:
https://www.callan.com/research/files/757.pdf
Here is a Link to the slightly less famous MSCI Sector performance Periodic Table:
http://www.msci.com/resources/factsheets/MSCI_USA_Sector_Indices_Returns_and_Volatilities.pdf
The obvious, outstanding takeaway from these presentations is the completely random character of the annual returns. Predicting these annual position changes with any accuracy is simply not possible.
The commitment that active management makes to their dubious projections explains a significant fraction of their performance challenges. Management and trading costs add to those challenges.
So, I take issue with the articles title “2014: The Year that Nothing Worked”. Some things have worked quite well. Overall, the markets are returning rather normal rewards in various pieces.
Active market investment wisdom seems ephemeral. Those few who enjoy some annual success seem to be one-trick ponies. It is tough to repeat superior excess returns. This too has a firm statistical basis. Market heroes over time are a very rare breed. The unpredictable nature exhibited by all sorts of Periodic Investment Tables illustrate why this is so.
These data support the need for broad market diversification. These data document the folly of active fund management once again, however, this time with an exclamation point for emphasis.
Best Wishes for the coming New Year and beyond.

http://individual.troweprice.com/public/Retail/Planning-&-Research/T.-Rowe-Price-Insights/Fund-Manager-Views/Asset-Allocation-Striking-the-Right-Balance?placementGUID=em_id_escid444714_COR&creativeGUID=EMHDRHT&v_sd=201412
Neutral Between Stocks and Bonds
Favor Non-U.S. Over U.S. Equity
Favor U.S. Large-Cap Over U.S. Small-Cap Equity
Favor U.S. Growth Over U.S. Value Stocks
Favor High Yield Over U.S. Investment-Grade Bonds
Favor U.S. Investment-Grade Over Non-dollar Bonds
Favor Global Equity over Real Assets

FYI: Fidelity's $111 billion Contrafund sold shares of energy companies Noble Energy and Continental Resources in November while boosting exposure to Southwest Airlines and FedEx Corp, according to the fund's latest holdings disclosure.
Regards,
Ted
http://www.reuters.com/assets/print?aid=USL1N0UD0RV20141229

BINGO!
Among alternative strategy funds, HSGFX may boast the most consistent performance. 9% annual losses 3 years running. Negative for 10+ years. Try funding your retirement on that.
Definition of Insanity: Doing the same thing over and over - and expecting different results.

@Bitzer - +1

FYI: It’s been one of the worst years for investment decisions on record, almost across the board. With some help from Charles Dickens, let’s take a look at what we experienced.
Regards,
Ted
http://fortune.com/2014/12/24/investing-year-review/

FYI: (Click On Article Title At Top Of Google Search)
The money-management industry’s push to bring hedge-fund-style trading to the masses has suffered a setback.
Investors yanked more than $5 billion so far this year from the largest and most popular “liquid-alternative” mutual fund as losses mounted on bad bets tied to the global economy, according to fund-research firm Morningstar Inc. Assets in the MainStay Marketfield fund have fallen 45% from a February peak of $21.5 billion.
Regards,
Ted
https://www.google.com/search?newwindow=1&site=&source=hp&q=hot+funds+take+wrong+turns++qsj&oq=hot+funds+take+wrong+turns++qsj&gs_l=hp.3...1711.13190.0.13531.31.31.0.0.0.0.76.1725.31.31.0.msedr...0...1c.1.60.hp..13.18.1048.ibd_QpaCRa4
M* Snapshot Of MFADX: http://quotes.morningstar.com/fund/f?t=MFADX&region=usa&culture=en-US
Lipper Snapshot Of MFADX: http://www.marketwatch.com/investing/fund/mfadx
MFADX Is Unranked the The (L/S E) Fund Category By U.S. News & World Report:
http://money.usnews.com/funds/mutual-funds/long-short-equity/mainstay-marketfield-fund/mfadx
Mutual Fund Wire.Com Slant; http://www.mfwire.com/common/artprint2007.asp?storyID=50446&wireid=2
Bloomberg Slant: http://www.bloomberg.com/news/print/2014-12-29/mainstay-marketfield-suffers-eighth-month-of-redemptions.html

Hi Dex,
Sorry for my long delay in reading and responding to your post. During this holiday season my dance-card has been especially full.
Thank you for your line-by-line review and commentary on the Morgan Housel rules of investing engagement list. I do not agree with many of your observations, but I appreciated all of them.
I really believe that we learn much more from opinions that run contrary to our own than from ones that completely coincide with our thinking. Diversity is good in many areas beyond the investment universe.
But I was flabbergasted by your heavy discounting of the value of reading. I seriously doubt you truly meant your closing statement about reading less and getting smarter.
I too almost totally abstain from viewing the TV business networks. They introduce murkiness and anxiety rather than clarity and calm. They encourage imprudent impatience and unwarranted trading action. I pass on them.
I do much reading from a carefully screened and selected group of market expert writers. I certainly concur that all writers are not equal, and some discriminating criteria need to be applied. I do so.
By way of an unfair comparison, I learn much more. with higher trust coefficient. from this cohort than from the MFO discussions. Often the MFO submittals are far too abridged to secure the required trust level, especially given that the contributor qualifications and incentives are unknown.
Currently, I count Charley Munger among my favorite investing writers.
Please note that both Munger and his partner Warren Buffett are dedicated and committed readers.
By not following that pattern you are choosing to ignore the advice and practice of these two giants. I suggest that you consider adopting their regimented approach. A summary of their method was provided in a 2013 article. It is titled “The Buffett Formula – How to Get Smarter”. Here is a Link to that excellent piece:
http://www.farnamstreetblog.com/2013/05/the-buffett-formula-how-to-get-smarter/
Please access this fine presentation of the Buffett-Munger study routine You could not do much better than to at least give their method a try. It works for them, it works for me, and it is likely to work for you if you give it some serious time. Good luck.
Best Wishes for next year.

Hi Puddnhead,
Yep, I remember the Studebakers ... Hawk, Super Hawk but most of all the Avanti.
Perhaps these links will be of interest ...
http://www.studebakerdriversclub.com/index.asp
http://www.streetsideclassics.com/showcar.php/atl/1866
and, this one where the Avanti broke 29 speed records to become the fastest factory stock production car of its day ... however, back in the day, they sold for about twice the price of a Cadillac.
http://www.theavanti.net/bonneville.html
Old_Skeet

Response to Hank:
My bet is that oil (price of WTI per barrel) will be between $70 to $80 by end of 2015. That is why I think buying into energy stocks that are not highly leveraged and energy & midstream MLP ETFs at this time is a winning investment strategy for 2015, with a small but well-defined downside and significant upside.