Yeah. Akre is just remarkable and one hopes he does not turn into Bill Miller. His fund has outperformed such other superior small-number-of-holdings vehicles YAFFX, FAMEX, and FTQGX, and also even CAPE.

There was a thread not that long ago linking a paper that claimed M* understated credit risks of bond fund holdings. M* and the authors had some back and forth.
That MFO thread wound up in the bullpen. Here's a M* discussion community thread on the paper.
One fact I got out of the paper was that M* treats nonrated bonds as junk. In contrast, funds themselves use their internal ratings for those bonds when calculating average credit quality. So while M* doesn't even give a style box value for this fund, if it did the credit rating would be low quality (junk), regardless of whether that made sense for the unrated portfolio.
You are correct that M* equates risk with volatility (giving more weight to downside volatility) and disregards the underlying portfolio. Its rationale, according to its methodology, is that such attributes are implicitly accounted for when it classifies the fund:

A style profile may be considered a summary of a fund’s risk-factor exposures. Fund categories define groups of funds whose members are similar enough in their risk-factor exposures that return comparisons between them are useful.

That's certainly suspect with junk munis. My "classic" example is BCHYX, a California junk bond fund that M* lumps together with California longs.
This is more than a random example. M* classifies HICOX as a single state intermediate muni. The manager describes its peers as being "in the High Yield Municipal Debt Fund category." (Annual statement).
Most people seem to take "risk" (really volatility) adjusted returns at face value. You're going further - questioning not only whether volatility is a good metric for risk, but why aren't obvious risk attributes like credit quality explicitly incorporated? Good question!
Just looking superficially at the fund, I can offer a good news/bad news reason for buying/not buying it. It's been managed by the same manager for three decades. One's got to figure that if it hasn't had a major blowup in that period of time (I haven't checked), then he knows what he's doing with all these bonds. (Though as you point out, they're very narrowly focused and the landscape may be changing.)
But any fund, not just this one, with a single manager for that period of time has significant management risk, especially when virtually its whole portfolio consists of unrated securities. In the Annual Statement, he describes himself as "new to Medicare", i.e. mid-to-late 60s.
Since you asked about pricing, see Note 2 in the Annual Statement. It's pretty much boilerplate but goes to describe how bonds are priced. The fund has no level 1 bonds, meaning bonds that trade frequently (so that you can quote the market price directly). Most of the bonds are level 2, meaning that while these particular bonds may not be trading frequently, there are enough "comps" to get a good estimate. Level 3 is divining prices from unobservable data.
"Securities for which there is no last sales price are valued by an independent pricing service based on evaluated prices which considers such factors as transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities, or are fair valued by management. "

I may be slow, so help me out. LDVAX aims to replicate an index by taking positions in companies not in the index. I get CAPE and MOAT, which I own, because they invest in stocks that are part of their relative indices. CAPE does it indirectly through instruments I don't fully understand, but MOAT defines its index members quarterly and buys equal weights of the components. Both CAPE and MOAT do really well matched against SPY and I sometimes trade in and out of these ETFs depending on market conditions. I don't understand how LDVAX's managers can examine VC/PE activity for the previous quarter and translate those findings into buys or sells of companies not the subject of the activity. I recognize that existing listed companies might be receiving new infusions of capital though VC/PE, thereby making them candidates for purchase. However, for start-ups or brand new ideas, there won't be a listed stock and, more importantly, if the newby has some truly revolutionary idea or technology, there won't be a similar stock to buy. I can't argue with LDVAX's results, but they need to be put in the context of a perfect recent market environment for growth and an apparent need to trade furiously. S/T CG have risen over the fund's three-year history, so there are tax consequences. I'm hoping a board member understands better than I what the secret sauce is that juices the returns. My problem may be that I'm like the HS football team I played on: we were small, but we were slow.

DoubleLine has an international Shiller/CAPE strategy that may be of interest to value investors. The tickers are DLEUX/DSEUX.
dinky linky

Maintain a core portfolio of debt instruments that focuses on global fixed income rotation while simultaneously obtaining exposure to the European Equity sector rotation strategy via The Shiller Barclays CAPE® Europe Sector Net TR USD Index. The Index aims to identify undervalued sectors based on a modified CAPE® Ratio, and then uses a momentum factor to seek to mitigate the effects of potential value traps. By using both a value indicator and a momentum indicator, the Index aims to provide more stable and improved risk adjusted returns. The CAPE® Ratio is used to assess equity markets valuations and averages ten years of reported earnings to account for earnings and market cycles. European sectors are equal-weighted notional long exposure to four European sectors that are undervalued. Each European sector is represented by a sector index. Each month, the Index ranks ten European sectors based on a modified CAPE® Ratio (a “value” factor) and a twelve-month price momentum factor (a “momentum” factor). The Index selects the five European sectors with the lowest modified CAPE® Ratio — the sectors that are the most undervalued according to the CAPE® Ratio. Only four of these five undervalued sectors, however, end up in the Index for a given month, as the sector with the worst 12-month price momentum among the five selected sectors is eliminated. The sectors are typically comprised of issuers represented in the MSCI Europe Index, which captures large and mid cap stocks across 15 developed market countries in Europe.

I believe they will Lewis because that's the way the world is moving. Progress might be slow and measured but I think we might be shocked by the investing landscape 10 years from now compared to today. Just in energy related issues alone we'll see more alt-energy adopted, batteries, electric vehicles even if just hybrid types and the list goes on. Changes are coming, at least I hope so.

Hi @Gary1952,
Welocme to MFO.
Thank you for your question.
This should help provide an understanding of how I govern my portfolio along with how the pieces fit into a master portfolio. The hybrid income sleeve is a big part of my portfolio and is detailed below.
Consolidated Master Portfolio & Sleeve Management System ... Last Revised on 12/31/2019
Now being in retirement here is a brief description of my sleeve management system which I organized to better manage the investments held within mine and my wife's portfolios. The consolidated master portfolio is comprised of two taxable investment accounts, two self directed retirement accounts, a health savings account plus two bank savings accounts. With this, I came up with four investment areas. They are a Cash Area which consist of two sleeves ... an investment cash sleeve and a demand cash sleeve. The next area is the Income Area which consist of two sleeves ... an income sleeve and a hybrid income sleeve. Then there is the Growth & Income Area which has more risk associated with it than the Income Area and it consist of four sleeves ... a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. Then there is the Growth Area where the most risk in the portfolio is found and it consist of five sleeves ... a global growth sleeve, a large/mid cap sleeve, a small/mid cap sleeve, an other investment sleeve plus a special investment (spiff) sleeve. The size of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds held and their amounts. By using the sleeve management system I can get a better picture of my overall investment landscape. I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly for analysis. All my funds with the exception of those in my health savings account pay their distributions to the Cash Area of the portfolio. This automatically builds cash in the Cash Area to meet the portfolio's disbursement needs (when necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio's five year average return. In this way principal builds over time. In addition, most buy/sell transactions settle from, or to, the Cash Area with some net asset exchanges between funds taking place. My rebalance threshold is + (or -) 2% of my neutral allocation for my Income Area, Growth & Income Area and Growth Area while I generally let the Cash Area float. However, at times, I can tactically position by setting a target allocation that is different from the neutral weighting to overweight (or underweight) an area without having to do a forced rebalance. I do an Instant Xray analysis of the portfolio quarterly and make asset weighting adjustments as I feel warranted based upon my assessment of the market(s), my goals, my risk tolerance, my cash needs, etc. I have the portfolio set up in Morningstar's portfolio manager by sleeve, by each area and the portfolio as a whole for easy monitoring plus I use brokerage account statements, Morningstar fund reports, fund fact sheets along with their annual reports to follow my investments. In addition, I use my market barometer and equity weighting matrix system as a guide to assist me in throttling my equity allocation through the use of equity ballast, or a spiff position, when desired. I also maintain a list of positions to add (A) to, to buy (B), to reduce (R), or to sell (S). Generally, funds are assigned to a sleeve based upon a best fit basis. Currently, my investment focus is to position new money into income generating assets. The last major rebalanced process was started during the 4th Quarter of 2018 and was completed in the 1st Quarter of 2019 along some sleeves being reconfigured along with the movement to a new asset allocation.
Portfolio Asset Allocation: Balanced Towards Income ... 20% Cash, 40% Income, 30% Gr & Inc and 10% Growth
CASH AREA: (Weighting Range 15% to 25%, Neutral 20%, Target 15%, Actual 14%)
Demand Cash Sleeve ... Cash Distribution Accrual & Future Investment Accrual
Investment Cash Sleeve ... MMK Funds: AMAXX, TTOXX, PCOXX, CD Ladder & Savings
INCOME AREA: (Weighting Range 35% to 45%, Neutral 40%, Target 40%, Actual 39%)
Income Sleeve: BLADX(A), FLAAX(B), GIFAX, JGIAX(A), LBNDX, NEFZX, PGBAX, PONAX & TSIAX
Hybrid Income Sleeve: APIUX(A), AZNAX(A), BAICX, CTFAX, DIFAX, FBLAX, FISCX, FKINX, FRINX(A), ISFAX, JNBAX & PMAIX
GROWTH & INCOME AREA: (Weighting Range 25% to 35%, Neutral 30%, Target 30%, Actual 32%)
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX(A) & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, HWIAX & LABFX
Global Equity Sleeve: CWGIX, DEQAX, DWGAX(A) & EADIX
Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
GROWTH & OTHER ASSET AREA: (Weighting Range 5% to 15%, Neutral 10%, Target 15%, Actual 15%)
Large/Mid Cap Sleeve: AGTHX, AMCPX & SPECX
Small/Mid Cap Sleeve: AOFAX, NDVAX & PMDAX
Global Growth Sleeve: ANWPX, NEWFX & SMCWX
Other Investment Sleeve: KAUAX(A), LPEFX & PGUAX
Equity Ballast & Spiff Sleeve: No position held at this time.
In addition, my all weather asset allocation might be of some interest to you as well. Below is my blurb arbout it.
Old_Skeet's All Weather Asset Allocation.
My all weather asset allocation of 20% cash, 40% income and 40% equity affords me everything necessary to meet my needs now being in the distribution phase of investing. The benefit of this asset allocation is that it provides sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
The 20% held in cash area provides me ample cash should I need a cash draw over and above what my portfolio generates plus it can provide the capital necessary to fund a special investment position (spiff) should I choose to open one during a stock market pullback. In addition, cash helps stabilize a portfolio during stock market volatility. Example of investments held in this area are cash, money market mutual funds and CD's.
The 40% held in the income area provides me ample income generation to meet my income needs in retirement. It is a well diversified area that incorporates a good number of income generating type funds. Some examples of investments held in this area are ISFAX, PONAX & PGBAX.
The 40% held in the equity area provides me some dividend income along with some growth, that equities generally provide, that offsets the effects of inflation over time. Some examples of investments held in this area are NEWFX, SVAAX, SPECX
Generally, for my income distributions, I take no more than a sum equal to what one half of my five year average total return has been. In this way principal grows over time.
@Gary1952 ... Thanks again for your question. I'm thinking the above information will provide the answer(s) you seek (or might seek) about me (going forward) as to how I govern.
Old_Skeet

Baseball_Fan: "Following closely the Bond OEF Investing for more Conservative Investors...does anyone on that thread really trust/know what their funds are invested in? Even conservative funds with asset backed holdings rated highly by the rating agencies you have to wonder don't you? Crazy how many high priced homes I see owned by folks who drive older beat up cars. Don't want to sound elitist but something tells me they are leveraged to the hilt which could spell trouble if interest rates/job market/economy changes. Driving up Sheridan Road in the affluent North Shore burbs of CHI seems every fifth McMansion is up for sale...and same homes been for sale seems like over two years...escape from taxes and/or many of those folks living in those expensive homes know we are in an epic asset bubble?"
B, I hope you get something out of the Bond OEF Investing for more Conservative Investors. I do believe you have to establish some trust in the fund managers of the bond oef fund you are considering, and you have to invest in a manner that fits your risk level. Most bond oef mutual funds have a huge number of assets, that are broken down into categories of bond funds--government, corporates, securitized assets, derivatives, HY and Foreign assets, etc. etc. You have to do extensive due diligence to understand the fund, but it is very difficult to have a level of detailed understanding you are looking for. My due diligence often is tied to looking at detailed analytical information available on the fund web site, in its annual and semiannual performance statements, in its prospectus, etc. but ultimately I like to look at the fund on Portfolio Visualizer, see visually its performance patterns, look at upside/dowside capture ratios, study standard deviation, Sharpe and Sortino ratios, look at Peak to Trough performance in downmarkets, etc. I try to form a strong impression of what to expect from a fund, and I have to form a lot of trust in the fund managers. You have to decide what works for you, and your fund understanding, but there is a lots of information out there to help determine if it fits your needs, and the role you want fulfilled by a given fund under consideration.
Come visit me on the thread you mentioned, and you may find a host of other posters willing to give you some thoughts you may find worthwhile! Good luck and best wishes!

First time poster, greetings to all, posting some investment thoughts via stream of consciousness, all feedback welcome
I'm heavily invested in Dominion Energy Reliability Notes, paying 2.7% / $50k+ investments, you are lower on the capital structure here, full access to your funds at any time, no FDIC but backed by the financial strength of the company. Does anyone have any experience investing in these Notes or have additional input?
Following closely the Bond OEF Investing for more Conservative Investors...does anyone on that thread really trust/know what their funds are invested in? Even conservative funds with asset backed holdings rated highly by the rating agencies you have to wonder don't you? Crazy how many high priced homes I see owned by folks who drive older beat up cars. Don't want to sound elitist but something tells me they are leveraged to the hilt which could spell trouble if interest rates/job market/economy changes. Driving up Sheridan Road in the affluent North Shore burbs of CHI seems every fifth McMansion is up for sale...and same homes been for sale seems like over two years...escape from taxes and/or many of those folks living in those expensive homes know we are in an epic asset bubble?
Heavily invested in Brookfield Asset Management (BAM) and Berkshire - B (BRK/B), consider them a sort of "defacto", well managed, mutual funds without the fees. Follow Akre and Ackman via GuruFocus new holdings, have invested in Agilent (A) and Descartes Systems Group (DSGX). Heavily invested in Medtronic (MDT) and Teleflex (TFX), we're all getting older and looking for the repeal of the ridiculous Medical Device Tax (taxes profits not revenue, huh, who thought that was a good idea, companies thus cut jobs or sent solid paying jobs overseas).
Not a fan of Mutual funds, no out performance, "skimming off the top" with their management fees. ETFs are not for me, do like their low cost but too linked to herd behavior, what goes up must come down, no? I'm amazed by how many folks who invest in their 401Ks etc just follow what they are told by the "plan representatives" and have no idea how the markets work or what they are invested in.
Investment style is "anti-fragile" ala Taleb. Majority % of investments in safe, very conservative investments (T-Bills, 5 year CDs), smaller % in DERI Dominion Notes and ~15-20% in handful of stocks mentioned above.
Comments?
Good investing to all,
B

Right. Was just registering that since CAPE notionally buys and sells monthly, it made sense (to me anyway) why they would not report that activity in real time.

>> I can't find what four sectors it is effectively invested in until after the fact; is there a real-time source of what's in the CAPE index?
perhaps to prevent frontrunning and such, no ?

DSENX seems like a pretty straightforward fund. It has 200% exposure to "the market", or if you prefer, 100% exposure to the US equity market and 100% exposure to the bond market.
IMHO the major risk is that it is effectively 100% leveraged. How it achieves that leverage (which happens to be via total return swaps) is secondary. In essence, the swaps give it 100% (notional) exposure to the CAPE index for virtually no cash. So it is free to deploy its full NAV investing in bonds.
The aspects of this fund that I find opaque are not its use of derivatives, but rather that:
- I can't find what four sectors it is effectively invested in until after the fact; is there a real-time source of what's in the CAPE index?
- the bond portfolio is actively managed in a way I haven't discerned.
It behaved in the 4th quarter of 2018 about the way one would expect. It didn't deviate much from CAPE, so you can figure that the small differences were due to its bond exposure moving in small but mysterious ways. From M*, comparing DESNX to CAPE (NAV):
Oct 2018: -8.38% vs. -8.17%
Nov 2018: 1.42% vs. 1.53%
Dec 2018: -9.00% vs. -8.62%
Aside from overhead, it looks like the bond portfolio dragged down the return by about ½% over the quarter. Given the opacity of that part of the portfolio, a small drop while AGG was rising 1.62% shouldn't come as a shock. For example, PIGIX dropped 0.17% in that quarter.
As to the risk in total return swaps, it depends on how they're used and for what purpose (defensive or to enhance returns). VWELX, hardly an aggressive fund, may use these swaps:
"[VWELX] may also invest, to a limited extent, in derivatives. ... The Fund’s derivative investments may include ... total return swaps, and other types of derivatives. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns."
DESNX uses derivatives for the purpose of leveraging (magnifying) investment returns. Again, it's not the derivative per se that is the source of much of the risk so much as how it is used. Regardless, DoubleLine makes it pretty clear how the swaps are being used. In this sense, it's a fairly straighforward fund.

@David_Snowball

Is this a useful focus? How might I improve it?

I think it's worth adding international exposure even if it didn't hold up as well in the last crash for the full cycle. The thing is, to improve results one must always be thinking forward and while performance history is useful, it is only useful in regard to finding clues to how something might perform in the future. So the question becomes what fund on the list might repeat its success during the next market cycle and what isn't on the list that will also do well? I think international exposure is important now for two reasons--relative valuations between U.S. and emerging markets are particularly wide, increasing one's opportunity set with emerging exposure. But two, and this has been true for a long time, Americans have a significant home country bias even if they don't own stocks at all. Most of one's assets and human capital are "invested" in the U.S. if one includes one's home, bank accounts and job which pays in U.S. dollars.
Regarding the existing list, I think it is important to analyze sector exposures within funds that performed in the last cycle and analyze how those sectors might perform in the next cycle. Yacktman for instance has long held exposure in consumer defensive or staples stocks such as Proctor & Gamble, Coca-Cola, Pepsi, Johnson & Johnson in addition recently to a large slug in Samsung. The question to ask is has anything changed in the commercial outlook for such steady-eddies? I would argue for instance a lot has changed for a company like Proctor & Gamble as thanks to the Internet the competitive landscape for purchases like razor blades and soap is different. The question then becomes is the money manager aware of these changes. in Yacktman's case, I think the answer is yes from my experience with them. Yet just because you're aware of significant changes in the mainstays of your portfolio, doesn't mean you have figured out what suitable replacements might be yet. That can be quite challenging. One can do a similar analysis with Prospector Opportunity, which has significant exposure to the financial services sector, albeit that sector has diversification within it in various sub-sectors.

David, I get the sector breakout. It’s the derivatives that no one can explain - they juice the returns a bit I imagine. I’ll go back to that Buffett quote, derivatives are financial weapons of mass destruction.

This knock is fun to read, 6y on:
https://www.etf.com/sections/blog/20177-inside-professor-shillers-cape-etn.html
I cannot find that he has written a word since. AUM now $200M.

@DS, yeah, I read Shiller's piece when it appeared (a few days ago) and found it alarming, not all that helpful, not that it was designed to be. ' ... thoughts that investors have about the thoughts of other investors' seemed chiefly a restatement of the hoary beauty pageant analogy, avoiding which is notionally one of the pluses of the CAPE etn. I certainly hope the automatic value churn partly works around animal spirits. A pity regardless to jump from Keynes's famous locution to Trump's self-regard. Shiller naturally is motivated to side with expertise over animal dreams. I was pleased to see his Nobel unmentioned, and that speech of his rather presages the column:
https://www.nobelprize.org/uploads/2018/06/shiller-lecture.pdf

Hi, David. Shiller had an article in today's (1/5/20) New York Times, if you're interested. He explains the rationale for the Shiller CAPE, notes that it's at its 3rd highest level in history (1929, 1999) and talks a bit about "animal spirits" as an explanation for it.
He makes the old-guy-with-a-PhD (my people!) argument that we increasingly devalue evidence in favor of "trusting our gut." Maybe. I was intrigued to learn that phrases like "gut reaction" only date to the 1960s and 1970s but I'm not sure that the underlying idea is as new as Dr. Shiller assumes.
Hi, gmarceau. "There are 11 industry sectors in the S&P 500. The CAPE index ranks them from most expensive to least expensive, based on their 10 year earnings history, and invests in the five least expensive sectors." It's certainly a bit more complex than that, and DoubleLine implements the strategy with derivatives rather than direct investment, but it doesn't strike me as terribly complex. Some critics think the bigger question is whether there's useful information in a sector's 10 year CAPE. I haven't much looked at the question, though perhaps the other David has?
David

Even with u/d symmetry, things can go well (obviously; in a rising market).
SP500 capture = 1, u/d 100/100.
CAPE (whose index is SP500) u/d likewise = 1, 103/103. In its 7+y, it adds (to a $10k startpoint) ~$7k above SP500, ~$30k vs ~$23k. That seems a lot of added value.
DSENX even more than that, with its 1.12 capture. Special bond sauce is the difference from CAPE.
Is CAPE's automatic monthly operating principle marketing timing, or defensive? Or both? Must reread the P&I article @msf cites. By RGoldsticker (great name) of ABiller & Assoc.

Hi, David.
I simply set the screener using three parameters:
Category - 12 styles (LCV, etc) plus Equity Income, Aggressive Allocation, Flexible
Universe - mutual funds or ETFs
Display - full cycle 5
You get a warning that there are 1400 resulting funds and the list will be truncated to the 1000 with the highest APR unless you add criteria. I just accepted the top 1000.
On the results screen, I scroll over to "Capture SP500" and click. That sorts them by that criterion.
When I shift to a six-year display (because DSENX is 6), it is more or less 70th on the list.
DoubleLine Shiller Enhanced CAPE DSENX
Capture 1.12
Downside capture 102
Upside capture 114
APR 15.0
Does that help?
David

I wonder if this affects / will affect CAPE and DSEEX.
I remembered that Nocera piece only because one of my kids was in B-school at the time and commencing formal study of VaR, Taleb all the rage. Also I was making then losing money with Novastar. (French taught at that B-school, so also much ultrafine discussion of efficiency in markets.)

Hi @Starchild,
Thanks for your comment and question that you directed my way. Many of my American Fund holdings came to me via gift and inheritance with some of the funds dating back a couple of generations thus being in family hands all the way back to my great grandfather. As my great grandfather and grandfather sold off farm land they invested the sale proceeds and spread it out among family members with some of it being invested in American Funds. We also have a policy of not putting all of our eggs in a single basket.
Starchild I'd like your thoughts on where I overlap. Please consider manager stradegy with your answer as the funds might occupy the same style boxes, etc. but the managers themselves differ using many different investment strategies. Notice I've got growth, value, momentum, contrarian, equity dividend, fixed income of many types, special opportunity, etc.
I'm posting my sleeve management system along with portfolio positions so you have an understaning of what I actually do own for a better understanding of how I govern family money.
Consolidated Master Portfolio & Sleeve Management System ... Last Revised on 11/15/2019
Now being in retirement here is a brief description of my sleeve management system which I organized to better manage the investments held within mine and my wife's portfolios. The consolidated master portfolio is comprised of two taxable investment accounts, two self directed retirement accounts, a health savings account plus two bank savings accounts. With this, I came up with four investment areas. They are a Cash Area which consist of two sleeves ... an investment cash sleeve and a demand cash sleeve. The next area is the Income Area which consist of two sleeves ... an income sleeve and a hybrid income sleeve. Then there is the Growth & Income Area which has more risk associated with it than the Income Area and it consist of four sleeves ... a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. Then there is the Growth Area where the most risk in the portfolio is found and it consist of five sleeves ... a global growth sleeve, a large/mid cap sleeve, a small/mid cap sleeve, an other investment sleeve plus a special investment (spiff) sleeve. The size of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds held and their amounts. By using the sleeve management system I can get a better picture of my overall investment landscape. I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly for analysis. All my funds with the exception of those in my health savings account pay their distributions to the Cash Area of the portfolio. This automatically builds cash in the Cash Area to meet the portfolio's disbursement needs (when necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio's five year average return. In this way principal builds over time. In addition, most buy/sell transactions settle from, or to, the Cash Area with some net asset exchanges between funds taking place. My rebalance threshold is + (or -) 2% of my neutral allocation for my Income Area, Growth & Income Area and Growth Area while I generally let the Cash Area float. However, at times, I can tactically position by setting a target allocation that is different from the neutral weighting to overweight (or underweight) an area without having to do a forced rebalance. I do an Instant Xray analysis of the portfolio quarterly and make asset weighting adjustments as I feel warranted based upon my assessment of the market(s), my goals, my risk tolerance, my cash needs, etc. I have the portfolio set up in Morningstar's portfolio manager by sleeve, by each area and the portfolio as a whole for easy monitoring plus I use brokerage account statements, Morningstar fund reports, fund fact sheets along with their annual reports to follow my investments. In addition, I use my market barometer and equity weighting matrix system as a guide to assist me in throttling my equity allocation through the use of equity ballast, or a spiff position, when desired. I also maintain a list of positions to add (A) to, to buy (B), to reduce (R), or to sell (S). Generally, funds are assigned to a sleeve based upon a best fit basis. Currently, my investment focus is to position new money into income generating assets. The last major rebalanced process was started during the 4th Quarter of 2018 and was completed in the 1st Quarter of 2019 with some sleeves being reconfigured along with the movement to a new asset allocation of 20% cash, 40% income and 40% equity.
Portfolio Asset Allocation: Balanced Towards Income ... 20% Cash, 40% Income, 30% Gr & Inc and 10% Growth
CASH AREA: (Weighting Range 15% to 25%, Neutral 20%, Target 15%, Actual 14%)
Demand Cash Sleeve ... Cash Distribution Accrual & Future Investment Accrual
Investment Cash Sleeve ... MMK Funds: AMAXX, GOFXX(B), PCOXX, CD Ladder(R) & Savings
INCOME AREA: (Weighting Range 35% to 45%, Neutral 40%, Target 40%, Actual 39%)
Income Sleeve: APIUX(A), BLADX(A), GIFAX, JGIAX(A), NEFZX, PGBAX, PONAX & TSIAX
Hybrid Income Sleeve: AZNAX(A), BAICX, CTFAX(A), DIFAX, FBLAX, FISCX, FKINX, FRINX, ISFAX, JNBAX & PMAIX
GROWTH & INCOME AREA: (Weighting Range 25% to 35%, Neutral 30%, Target 30%, Actual 32%)
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX(A) & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, HWIAX & LABFX
Global Equity Sleeve: CWGIX, DEQAX, DWGAX(A) & EADIX
Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
GROWTH & OTHER ASSET AREA: (Weighting Range 5% to 15%, Neutral 10%, Target 15%, Actual 15%)
Large/Mid Cap Sleeve: AGTHX, AMCPX & SPECX
Small/Mid Cap Sleeve: AOFAX, NDVAX & PMDAX
Global Growth Sleeve: ANWPX, NEWFX & SMCWX
Other Investment Sleeve: KAUAX(A), LPEFX & PGUAX
Equity Ballast & Spiff Sleeve: No position held at this time.
Currently, I'm heavy in equity awaiting December mutual fund capital gain distributions that will preform an automatic rebalance of sorts by raising my cash allocation as I recieve all mutual fund distributions in cash. This should bubble me back towards a 20%/40%/40% asset allocation. Equities, indeed, had a nice run this year.

Well ok then Skeet!

Hi @Starchild,
Thanks for your comment and question that you directed my way. Many of my American Fund holdings came to me via gift and inheritance with some of the funds dating back a couple of generations thus being in family hands all the way back to my great grandfather. As my great grandfather and grandfather sold off farm land they invested the sale proceeds and spread it out among family members with some of it being invested in American Funds. We also have a policy of not putting all of our eggs in a single basket.
Starchild I'd like your thoughts on where I overlap. Please consider manager stradegy with your answer as the funds might occupy the same style boxes, etc. but the managers themselves differ using many different investment strategies. Notice I've got growth, value, momentum, contrarian, equity dividend, fixed income of many types, special opportunity, etc.
I'm posting my sleeve management system along with portfolio positions so you have an understaning of what I actually do own for a better understanding of how I govern family money.
Consolidated Master Portfolio & Sleeve Management System ... Last Revised on 11/15/2019
Now being in retirement here is a brief description of my sleeve management system which I organized to better manage the investments held within mine and my wife's portfolios. The consolidated master portfolio is comprised of two taxable investment accounts, two self directed retirement accounts, a health savings account plus two bank savings accounts. With this, I came up with four investment areas. They are a Cash Area which consist of two sleeves ... an investment cash sleeve and a demand cash sleeve. The next area is the Income Area which consist of two sleeves ... an income sleeve and a hybrid income sleeve. Then there is the Growth & Income Area which has more risk associated with it than the Income Area and it consist of four sleeves ... a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. Then there is the Growth Area where the most risk in the portfolio is found and it consist of five sleeves ... a global growth sleeve, a large/mid cap sleeve, a small/mid cap sleeve, an other investment sleeve plus a special investment (spiff) sleeve. The size of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds held and their amounts. By using the sleeve management system I can get a better picture of my overall investment landscape. I have found it beneficial to Xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly for analysis. All my funds with the exception of those in my health savings account pay their distributions to the Cash Area of the portfolio. This automatically builds cash in the Cash Area to meet the portfolio's disbursement needs (when necessary) with the residual being left for new investment opportunity. Generally, in any one year, I take no more than a sum equal to one half of my portfolio's five year average return. In this way principal builds over time. In addition, most buy/sell transactions settle from, or to, the Cash Area with some net asset exchanges between funds taking place. My rebalance threshold is + (or -) 2% of my neutral allocation for my Income Area, Growth & Income Area and Growth Area while I generally let the Cash Area float. However, at times, I can tactically position by setting a target allocation that is different from the neutral weighting to overweight (or underweight) an area without having to do a forced rebalance. I do an Instant Xray analysis of the portfolio quarterly and make asset weighting adjustments as I feel warranted based upon my assessment of the market(s), my goals, my risk tolerance, my cash needs, etc. I have the portfolio set up in Morningstar's portfolio manager by sleeve, by each area and the portfolio as a whole for easy monitoring plus I use brokerage account statements, Morningstar fund reports, fund fact sheets along with their annual reports to follow my investments. In addition, I use my market barometer and equity weighting matrix system as a guide to assist me in throttling my equity allocation through the use of equity ballast, or a spiff position, when desired. I also maintain a list of positions to add (A) to, to buy (B), to reduce (R), or to sell (S). Generally, funds are assigned to a sleeve based upon a best fit basis. Currently, my investment focus is to position new money into income generating assets. The last major rebalanced process was started during the 4th Quarter of 2018 and was completed in the 1st Quarter of 2019 with some sleeves being reconfigured along with the movement to a new asset allocation of 20% cash, 40% income and 40% equity.
Portfolio Asset Allocation: Balanced Towards Income ... 20% Cash, 40% Income, 30% Gr & Inc and 10% Growth
CASH AREA: (Weighting Range 15% to 25%, Neutral 20%, Target 15%, Actual 14%)
Demand Cash Sleeve ... Cash Distribution Accrual & Future Investment Accrual
Investment Cash Sleeve ... MMK Funds: AMAXX, GOFXX(B), PCOXX, CD Ladder(R) & Savings
INCOME AREA: (Weighting Range 35% to 45%, Neutral 40%, Target 40%, Actual 39%)
Income Sleeve: APIUX(A), BLADX(A), GIFAX, JGIAX(A), NEFZX, PGBAX, PONAX & TSIAX
Hybrid Income Sleeve: AZNAX(A), BAICX, CTFAX(A), DIFAX, FBLAX, FISCX, FKINX, FRINX, ISFAX, JNBAX & PMAIX
GROWTH & INCOME AREA: (Weighting Range 25% to 35%, Neutral 30%, Target 30%, Actual 32%)
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX(A) & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, HWIAX & LABFX
Global Equity Sleeve: CWGIX, DEQAX, DWGAX(A) & EADIX
Global Hybrid Sleeve: CAIBX, TEQIX & TIBAX
GROWTH & OTHER ASSET AREA: (Weighting Range 5% to 15%, Neutral 10%, Target 15%, Actual 15%)
Large/Mid Cap Sleeve: AGTHX, AMCPX & SPECX
Small/Mid Cap Sleeve: AOFAX, NDVAX & PMDAX
Global Growth Sleeve: ANWPX, NEWFX & SMCWX
Other Investment Sleeve: KAUAX(A), LPEFX & PGUAX
Equity Ballast & Spiff Sleeve: No position held at this time.
Currently, I'm heavy in equity awaiting December mutual fund capital gain distributions that will preform an automatic rebalance of sorts by raising my cash allocation as I recieve all mutual fund distributions in cash. This should bubble me back towards a 20%/40%/40% asset allocation. Equities, indeed, had a nice run this year.