Interesting list for sure. I was glad to see you include WCPNX, as it appears to be a compelling fund based on its 3-year track record. I also took a look at WEFIX to gauge performance by the managers on that fund. So far, so good. Just curious, would you consider WCPNX as a "core plus" fund? It doesn't seem to fit the definition as I understand it, with a fairly low yield and a rather small (7-8%) exposure to lower rated bonds.

Short lists and explanations in 2nd half below.
I invest for total return, not income. That leads to the question I keep asking myself, so why invest in bonds at all, when equity does better over the long term?
One reason is diversification - one never knows what will do better from one year to the next. Using bonds for this purpose is a bit like buying insurance. It costs you money (bonds won't do as well long term), but it provides protection against short term drops in the worst case.
I buy that, but only to a limited degree. So I'll use more aggressively managed bond funds that include areas like high yield that are more equity-like. (That is, I favor core plus and multisector over vanilla core funds.) I'm not giving up quite as much in return, but I'm also not getting quite the diversification benefit that a vanilla fund would provide. It's how I choose to position myself on the risk/reward curve. Each person has his or her own comfort level.
With that same nod to aggressiveness, I also use bond funds as cash alternatives. Obviously this is a different type of bond fund from those used for total return.
General attributes I would like the funds to have :
- Low costs. Really important in bond funds, where correlation between performance and cost is high.
- Convenience, but I'll only pay a little for that. I've no problem paying $5 to Fidelity to buy more of a TF fund. On a $5K purchase, that comes out to 0.1%, often less than the cost of owning a different fund that's NTF, especially over longer periods of time.
Personal dislikes:
- Leverage. I'm fine with 100% exposure to risk with my investment. Don't give me 150% risk exposure.
- MBS. The fact that there are several pricing models shows that these are hard to value. More important is that with their built in call options (early payoffs), they behave badly when yields shift quickly. A rise in rates causes borrowers to hold on to their mortgages, thus increasing duration and amplifying the drop in bond price. (Negative convexity.) A side effect is that duration numbers for these securities can be deceptive. They're good diversifiers in a broad bond fund; I just don't want a fund hooked on them.
Macro observation: I almost never time markets. But one must pay attention to the fact that we've had a 35-40 year decline in interest rates that has begun to reverse. IMHO the question is how fast and how far that will go, but not if. This makes it important to watch how interest rate risk is handled.
=============
Core plus funds (nothing without some blemishes):
- BCOIX - good performance, low cost. Flexible with credit risk (i.e. it's core plus), it can't do much about duration. "The Advisor attempts to keep the duration of the Fund’s portfolio substantially equal to that of its benchmark."
- MWTRX - you used to be able to get MWTIX with a $25K min at Schwab. Now it's $100K. Retail class is slightly pricey. Years ago, managers contrasted their fund with Pimco Total Return by saying that they had the luxury of focusing on issue selection, while Gross was limited to macro calls due to the size of his fund. Now MWTRX is bloated and performance has declined over the past three years. Still fine management.
- DODIX - cheap, good performance, flexible on credit risk, defensive on interest rate risk. All positive. Not a fund I would have thought of as core plus (my impression was more vanilla), but upon closer look has a nice mix of securities. Main concern is its increasing popularity and girth.
- WCPNX - just started looking at this (see MFO thread for others' thoughts). Slightly pricey (0.61%), but FWIW, NTF. More importantly, I was impressed a few years ago (last time I looked) with Weitz Short-Intermediate (now Weitz Short Duration) fund WEFIX. Same managers here. I also like that this fund has a somewhat short duration. Needs more research.
- EIBAX - Gaffney's been there for 2.5 years. She didn't do well at her first EV charge EVBIX. Perhaps she was trying too hard to prove herself, but she got overly aggressive, loading up with equities and commodities. This is a tamer fund, though still wild. Hard to even call it a core plus, given that it's allowed 35% in junk and 35% in foreign. That describes a multi-sector fund, leading us to ...
Multi-sector funds (the usual suspects) - used for manager-allocated exposure to junk and foreign bonds.
- PIMIX - sharp manager, great past performance, but with qualifications I've already noted, like leverage and a fondness for MBS. Also, what happened to all the voices who seem to cry out "mean reversion"? (Here though, there are specific market conditions that one can point to that suggest lower returns going forward.)
- LSBDX - a manager who claims experience in investing the last time interest rates rose; that raises succession as a concern. Ridiculously volatile, but acceptable to me for something this far out on the portfolio risk curve (aggressive multisector). I like that it has shortened its duration. A quirk in its prospectus allows unlimited Canadian investment, perhaps a way to increase non-dollar exposure without going overseas.
- FSICX - an easy buy if you use Fidelity, else costly. Generally solid fund.
"Enhanced cash"-ish bond funds - used as buffer for equity investments (to draw from when funds have dropped in value)
Muni funds - you need to go out at least a couple of years in duration to get yields high enough to justify skipping the bank account.
- BTMIX - a young fund, but with a solid management team that's been around a long time
- VMLTX - Vanguard = low cost, conservative management
Taxable funds
- RPHYX - pricey, but with a unique strategy that keeps it sufficiently ahead of banks to justify the risk. I still don't think it scales, so it is good that this is closed.
- FPNIX - I've followed this since the Rodriguez days, when you couldn't get it without a load. Now you can, but Atteberry may have tamed the fund a bit too much. Where else do you find interest only derivatives used so extensively for defensive purposes? That dates back to Rodriguez.

Morningstar premium screener. Ask for 2004 annual returns >= 0 and 2005 returns >=0 and ...
Pretty easy (but you do need a premium account with M*). The tedious part was transcribing the tickers :-( But I find a manual exercise like that helpful; it forces me to take a close look at the results.
Beyond that, I just made notes on a few funds that I've kept eyes on, like Bernstein (for very stable very short term state-specific munis), TCW/MetWest, and Vanguard. WEFIX was on my short list for years (and I'd included it in a suggested portfolio for a friend), until they upped the min and created a more expensive retail class.

According to M*, there are exactly two non-bond funds that did not lose money in any of the past ten calendar years. WICAX (one of the three funds named), and KRFEX.
While NSTLX (the institutional share class of N&B Strategic Income) makes the cut, the ticker that was given in the article, NSTAX (A class) does not, because that share class did not exist until 3/3/2008.
Both share classes of TCW Total return (TGLMX as well as the named TGMNX) made the grade, but it is worth noting that management changed about midway through the ten years. The MetWest management that TCW bought is great, but I'd rather invest in their flagship fund MWTIX.
As I've said before, I don't think there's anything magical about 0.000% return. But FWIW, the other nonlosers are:
Taxable bond funds: FXICX, AALPX, AVEFX, BBBMX, CCBAX, DFIHX, DFGFX, SDGIX, FGUSX, FPNIX, GSTGX, MXSDX, HUBAX, JASBX, JIBDX, HLLVX, LKFIX, DFCFX, DFYGX, MSTIX, MUCYX, BSBAX, PYSBX, PRVBX, PIASX, PMYIX, PSBAX, PIFZX, SIGVX, STBFX, BSGAX, PRWBX, TSDOX, DIHQX, FOSIX, UGSDX, VBISX, VFIRX (note only the Admiral shares made the cut), WEFIX (used to be NTF until Weitz added a retail class with a 0.25% admin fee in 2011), SGVAX, MVSAX
Muni bond funds: ALABX, ATOIX, SDCMX, SDDMX, SDNYX (Bernstein short duration funds don't make much but are very stable; don't know any way to get them without a load), MDLMX, MINSX, CNTIX, HICOX, NSMIX, DFSMX, DSIBX, FMUUX, FSHIX (the retail version, FMTAX - load waived at Vanguard - lost a few basis points in 2008 and 2013), FISHX (the T class lost 0.17% in 2013), FSTFX, FFTFX, GSDUX, FLTRX, SUMAX, PRMDX, PRFSX, LTCAX, LTMIX, VMLTX, VWSTX, SCTIX, SMUAX, SHDAX.
Not surprisingly, the muni bond funds tend to be short or short-intermediate.

I've been doing a serious portfolio makeover the last few months. Recently sold WEFIX and added to my RPHYX. For the rest I've been buying global, selling local:
Bought IVSIX, JPPIX, TWEBX, FPRAX, SGHIX, RPGAX, GPROX. Sold FPACX, PRWCX, VDIGX, GPIOX, BERWX.
Also recently bought two closed end global bond funds: BGH and VGI. The double digit discounts tempted me. BGH is now down to single digits, VGI has widened a bit. I hope that tax selling is about over for them.
Hope to settle down to buy-and-hold now. I think these are funds which are amenable for that.

Reply to @AndyJ: Thanks, AndyJ. I think I'll go with RPHYX, ADBLX or WEFIX (or a combination with PONDX) - and let the managers far more knowledgeable than I decide what moves to make.

Reply to @catch22: Wow, Catch... thanks for taking so much of your time to respond.
I am confused about your TIP recommendation. Aren't TIPs best used to combat inflation when one expects a recovery and not a recession? The negative yield doesn't bother me (since I don't withdraw any funds to live on) as long as the total return is good. But all TIPS lost too much for me in 2008. And, most importantly for this particular investment account, I don't want David to see losses in his account during extended downturns/recession.
I do have PLDDX on my Watch List - and those returns are more what I am looking for in this account. But my WEFIX that I've held for years has done better during down times (2.29% in 2008 vs the small PLDDX loss of -1.58%) yet still competitive in good times for short-term bond funds - and PLDDX has a very high percentage mortgage allocation which is one of my main problems in just going with most intermediate-term bonds as I don't know how all these mortgage investments will perform in the next crash.
P.S. I always enjoy reading your posts updating your investments - you've done very well with your bond funds portfolio! Thanks for keeping that updated.
P.P.S. Nice that you remembered my garden. After 3 months of repotting every one of my 650 Clivia (when so many diseased/infected after recent construction), I'll probably end up losing 100 of them.... but think the rest may recover so that's a big plus. VERY HOT, though, with 93 degrees here in Huntington Beach, California, which doesn't help.

We have two relatively small percentage of our total investments/savings/cds in two Roth IRAs. They were temporarily put into Roth CD's a couple years ago and are now due to expire. The best rate we found if kept in CD's is 2.05% for 7 years.
My husband likes "safe and easy", but it would be hard for me to go that route, if only on principle. I would like to offer him a MF alternative that is most likely to at least double that rate... but also with very little chance of losses during extended downturn periods - and the timing seems especially poor with election/current unsolved economic problems right around the corner. We have ample funds in current money market/cd's that we don't need any income from these Roth IRAs.
IF we have a recession, can you recommend a mutual fund that is most likely to GAIN 2% or more? In the 2008 crash, WEFIX gained 2.29% in 2008, and several intermediate and short-term bond funds/etf's gained 6%+ (BND, BIV, VFIIX, VUSTX, SHY, VBISX), and my IAU gained 5.11%, and all definitely beat 2% over 7 year period.
But this is not 2008, and aren't the economic problems likely to be different enough that what did well then will not do well during our next extended strong downturn. So many of the bond funds now have significant amounts invested in mortgage-backed securities, so I don't know how well they would hold up in a recession.
Cathy

Reply to @scott: Thanks, Scott... it's so nice to be able to join in again. I've never been comfortable with the Arbitrage-type funds... my short term THOPX, and even more conservative WEFIX seems to regularly outperform (or at least keep up) with those funds with less volatility.
I like SIRIX, but it holds too high percentage of DBLTX, which I already own. I've been very happy with BERIX - and even not afraid of my YACKX, which has ups and downs within my comfort zone and has gained well over my goals.
My "closest to cash" fund is RPHYX - YTD and 12 month returns low, but so much better than cd's, and nice and steady.
I am concerned about my PRIIX, seems too longer-term to be in Treasuries now. What do you think about this?

Reply to @Investor: Thanks for your comments. Please pardon my tardy response. I’m very slowly learning how to use the MFO board. Maybe with the new posting structure being proposed I’ll get better at this.
Poking around Schwab’s site I did find a Weitz new alternative to WEFIX short intermediate fund: WSHNX. But Fundaments’ pick of PTTDX looks like a better choice for my needs than WSHNX and I really prefer MWTRX to PTTDX. The aggregate index SWLBX and even lower cost ETF alternative SCHZ look great especially since I can trade that ETF for zip. Schwab has a transaction fee for VBMFX and FBIDX so those won’t work for these Roths.

Reply to @glampig: Why bother with WEFIX. Just get BND or AGG or SCHZ which follow the Barclays US bond index. Or if you prefer mutual fund VBMFX, FBIDX, SWLBX.
The bond index itself has better 1, 3, 5, 10 and 15 year record than WEFIX. And it did perform better in 2008.

It's true that 2009 expenses were generally higher (because some ERs are based on AUM, which obviously dropped at the end of 2008), but after seeing that Forester Discovery had been waiving all of its 1.35% expenses in 2009, I figured that any small differences in the other funds' expense ratios would be subsumed by this one low figure.
Only Arbitrage (ARBFX) had a sizeable jump, and even that jump (43 basis points) was less than the difference between the reported 1.72% ER in 2009 and the computed 1.18% ER for 2011.
For the record:

Fund	Weight	2011	 2009	
FVALX	5%	1.25%	1.35%	
AMAGX	5%	1.14%	1.30%	
QRSVX	5%	1.24%	1.35%	
INTLX	10%	1.35%	0.00%	1.35% w/o waivers
MAPIX	10%	1.14%	1.30%	
BPLEX	10%	2.72%	2.75%	
ARBFX	10%	1.52%	1.95%	
HSTRX	15%	0.64%	0.75%	
MGIDX	7.50%	0.89%	1%	
PTTDX	7.50%	0.75%	0.75%	
WEFIX	7.50%	0.64%	0.69%	
PGNDX	7.50%	0.90%	0.90%	
Avg		1.1817%	1.1650%	
Weighted Avg	1.1890%	1.1548%	

Don't know where you're getting your average ER from. Using M* data, here's what I've got:

Fund	Weight	ER	Category	Cat Avg ER
FVALX	5%	1.25%	LV		1.27%
AMAGX	5%	1.14%	LG		1.36%
QRSVX	5%	1.24%	SV		1.49%
INTLX	10%	1.35%	World Alloc	1.34%
MAPIX	10%	1.14%	Pac/Asia	1.78%
BPLEX	10%	2.72%	Long/Short	2.12%
ARBFX	10%	1.52%	Mkt Neutral	2.14%
HSTRX	15%	0.64%	Cons Alloc	0.97%
MGIDX	7.50%	0.89%	Int Gvmt	0.99%
PTTDX	7.50%	0.75%	Int Bond	0.96%
WEFIX	7.50%	0.64%	ST Bond		0.86%
PGNDX	7.50%	0.90%	Int Gvmt	0.99%
Avg	100%	1.1817%			1.3558%
Weighted Avg	1.1890%			1.3745%

I agree that some of the expenses are higher than I'd use (category averages tend to be notoriously high, so besting them is a low bar to meet). But except for Robeco Long/Short, they all beat (or virtually meet, in the case of Forrester Int'l) their category averages.

Part 2:
Individual fund notes:
FVALX, INTLX: These Forester funds have demonstrated the ability to limit losses by going to cash when conditions so indicate and they do so without worrying about whether they will fully participate in the recovery. Hence they fit the goals of this portfolio well.
Forester was so successful with this simple strategy that FVALX became the only equity fund to have positive (albeit close to zero) returns in 2008.
Unfortunately, this brings in people who look at the rankings, see this fund at the top in 2008 and invest and get disappointed when the fund lags in a bull market.
This fund is chosen for the very strategy (that was incidentally vindicated in 2008) with the full knowledge that it will not necessarily be anywhere near the top in bull markets or even beat the index.
Alternative to FVALX is Amana Income AMANX which does not provide as much downside protection but has done well using a very conservative approach in value investing and keeping the volatility low but it will be slightly more volatile than FVALX. Another slightly higher volatile alternative is Yacktman fund (YACKX)
Alternative to INTLX is Sextant International SSIFX (coincidentally managed by the manager of AMANX) for similar reasons.
AMAGX: A very well managed Large Cap growth fund with a long history of good performance. The downside protection is also reasonable within its class even though there does not appear to be any capital protection strategies in place.
QRSVX: Not a well known fund but is one of the very few funds that is widely available without a transaction fee, has at least a 5 year history and has managed to limit downside in the bear market in the small cap category. The volatility is also kept low.
A better known substitute is Royce Special Equity (RYSEX) if available without a transaction fee. Newer Intrepid Small Cap (ICMAX) has done very well although its short history may be a concern as well as Pinnacle Value (PVFIX) if available without a transaction fee. Both ICMAX and PVFIX are low volatility funds and have capital protection as a goal of the fund to fit the goals of this portfolio well.
MAPIX: The only selection without a 5 year history but comes with a very strong pedigree from Matthews Asia that specializes in Asian funds. This fund has extremely low volatility, even lower than most domestic equities and has managed to deliver very good total returns with a combination of stocks, convertibles and preferred shares.
Alternatives would be either Matthews Asia Pacific (MPACX) at higher volatility with good downside protection or Matthews Asian Growth and Income (MACSX) at lower volatility but can potentially lose more money in bear markets.
BPLEX: An alternative investment fund that tries to get good returns in both bull and bear markets. A long-short fund that can be mistaken for another performance chasing choice because of its recent performance. But this would be a good choice even if its performance in 2009 was just average or even below average.
Looking under the hood shows this fund to be quite different from other long-short funds that try to use both long and short depending on the stock valuations. This fund seems to switch between a primarily long fund (but with short positions to hedge) with good stock selection or a primarily short fund (with long positions to hedge) depending on the macro market conditions thus minimizing individual stock market timing risks.
This is not different in strategy from Forester's philosophy except that its uses shorting rather than just go to cash and uses small caps rather than large caps.
So it does very well in longer bear or bull market years and lags during transitions but without losing much money.
Unfortunately, none of the alternatives for this fund come anywhere close to it in performance as they primarily seem to depend on picking the right stocks to go long or short across all conditions rather than acting like a good long fund or a good hedged fund depending on macro conditions. It is a unique standout.
ARBFX: Another alternative investment fund which depends on arbitraging mergers and acquisitions by buying a company that is being acquired and often shorting the company acquiring. The risks for such funds come only if the M&A does not go through. The earlier you get on as soon as an M&A is announced, the riskier. This fund takes very little risks by waiting to get on and arbitraging just the last few months before an M&A. This keeps the volatility very low and the gains low as well.
An alternative is the similar Merger fund (MERFX) which has a disadvantage because of its size and so may not be able to move quickly in and out.
HSTRX: Hussman's conservative allocation fund is managed in a risk-managed fashion where the portfolio is continually and pro-actively positioned to address the current risk evaluation of the market. Unlike his strategic growth fund, this fund does not take any significant bets on equities and so any incorrect decisions in his strategy does not have as much of a downside impact unlike the other fund. This has allowed HSTRX to show very consistent and impressive performance over a long period of time with very little volatility.
MGIDX: Intermediate duration mortgage securities fund that manages to keep volatility low with good performance and uses shorting/options to achieve this. The ability to short or use options will make this fund able to provide downside protection and manage credit and interest risks, a good idea when mortgage rates are likely to rise in the future.
Alternative is PTMDX - PIMCO Mortgage-Backed Securities D which shorts even more aggressively.
PGNDX: A GNMA fund that manages risk via shorting while preserving the upside of a GNMA fund. Good due to the same reasons as MGIDX above.
Alternatives are non-shorting GNMA funds such as USGNX from USAA, VFIIX from Vanguard or BGNMX from American Century which may have more losses if the mortgage rates were to rise rapidly.
PTTDX: An intermediate investment grade fund that also manages risk via shorting and useful in an expected interest rate rising environment in the future. Low volatility.
Alternatives are non-shorting funds with low volatility THOPX Thompson Plumb Bond or CPTNX American Century Government Bond Inv
WEFIX: A fund with the ability to move between short and intermediate durations based on market conditions and hence able to take advantage of the conditions better than a strictly short term fund. Does not use shorting.
Alternatives are USSBX from USAA, WEFIX Weitz Short-Intermediate Income, VFISX Vanguard Short-Term Treasury, PLDDX PIMCO Low Duration D. The last one from PIMCO does use shorting.

Hello DAK- Like Catch, I haven't followed the portfolio, but here is Fundmental's entire post. I "archived the archive" shortly before FA went away, "just in case".
Because it's length exceeds the allowed maximum here, I've divided it into two parts for you.
Regards- Old Joe
"Make More, Lose Less" Portfolio
Posted by Fundmentals on December 09, 2009
I am sure many of you have come across the situation of a friend or a family member clueless about investing ask you to help them with a stash of money.
The real-life requirements are usually "simple":
1. "Want your help to make some money. I can lose money all by myself"
2. "I can put it in the market for 5 years. Can leave it there longer if it is making money but not if it is losing money"
3. "Don't ask me to do anything more than once a year"
The following portfolio is designed specifically for people that are not:
(a) expecting to beat the market
(b) don't want the portfolio to go down much (likely to panic and sell at the bottom if they went down 10% or more)
(c) would like some decent gains - more than what they can get with money market funds, CDs or even just bond funds without which they will not take the risk of investing at all and
(d) don't want to fiddle with it more than once a year.
The Portfolio-
Domestic Equity:
5% Forester Value (FVALX) - Large Value
5% Amana Trust Growth (AMAGX) - Large Growth
5% Queens Road Small Cap Value (QRSVX) - Small Value
International/Global equity:
10% Forester Discovery (INTLX) - World Allocation
10% Matthews Asia Dividend (MAPIX) - Diversified Asia/Pacific
Alternate investments:
10% Robeco Long/Short Eq Inv (BPLEX) - Long/short equity
10% Arbitrage Fund (ARBFX) - Merger/arbitrage
15% Hussman Total Return (HSTRX) - Conservative allocation
Bonds
7.5% Managers Intermediate Govt (MGIDX) - Mortgage securities/Govt
7.5% PIMCO Total Return D (PTTDX) - Intermediate Investment Grade Bond
7.5% Weitz Short-Interm Income (WEFIX) - Short-Intermediate Term Investment Grade Bond
7.5% PIMCO GNMA D (PGNDX) - GNMA
Backtested performance:
If portfolio invested on 1/1/2008, results as of 11/13/2009:
Total return: +15.05%;
2008 Performance: -4.79%
2009 YTD: 20.84%
Portfolio X-Ray:
Stocks 52.3%; Bonds 38.1%; Cash 9.6%
Stocks: US 56.00%; International 44.00%
US equities:
Large cap 27.4%;
Mid cap 22.8%; Small Cap 49.8%
Value 36.9%;
Blend 53.0%;
Growth 10.1%
International equities:
Europe 24.1%;
Pacific 38.5%;
Canada 18.9%;
Emerging Markets 18.5%
Bonds
Taxable 78.70%;
Uncategorized 21.30%
Credit quality High 78.7%;
Uncategorized 21.30%
Duration: Medium 20.2%
Low 58.5%
Uncategorized 21.3%
Costs
Portfolio average 1.72%
Portfolio construction notes:
The portfolio is constructed to solve a basic flaw in traditional portfolio construction. Diversification using high volatility equity funds (even index funds with market volatility) results in deep losses during bear markets as most such equities become correlated and go down together.
Just depending on bond allocation to reduce losses requires primarily allocation to Treasuries as it is the only type of asset that can be depended on to show negative correlation with equities in bear markets. But unlike in the past, Treasuries starting with the current situation of low interest rates cannot be expected to provide much gains going forward so the portfolio may turn out to be too conservative or too aggressive based on what happens in the market regardless of how much is allocated to Treasuries.
As a solution, portfolio picks only funds designed with a strategy to reduce/minimize losses during long bear markets and has some capital protection goals in place. The overall volatility is reduced by depending on each fund to reduce its own volatility rather than depend on lack of correlation to reduce the volatility.
Note that this is not the same thing as picking funds with the highest returns in either bear or bull markets or both. Nor are the returns attributable to some fantastic market timing in picking which stocks to buy and when to sell.
In fact, most of these funds will likely not consistently appear in the top 10% of their class except occasionally. But all of them will have shown the ability to limit losses by reacting to long-drawn down market conditions and make decent gains in long-drawn up market conditions.
In other words, the only market timing they will show will be in recognizing long bear markets as in recognizing the difference between 2008 and 2009, not what happens month to month. None of them try to time tops and bottoms.
Methodology:
Portfolio Requirements:
1. Capital protection and lack of volatility extremely important. No long periods of losses. No "wait for 10-20 years or more" excuse for losses.
2. Asymmetric behavior - as much of the upside as possible, as little of the downside as possible
3. Simple portfolio with high quality no-load funds widely available in the main brokerages
4. Only annual tune-ups
5. Total return more important than income
6. No assumption of bull/bear markets for the portfolio as a whole, no forecasted assumptions of economy or any other indicators, doom/gloom predictions, etc.
Concrete requirements:
1. Not more than 12 funds.
2. No single fund with less than 5% allocation or more than 15% allocation
3. Portfolio must be diversified but not necessary to cover all asset/fund classes. Only asset classes that have shown consistent returns without long loss periods and small drawdowns. Riskier assets only within risk-managed funds.
4. No assumptions of correlation or lack of correlation between asset classes going forward but no gross overlaps between funds. Some overlap is fine.
Screening criterion for funds:
1. No-load, ER less than or equal to category average, been in existence for at least 5 years.
2. No losses in 3, 5 or 10 yr (if available) rolling periods (amazing how many asset classes or funds drop out here)
3. Manager has been around for at least the category average
4. Minimum initial purchase not more than $3000 (i.e., minimum not more than $60k portfolio)
5. Best 3 month performance must be better than worst 3 month performance over its lifetime (amazing how many funds you lose with this criterion)
6. Best volatility-adjusted performance (3-yr and 5-yr) in class, not necessarily the best returns.
7. Volatility of each fund on its own must not exceed 10% of total stock market index, total bond index or balanced index as appropriate.
8. Lowest volatility to break a tie all else remaining the same.
9. No bias towards active or passive funds as long as the above criterion are satisfied
10. Allocation percentages based entirely on relative volatility-adjusted returns (3-yr and 5-yr), no ad hoc allocation decisions.

Hi Catch, I will look into your suggestions. I'm a US expat living in Spain. For that reason I don't believe that I need any more foreign exposure, and would rather invest in bond funds Stateside. Funds that I'm consider are: FTBFX, DODIX, BCOIX, MWTRX, WEFIX, and PRWBX. I'm certainly open to suggestions. Not interested in Hi Yield, or anything racy. I'm tired of having cash sit in the bank, losing purchasing power by earning practically 0% interest.

Howdy glampig,
Fidelity indicates $25K minimum for WEFIX, and they too have a $75 TF. Gotta like the ticker though.....
Not knowing where you're headed with investments; but also take a peek at VWINX for a conservative blend.
Regards,
Catch

Thanks so much for the responses, Mark and Catch22. Fundamentals was obviously a deep data driller who took the time to develop a portfolio for someone with my needs. Since Fundamentals posted his MM/LL in November/ December 2009, 2 funds (BPLEX & ARBFX) closed and 2 funds (HSTRX & WEFIX) have TFs at Schwab. WEFIX also has a $100k buy in that is too rich for these Roths. I’m currently researching alternatives for those funds, including MERFX which, as Fundamentals noted, is possibly a bit too fat to be as effective as ARBFX. Fundamentals was gracious enough to provide a list of other choices so I’ll start there. Again, thanks for ferreting this. I regret being so late in returning to investing that I missed the opportunity to get to know Fundamentals before his passing. At least through FA/MFO, his contribution continues to live on. PS, Mark, my wife received an iPad 2 for Christmas…remembering you as an Apple fan. Happy New Year! Rick, the glampig

PART 2
Screening criterion for funds:
1. No-load, ER less than or equal to category average, been in existence for at least 5 years.
2. No losses in 3, 5 or 10 yr (if available) rolling periods (amazing how many asset classes or funds drop out here)
3. Manager has been around for at least the category average
4. Minimum initial purchase not more than $3000 (i.e., minimum not more than $60k portfolio)
5. Best 3 month performance must be better than worst 3 month performance over its lifetime (amazing how many funds you lose with this criterion)
6. Best volatility-adjusted performance (3-yr and 5-yr) in class, not necessarily the best returns.
7. Volatility of each fund on its own must not exceed 10% of total stock market index, total bond index or balanced index as appropriate.
8. Lowest volatility to break a tie all else remaining the same.
9. No bias towards active or passive funds as long as the above criterion are satisfied
10. Allocation percentages based entirely on relative volatility-adjusted returns (3-yr and 5-yr), no ad hoc allocation decisions. Individual fund notes:
FVALX, INTLX: These Forester funds have demonstrated the ability to limit losses by going to cash when conditions so indicate and they do so without worrying about whether they will fully participate in the recovery. Hence they fit the goals of this portfolio well. Forester was so successful with this simple strategy that FVALX became the only equity fund to have positive (albeit close to zero) returns in 2008.
Unfortunately, this brings in people who look at the rankings, see this fund at the top in 2008 and invest and get disappointed when the fund lags in a bull market.
This fund is chosen for the very strategy (that was incidentally vindicated in 2008) with the full knowledge that it will not necessarily be anywhere near the top in bull markets or even beat the index.
Alternative to FVALX is Amana Income AMANX which does not provide as much downside protection but has done well using a very conservative approach in value investing and keeping the volatility low but it will be slightly more volatile than FVALX. Another slightly higher volatile alternative is Yacktman fund (YACKX)
Alternative to INTLX is Sextant International SSIFX (coincidentally managed by the manager of AMANX) for similar reasons.
AMAGX: A very well managed Large Cap growth fund with a long history of good performance. The downside protection is also reasonable within its class even though there does not appear to be any capital protection strategies in place.
QRSVX: Not a well known fund but is one of the very few funds that is widely available without a transaction fee, has at least a 5 year history and has managed to limit downside in the bear market in the small cap category. The volatility is also kept low.
A better known substitute is Royce Special Equity (RYSEX) if available without a transaction fee. Newer Intrepid Small Cap (ICMAX) has done very well although its short history may be a concern as well as Pinnacle Value (PVFIX) if available without a transaction fee. Both ICMAX and PVFIX are low volatility funds and have capital protection as a goal of the fund to fit the goals of this portfolio well.
MAPIX: The only selection without a 5 year history but comes with a very strong pedigree from Matthews Asia that specializes in Asian funds. This fund has extremely low volatility, even lower than most domestic equities and has managed to deliver very good total returns with a combination of stocks, convertibles and preferred shares.
Alternatives would be either Matthews Asia Pacific (MPACX) at higher volatility with good downside protection or Matthews Asian Growth and Income (MACSX) at lower volatility but can potentially lose more money in bear markets.
BPLEX: An alternative investment fund that tries to get good returns in both bull and bear markets. A long-short fund that can be mistaken for another performance chasing choice because of its recent performance. But this would be a good choice even if its performance in 2009 was just average or even below average.
Looking under the hood shows this fund to be quite different from other long-short funds that try to use both long and short depending on the stock valuations. This fund seems to switch between a primarily long fund (but with short positions to hedge) with good stock selection or a primarily short fund (with long positions to hedge) depending on the macro market conditions thus minimizing individual stock market timing risks.
This is not different in strategy from Forester's philosophy except that its uses shorting rather than just go to cash and uses small caps rather than large caps.
So it does very well in longer bear or bull market years and lags during transitions but without losing much money. Unfortunately, none of the alternatives for this fund come anywhere close to it in performance as they primarily seem to depend on picking the right stocks to go long or short across all conditions rather than acting like a good long fund or a good hedged fund depending on macro conditions. It is a unique standout.
ARBFX: Another alternative investment fund which depends on arbitraging mergers and acquisitions by buying a company that is being acquired and often shorting the company acquiring. The risks for such funds come only if the M&A does not go through. The earlier you get on as soon as an M&A is announced, the riskier. This fund takes very little risks by waiting to get on and arbitraging just the last few months before an M&A. This keeps the volatility very low and the gains low as well.
An alternative is the similar Merger fund (MERFX) which has a disadvantage because of its size and so may not be able to move quickly in and out.
HSTRX: Hussman's conservative allocation fund is managed in a risk-managed fashion where the portfolio is continually and pro-actively positioned to address the current risk evaluation of the market. Unlike his strategic growth fund, this fund does not take any significant bets on equities and so any incorrect decisions in his strategy does not have as much of a downside impact unlike the other fund. This has allowed HSTRX to show very consistent and impressive performance over a long period of time with very little volatility.
MGIDX: Intermediate duration mortgage securities fund that manages to keep volatility low with good performance and uses shorting/options to achieve this. The ability to short or use options will make this fund able to provide downside protection and manage credit and interest risks, a good idea when mortgage rates are likely to rise in the future.
Alternative is PTMDX - PIMCO Mortgage-Backed Securities D which shorts even more aggressively.
PGNDX: A GNMA fund that manages risk via shorting while preserving the upside of a GNMA fund. Good due to the same reasons as MGIDX above.
Alternatives are non-shorting GNMA funds such as USGNX from USAA, VFIIX from Vanguard or BGNMX from American Century which may have more losses if the mortgage rates were to rise rapidly.
PTTDX: An intermediate investment grade fund that also manages risk via shorting and useful in an expected interest rate rising environment in the future. Low volatility.
Alternatives are non-shorting funds with low volatility THOPX Thompson Plumb Bond or CPTNX American Century Government Bond Inv WEFIX: A fund with the ability to move between short and intermediate durations based on market conditions and hence able to take advantage of the conditions better than a strictly short term fund. Does not use shorting.
Alternatives are USSBX from USAA, WEFIX Weitz Short-Intermediate Income, VFISX Vanguard Short-Term Treasury, PLDDX PIMCO Low Duration D. The last one from PIMCO does use shorting.

Howdy glampig/Mark,
This is "Fundmentals" MakeMore/LoseLess MMLL write from Nov/Dec 2009:
Two parts are required, as the text body exceeds the limits of this web site.
Regards,
Catch
PART 1
Posted by: Fundmentals
Date: November/December 2009
Subject line: Model portfolio design
Body of post:
I am sure many of you have come across the situation of a friend or a family member clueless about investing ask you to help them with a stash of money. The real-life requirements are usually "simple":
1. "Want your help to make some money. I can lose money all by myself"
2. "I can put it in the market for 5 years. Can leave it there longer if it is making money but not if it is losing money"
3. "Don't ask me to do anything more than once a year"
The following portfolio is designed specifically for people that are not
(a)expecting to beat the market
(b)don't want the portfolio to go down much (likely to panic and sell at the bottom if they went down 10% or more)
(c) would like some decent gains - more than what they can get with money market funds, CDs or even just bond funds without which they will not take the risk of investing at all and
(d) don't want to fiddle with it more than once a year.
The Portfolio
Domestic Equity:
5% Forester Value (FVALX) - Large Value
5% Amana Trust Growth (AMAGX) - Large Growth
5% Queens Road Small Cap Value (QRSVX) - Small Value
International/Global equity:
10% Forester Discovery (INTLX) - World Allocation
10% Matthews Asia Dividend (MAPIX) - Diversified Asia/Pacific
Alternate investments:
10% Robeco Long/Short Eq Inv (BPLEX) - Long/short equity
10% Arbitrage Fund (ARBFX) - Merger/arbitrage
15% Hussman Total Return (HSTRX) - Conservative allocation
Bonds
7.5% Managers Intermediate Govt (MGIDX) - Mortgage securities/Govt
7.5% PIMCO Total Return D (PTTDX) - Intermediate Investment Grade Bond
7.5% Weitz Short-Interm Income (WEFIX) - Short-Intermediate Term Investment Grade Bond
7.5% PIMCO GNMA D (PGNDX) - GNMA
Backtested performance
If portfolio invested on 1/1/2008, results as of 11/13/2009:
Total return: +15.05%;
2008 Performance: -4.79%
2009 YTD: 20.84%
Portfolio X-Ray:
Stocks 52.3%; Bonds 38.1%; Cash 9.6%
Stocks US 56.00%; International 44.00%
US equities
Large cap 27.4%; Mid cap 22.8%; Small Cap 49.8%
US equities
Value 36.9%; Blend 53.0%; Growth 10.1%
International equities
Europe 24.1%; Pacific 38.5%; Canada 18.9%; Emerging Markets 18.5%
Bonds
Taxable 78.70%; Uncategorized 21.30%
Credit quality High 78.7%; Uncategorized 21.30%
Duration Medium 20.2% Low 58.5% Uncategorized 21.3%
Costs: Portfolio average 1.72%
Portfolio construction notes:
The portfolio is constructed to solve a basic flaw in traditional portfolio construction. Diversification using high volatility equity funds (even index funds with market volatility) results in deep losses during bear markets as most such equities become correlated and go down together.
Just depending on bond allocation to reduce losses requires primarily allocation to Treasuries as it is the only type of asset that can be depended on to show negative correlation with equities in bear markets. But unlike in the past, Treasuries starting with the current situation of low interest rates cannot be expected to provide much gains going forward so the portfolio may turn out to be too conservative or too aggressive based on what happens in the market regardless of how much is allocated to Treasuries.
As a solution, portfolio picks only funds designed with a strategy to reduce/minimize losses during long bear markets and has some capital protection goals in place. The overall volatility is reduced by depending on each fund to reduce its own volatility rather than depend on lack of correlation to reduce the volatility.
Note that this is not the same thing as picking funds with the highest returns in either bear or bull markets or both. Nor are the returns attributable to some fantastic market timing in picking which stocks to buy and when to sell.
In fact, most of these funds will likely not consistently appear in the top 10% of their class except occasionally. But all of them will have shown the ability to limit losses by reacting to long-drawn down market conditions and make decent gains in long-drawn up market conditions.
In other words, the only market timing they will show will be in recognizing long bear markets as in recognizing the difference between 2008 and 2009, not what happens month to month. None of them try to time tops and bottoms.
Methodology
Portfolio Requirements:
1. Capital protection and lack of volatility extremely important. No long periods of losses. No "wait for 10-20 years or more" excuse for losses.
2. Asymmetric behavior - as much of the upside as possible, as little of the downside as possible
3. Simple portfolio with high quality no-load funds widely available in the main brokerages
4. Only annual tune-ups
5. Total return more important than income
6. No assumption of bull/bear markets for the portfolio as a whole, no forecasted assumptions of economy or any other indicators, doom/gloom predictions, etc.
Concrete requirements:
1. Not more than 12 funds.
2. No single fund with less than 5% allocation or more than 15% allocation
3. Portfolio must be diversified but not necessary to cover all asset/fund classes. Only asset classes that have shown consistent returns without long loss periods and small drawdowns. Riskier assets only within risk-managed funds.
4. No assumptions of correlation or lack of correlation between asset classes going forward but no gross overlaps between funds. Some overlap is fine.