Reply to @Old Joe : Yes - definition of terms is "Debate 101" and generally the first step in problem solving. Hmmm ... I took Joe's question to be a reference to something I recently heard John Bogle speak about. Bogle takes your annual Social Security benefits (with some yearly "COLA" figured in) and multiplies that by your life expectancy. OK - Let's say your SS will average about $20,000 a year and your life-expectancy is 20 years. Bogle than computes that into a $400,000 bond you're sitting on (20X$20,000). Now, if you're 66 years old and follow his other age-based rule (by holding 66% bonds or other fixed income at that age) than your equity investments should amount to 34% - or about $200,000. I suspect that for some here that $200,000 might well represent the better part of their accumulated retirement savings, and so would therefore question the wisdom of following Bogle's advice to the letter. But, depends on the individual.
Guess I should have been more explicit in my reply. As far as the poster goes, I offered some general observations based on having followed John Bogle a good many years. His writings were among the first I read and enjoyed on the topic of investing. Frankly, am loath to advise anyone on anything financial, believing - as I'm sure you do - the best long-range investment plans derive from within and are tailored specifically to address the circumstances and needs of the individual. Thanks for your thoughts as always :-)

Here we go again: let's not define any terms, it makes it more interesting that way. If there is a standard generally accepted definition of "portfolio", does it or does it not include assets other than financial market products?
If a standard, generally accepted definition says yes or no, then the question answers itself. If there is no standard definition, then anybody can include whatever they darned well want to, and the term "portfolio" means whatever you want it to, so essentially becomes meaningless.
FWIW, Investopedia gives the following definition:
"A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals. "
If the question, as I suspect, is really "should SS be considered an asset for retirement planning purposes", I did, and believe that that is a valid approach. If you were to take a sum of cash and convert that to an annuity (which I certainly DO NOT recommend for the average investor), then that also should be included as a retirement asset for planning purposes. Likewise, a defined benefit retirement pension, if anyone still has one of those, and has confidence in the plan. Likewise income property, etc. Why would you not include any potential retirement income in your overall planning?

I say no unless you are close to retirement. For everyone else there is Master Card.
No....what I mean is, count on SS like you count on a bonus. Sure you rely on getting it while you are dreaming of buying a new car. When it always does not come through, you rant a little, and then get over it. You live.

Social Security as part of your portfolio
BY ANDREA COOMBES,
MARKETWATCH
COPYRIGHT © 2013 DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED.
MARKETWATCH — 08/19/13
Counting benefits as fixed income: opportunities and risk.
You may be counting on Social Security but if you’re not counting Social Security as a part of your overall asset allocation, you may be missing out on bigger gains in your retirement-savings portfolio.
Some financial advisers say retirement investors should consider the value of their Social Security benefits as a piece of their fixed-income investments.
Generally, adopting that strategy would mean shifting a big portion of your investible assets out of bonds and into stocks.
For example, if you’ve got $300,000 worth of Social Security benefits and a $700,000 investment portfolio, then your total portfolio is worth $1 million. If you wanted 50% of that portfolio, or $500,000, allocated to fixed-income investments, then just $200,000 of your investment portfolio would be in bonds, while $500,000 would be in equities.
There are different ways to gauge the present value of future benefits; one simple tactic is to add up your monthly benefit (you’ll have to guess how long you’ll be alive to collect benefits).
“We go through a process where we value someone’s Social Security like a TIP,” or Treasury Inflation Protected security, said Bill Meyer, chief executive of Social Security Solutions, which offers fee-based claiming tools and services. “Then we add it into the household’s allocation.”
In one scenario involving a hypothetical single person who claimed benefits at age 70, owned an investment portfolio worth $500,000, and employed a tax-efficient withdrawal strategy, Meyer said he found that this strategy led to 8 extra years of retirement income, compared with not counting Social Security in the person’s investment allocation.
Famed investor Jack Bogle, founder of the Vanguard Group, seems to agree. In an interview in June with investment researcher Morningstar, Bogle suggested retirement savers should consider the value of their Social Security benefits in their asset allocation.
First Bogle cited his penchant for basing one’s asset allocation on one’s age. (If you’re 40 years old, you have 40% of your investments in fixed income and 60% in equities. By the time you’re 60, you’ve got 60% in fixed income, 40% in equities).
Then he talked about Social Security, citing a saver who has $300,000 saved in an investment portfolio.
“If you capitalize that stream of future payments, most people’s Social Security is going to be…let’s say $300,000 for an average investor,” Bogle said. “If you have $300,000 all in equity funds, even equity-index funds, and $300,000 in Social Security, you are already at 50/50” fixed income versus equities, he said.
Meyer, of Social Security Solutions, acknowledged that many people “will be uncomfortable with taking on a larger stock position,” he said.
In his practice, after coming up with a value for a client’s Social Security benefits, the next step is a conversation with the client.
“That’s where Social Security meets risk management,” he said. “What does this really mean to have more stocks? How are you going to feel when the market goes up and down? A lot of people will say, ‘I understand this concept but I really don’t feel good when my 401(k) goes down $50,000,’” Meyer said.
People need to understand that “with the additional stock exposure there will be more volatility,” Meyer said. “With our clients, we’ll give them a target asset allocation and then we’ll give them a range.”
He tells clients: “Given your amount of Social Security, you could tilt your equity exposure as much as X.”
Then, Meyer said, “We show them the additional money they can get by having more stock. But then we run a Monte Carlo simulation to show them the volatility. What’s the most you could win, but what’s the most you could lose.”
Also, he warned, married couples—who can employ a variety of Social Security claiming strategies—might have a harder time estimating the value of their future benefits.
Income, not assets
Some disagree with this approach. “I advocate including [the value of Social Security benefits] in a net-worth statement, but I don’t necessarily go so far as to include it in a traditional investment allocation,” said Bob Klein, a certified financial planner and president of Retirement Income Center in Newport Beach, Calif. who also is a MarketWatch RetireMentor contributor.
“It’s a psychological issue, more than anything,” Klein said. “Say we’re in a real down market—they’re not going to be comforted necessarily by the fact that they have Social Security. They’re focusing on the fact that their portfolio is going down.”
Klein said he prefers to calculate the present value of projected retirement income from a client’s various retirement-income sources, such as an investment portfolio, Social Security and annuities.
“You’re not looking at assets per se. You’re looking at income and how the income is allocated,” he said.
One reason he likes that approach: It forces a focus on generating retirement income.
“The reality is you need income to live on and, furthermore, with life expectancies increasing, you’re going to be retired, chances are, for a lot longer than your parents were,” Klein said. “Income is the name of the game at that point.”
He added: “It’s important to recognize that Social Security does have value to it and include that present value, whatever it is, in a financial statement, but don’t include it in a traditional investment allocation format.”
How do you go about figuring the present value of your benefits? Looking at your statement on SSA.gov can help, but you will have to make a guess as to how long you will live. And if you’re many years away from retirement, you’ll have to make some guesses as to how much you’re likely to earn later in your career.
“You have to use a lot of assumptions,” Klein said. “The closer you are to full retirement age, the easier it is to do the calculation. However, you still have to make assumptions about longevity, which is tricky.”
Others agreed with Klein’s approach.
Counting Social Security as part of your investment allocation, and thus tilting your investments more heavily toward equities, puts your portfolio at too much risk, according to an article written in 2009 by Paul Merriman, president of the Merriman Financial Education Foundation, a longtime financial adviser and a MarketWatch RetireMentor.
Merriman said he still agrees now with what he wrote then.
“In a serious bear market, that heavy equity allocation could wipe out your portfolio’s ability to keep generating the income you need for retirement,” he wrote in the article.
“You’d still have your Social Security, but you might not have much else. You could be forced to drastically cut back your lifestyle—an unfortunate result that started when you didn’t think clearly about this,” he said.

Correct, of course.
Dodge and Cox did it to me, as did Tilson Focus (gee, "former hedge fund manager" and Kiplinger columnist [I think] - should be prudent, right?). Oakmark Select was already gone with WaMu.
Of course, I'm still pursuing the leprechaun manager who will give me that pot of something, but I suspect indexing with a small to mid cap and value twist shaded towards GMO's recommendations (about which they seem a bit unconfident) with a significant non-US component (where I might be more active management reliant) will be my post retirement strategy. I only hope that I can stop myself from early dementia disasters.

Reply to @Hrux:
Hi Heather,
Upon further reflection of your decision to favor passive Index funds for your company’s retirement program, I recalled some recent other institutional agency conversions to the passive investing discipline.
I certainly concur with your wise judgment to adopt that format, and for holding fast to any investment philosophy through an extensive fair period test. I believe we all are a little impatient and tend to abandon the ship prematurely. Simplicity and commitment work best.
Your decision to offer Index-like products is consistent with the direction being taken by many institutional agencies. There is a clear message here given that these influential institutions can trade more cheaply and more quickly than the private investor.
Also these entities have the muscle power to hire the best of the best money managers and have committees to screen for these superior managers. Yet they are taking the alternate pathway. This movement has been gaining momentum for at least a decade. The ICI 2013 Fact Book has extensive longitudinal tables that illustrate this trend for various categories of institutional investors.
Earlier this year, intrepid MFOer Ted posted a reference to an article that reported a California state pension plan (CalPERS) option to shift more of its gigantic savings into the passive Index camp. This could be a watershed event.
Apparently, before the proposed realignment, CalPERS already had an impressive fraction of its enormous holdings in passive products. That institution was unhappy with the lackluster performance of the other fraction which was assigned to numerous active fund managers, including a Hedge fund component. There is a disconnect between the extra costs and the end results which has prompted this agency to reexamine its investment advisor policies.
The evidence suggests that only about one-quarter of the active managers in the CalPERS program outperformed their benchmarks. Their excess returns did not compensate for the poor results achieved by the remaining three-quarters of active management. The CalPERS decision-makers are now asking the key question: Why bother?
Most likely, CalPERS final decision will influence other, smaller pension agencies. Their decision on this matter is expected momentarily. I am unaware of the outcome.
Best Wishes.

A wise old friend of mine once said "Noble prize winners and academia make the worst investors."
There is no doubt in my mind that there is no absolute "perfect" portfolio. It's up to each of us to find one that we are comfortable with. The best advice I can give is not to constantly shift strategies and try to stick with one approach for the long term AND do not rely solely on past performance to forecast future returns.
I do believe that 90+% of investors are best off investing in globally diversified stock and bond index funds, however, like I said above I'm not one of them in today's environment. There will be a day again when the risk reward is more attractive for buy hold rebalance.
On a side note, I'm on the board of our pension plan committee at work and was successful in eliminating all active funds for our plan participants. We now offer a plan consisting of: total US stock index, total international stock index, total US bond index, total international bond index and Short Term high quality bond fund. Very, very simple and effective plan. One chooses their allocation % to stocks and bonds between US and foreign. Low costs and well diversified using 4 funds. This approach gives the average investor the best chance of a successful retirement. However, outside of work is not for this investor!
If someone forced me to select one strategy for the long term and never change it....begrudgingly I'd suggest Harry Browne's portfolio of 4 equal parts: gold, stocks, treasuries and cash

Hi Guys,
I want to especially thank the MFO members who took precious time to craft a reply to my post. I deeply appreciation the extra effort needed. The replies demonstrate a fine diversity of viewpoints necessary to explore some of the subtleties of the topic, and our sensitivities to it. That’s good. Thank you all.
You all know that I’m a pure amateur in financial planning matters. I have never earned a dime selling investment advice or forecasts. I only participate actively on this website, and primarily focus on mathematical subjects.
I’m motivated to do so by my general observation that many US citizens, including financial counselors, are relatively numerically challenged. This observation is not only in regards to sophisticated mathematical methods, but disappointingly to simple arithmetic operations. For example, many do not exploit statistical base-rate data when making investment decisions even when that data is readily accessible.
That deficiency alone could do major damage to a portfolio. My postings and references are mostly designed and selected to address and to reduce that defect.
“Remember, O Stranger, arithmetic is the first of the sciences, and the mother of safety.” I culled that quote from John Bogle’s most recent book. He referenced Supreme Court Justice Brandeis who purportedly quoted Sophocles. I hate complexity.
The long and incomplete list of “experts” that I cited in my original post all concede that a few money managers have the skill set, the resources, and the intangible talent to beat the market. The difficulty is to identify these fortunate souls in a timely manner. Bogle’s analogy is the finding of a needle in a haystack. He concludes that that is too daunting a task. His flippant recommendation is to buy the haystack.
As I read your comments, I reviewed my original post. Even the “experts” on my Index proponent list are not always so expert; they too are not immune to mistakes, and some of these are really gross errors. I was reminded of one such error by Peter Lynch that must be close to shattering records in that category. It’s a lesson learning good story.
It’s often called “The 7 % Fiasco”. In a 1995 Worth Magazine article, Lynch claimed it is perfectly safe to withdraw 7 % annually from a retirement portfolio that is 100 % committed to equities. The absurdity of that claim was immediately challenged by Scott Burns, then of the Dallas Morning News, after completing irrefutable research. To his credit, Lynch quickly acknowledged his error and rescinded the article.
The original article could have done considerable retirement planning damage if not corrected. I was doing Monte Carlo drawdown simulations during that timeframe and was getting acceptable withdrawal rates in the 4 % annual range. By the way, add Scott Burns to my list of passive Index supporters.
I suspect we all fall victim to what the behavioral wizards call Confirmation bias. We more or less screen and sort information in a manner that reinforces our existing investment philosophy. It is very hard to resist this bias. Like one of my favorite Paul Simon songs “The Boxer” says: “A man hears what he wants to hear, and disregards the rest.” I think most of us recognize that there is no single way, no magic formula, to engage and profit from the markets.
What works to make the individual investor comfortable is right for that person. It seems that David Snowball operates this website with freedom of opinion as a guiding principle. We and our portfolios will prosper from that go-anywhere, open-minded freedom. Thank you David.
Controversy and debate is good. It generates better investment decisions. In doing so, please focus on the merits and shortcomings of the various arguments, not on any perceived personal traits of those making their cases.
Personally, I welcome opinion deviances while critically examining the substance of the supporting analysis, not its presentation style. I believe most of you guys do the same.
I suspect far too many among us invest far too much time in seeking an imaginary miracle money man. This financial miracle master will have the uncommon wisdom to correctly gauge the worldwide economic environment, be able to project the differential performance advantages between fixed income and equity market holdings, properly project critical market tipping points, assemble a portfolio that generates market-equivalent rewards while avoiding any market meltdowns, and can accomplish these Herculean tasks without incurring any major cost leakage impacts. Wow!
Such an investment superman is an unrealistic myth. A century of searching the records and scores of academic studies fail to discover more than a handful of these financial heroes, none of which were pre-identified for such extraordinary performance before the fact.
This is an overwhelming mission impossible assignment. Now, if pigs could fly ……
In closing, my number One takeaway from this exchange is that grand illusions die hard.
As a dedicated and informed group, we generally feel that both technical market timing and stock picking are almost fictional art forms, at least from a reliability and persistency perspective. We recognize that these active management techniques work sometimes, but also fail in a costly manner at other times. Yet we still pursue the golden dream of excess returns.
I suppose we all share some animal spirit genes. Hope is eternal and often conquers logic.
Good luck everybody.
Best Wishes.

I have spent the better part of my investing life as a promoter of passive investing and disciple of Gene Fama and DFA. While their research is certainly not without merit, I have come over the years to realize that the premise that markets are efficient is nonsense. Do you truly believe that investors make rational decisions based on the facts presented at all times? Indexing implies that prices should be adjusted so that the expected return of any stock should be the same. Do you believe that? Gene Fama doesn't believe it either which is why he recommnends a value/small cap tilt . If markets are efficient than why does a value premium exist? Fama says he doesn't know why. I think I do. Because markets aren't efficient. Gene Fama once told advisors that he only claims that his approach will work over an investment lifetime. Are you willing to wait your investment lifetime to see if he's right? I asked Gene Fama one time how he can say markets are efficient if tech stocks were trading at multiples in the hundreds and companies without revenue or assets were valued higher than established companies in the same industry? He said that you could have shorted them any time 3 years prior to the crash on the assumption that they were overvalued, and you would have incurred large losses. I told him I meant they could have just been sold. I wasn't referring to betting against them. If you had just sold them you would have been better off. No response for that.
So I pose the question does one believe that markets are efficient or is the entire premise flawed? Or should one overlook these flaws and adopt a passive approach, because it is still likely to beat an active approach? I think ultimately one has define who they want to be as an investor. Do you want to target relative or absolute returns. If you are happy with relative returns and style box investing, perhaps you will be better off with a passive approach. I am no longer content with relative return victories. If the market is down 40% again at some point (a real possibility) I am not going to be satisfied that I am down 30%. Passive strategies are great in up markets because they produce positive returns. When I believe the wind is at our back and stocks and bonds are cheap again I will be happy to re-adopt a passive approach.
Further, style box, or relative return investing does not account for the notion that you could be entirely removed from an asset class, or invested in another. For example. let's say a large cap growth fund was down 5% when the market was down 2%. But at the same time, high yield bonds produced a return of +6%. Were you better off becuase you only lost 2% vs. 5%, or worse off because you missed out on +6%. A passive investor would argue that this is proof you can't beat the market. I would argue that you missed an opportunity.
One more thing I would like to point out is the definition of risk. Do you define risk in terms of volitility or loss of capital? I believe most individuals define risk as a loss of capital. They should also define it as a loss of purchasing power, but that is not easily comprehended by the typical investor. Let's say you invested with a concentrated stock manager that modestly trailed the index after 10 years, but didn't lose money in any year while the market had some significant down years. Without knowing the future, would you be more comfortable knowing that your manager was managing your downside even if it cost you modest returns in the end? It's like buying a put option on your index portfolio. Is it worth the cost of insurance to know your downside is limited? I would think most investors would say that the risk protection and peace of mind is worth the cost of a modest reduction in returns. And don't ever forget what happened in Japan (market down 75% after 20 years) or the US for 20 years after 1929. It can happen again I am pretty sure Gene Fama will not be writing you a check to cover your losses if it does.
There is certainly more than one way to succeed as an investor. Your decisions become more significant each year that passes. The number gets bigger and there is one less year to accumulate assets. If you were closer to retirement I would strongly suggest you abandon the passive, static allocation approach. However, if you are young enough one could justify the approach as long as you are willing to stick with it through all market conditions. I am at a position in my life that I am far more comfortable with the active approach. I think there are going to be some excellent opportunites with great risk/reward trade-offs in the years ahead and I want to protect my capital to take advantage if and when they do arise. The current market and economic imbalances are great. In economics, imbalances must be corrected. It can be gradual or abrupt (like 2008) but they must correct. I am not predicting a market crash, but the risks are elevated due these imbalances. 60/40 portfolios will not hold up well in that environment (especially with the risk of rising interest rates)!
Now let's consider investing from a macro context...Enormous debt pile, record low interest rates, taxes that almost certainly will rise, and demographic headwinds and you start to see that the conditions we have become so accustomed the past several decades will be difficult to duplicate. Anything is possible but so many things would have to go right that beta returns has become a low probability outcome. Personally, I want the deck to be stacked in my favor before I make a 60/40 bet. That does not currently appear to be the case. This is especially true for risk sensitive investors and those with short-intermediate time horizons.

This is definitely not a portfolio that I would choose for myself and I do have 20+ years to retirement.
In particular, I think you are light on the equity side. You are trying to cover that using balanced/asset allocators. But, most of your stock allocation is large caps and your international coverage is lacking broad international both large and small caps. Personally I would get rid of your tactical allocation sleeve. You are likely to get disappointing results at the time you expect them to protect you.
You are waiting for Shiller P/E to drop to 10s to invest. It is possible you will be stuck waiting for it for a long time. People sat the whole bull market. It is a poor timing indicator for the day. It is a hugely lagging indicator. Good luck.
Try to construct a more conventional portfolio, be patient and avoid gimmicky funds at least keep such funds to a small percentage of your portfolio.
Keep Calm
And
Invest!

Another Income/Bond Discussion Mostly Closed End Ideas for Retirement Income. Note :Enhanced Usually Means Leverage
http://seekingalpha.com/article/1670822-multi-sector-bond-funds-for-enhanced-retirement-income?source=feed

Hi Heather. Although I think you are set up too conservatively for a +20 year time frame, I think your portfolio is constructed pretty well. And the reason I believe that is that it looks very similar to the way I set mine up. Very similar. We have different names for our categories, but we have the same desire to use proven active management with flexible investment styles. But of course, I am only 2 1/2 years to retirement (hopefully).
You have categories called global asset allocators and tactile long/short. I just lump that together and call it balanced and alternative strategies. But it's similar in that we want good managers to have a lot of investment flexibility, geographically and with asset allocation.
You, 55% in:
WABIX, FPACX, SGENX, GHUIX, AQMIX
me, 40% in
FPACX, FAAFX, MACSX, PAUIX, RGHVX
Then we have your more conventional equity/bond mix.
you 50/50 mix, YAFFX, SFGIX / DBLTX, OSTIX, TTRZX, FPNIX
me 60/40 mix, YAFFX, ARIVX, GPGOX, OAKIX, ODVYX / MWTRX, LSBRX, PRWBX, FGBRX
I will say, I keep ~10% out of this "core" part of the portfolio to move around with the hopes of adding alpha. Not sure I really do.
So, can't argue with your portfolio structure, but, I'll give my 2cents on other stuff. I don't know much about some of your flexible allocation funds, but I do think you have way to much allocated to them. I can see where you are coming from - trying to reduce volatility, but 55% of the portfolio? I'd knock that back to maybe 30% with FPACX, WABIX and one other. I might then go with 50% in stock funds and 20% in bond funds. There are some real good capital-preservation equity managers listed on this sight to chose from - or even index funds to fill some of the large cap equity portion. Re-evaluate in 10 years and bring it closer to a 60:40 or 50:50 mix down the road if you like.
Anyway, I like what you did and I guess you have to go with your gut on risk versus reward. But keep in mind, like others have said, volatility is not the same as risk over a long investment horizon (by the way, I do equate volatility to risk for shorter horizons).
Good luck and nice job.

Reply to @BobC:
You raised lots of questions/issues. I hope I can keep some of them straight:
- There seems to be an implicit assumption that the hypothetical investor being addressed doesn't have enough money/earnings to max out all the options.
If one can max out, then Roths tend to become somewhat more attractive (whether in a 401k or in an IRA), because they allow one to contribute a greater after-tax value. For example suppose the limit were say $10K, and one were in a 25% bracket now and in retirement. Then contributing the max, $10K, to a deductible plan would be worth $7.5K in after tax dollars, while contributing $10K to a Roth would be worth $10K in after tax dollars.
The ordering becomes much more important if one cannot max out all options.
Though the 401K contribution limit is higher than the IRA limit, if you're not maxing out everything the higher 401K limit is not a reason to start there first (especially w/o match). If you contribute first to the IRA and max it out, you can then contribute to the 401(k) with extra money.
- Roth 401(k) plan feature. Do most plans now really offer this? I would expect most new plans to offer it, but for existing plans to offer it the plan administrator would have to produce new docs (easy) and the plan sponsor (employer) would have to adopt those docs. Given how many people seem to be complaining that employers don't want to make any changes to improve plans, getting them to move on anything (even this simple) might not be a sure thing.
For example, after nearly a decade, Fidelity still does not offer a Roth option for its individual (solo) 401K(s) - some things do take eons to change.
- Even if you contribute post tax to a 401(k) (i.e. use the Roth option), all employer contributions including matching funds go in pre-tax. One should keep this in mind when allocating between Roth and traditional vehicles.
- Decent investment choices - may not be necessary, depending upon the state of the company and your career expectations. If you expect to be at the company for only a few years and then move on (or retire), it might still be worth participating. If :
-- you get a match, certainly up to that amount (assuming immediate vesting); or
-- you're maxing out elsewhere - you get more money into sheltered accounts ( and you'll be able to get it out of the 401K fairly quickly); or
-- the company is very young/small. Then it's quite possible that it will change plans as it grows into something real. Also, it's a lot easier to push a small company into changing its plan.
- Bob only touched the surface on factors to consider. I won't add to the list, they're virtually endless.

Reply to @AKAFlack: Of course it was a serious question: I was wondering why you had not talked about the great flexibility and drawdown discipline (often enforced by reality, of course) that retirees over the late 70s and into their 80s and 90s exhibit. I meant doing the work with or for, say, one's elderly parents. Perhaps you did and I missed it; I shall try to study your opus here before asking you further questions. 70 is not anyone's cutoff for 'really elderly', even if you're an instructor in this area. I will try to find your 'simple longterm exit strategy' and see how it plans for whatever. Same with Joe and his aspirational plans for Murphy. Thanks finally for diction correction; of course one preps for asteroids, or can, bearing in mind I naturally meant asteroid hit, in the usual idiom. Retirement going okay so far, thanks, owing to decades of savings and equity-fund investing. Don't know how the future will go, which is why I am here, studying away, thinking, etc.

13 funds, Heather, is a bit beyond what I'd want to bother taking the time to track and "babysit." Can you get this portfolio down to 8 or 9 funds? Spread out your money TOO much and you end up just diluting your profits. KISS it. Simplify:
EXAMPLE:
1. Domestic CORE, maybe a good balanced fund like MAPOX, mentioned above.
2. Domestic small-cap (MSCFX? From the same shop: Mairs and Power)....Or TRP PRSVX.
3. Domestic BONDS--- nothing longer than intermediate-term. DODIX, DBLTX. DLFNX.
(keep your bond stake small for several more years. You have 20+ years to retirement. You want this animal to GROW. Make sure, when the mutual funds offer you the choice to take pay-outs or to RE-INVEST them, that you do the LATTER!)
4. INTERNATIONAL, global: MAPIX, SFGIX (mentioned above, in your own note) and TBGVX.
5. World bonds: MAINX.
6. A small stake in EM bonds. No more than 3% or so of your total. Right now would be a perfect moment to buy-in because they are so depressed: PREMX, FNMIX.
You can't hope to cover EVERY base. Later on you can get more complicated with various "sleeves." Make it more complicated than it needs to be and you end up chasing your own tail. -----"Max."

Hi Guys,
I want to thank the MFO members who took a timeout to read about my enthusiasm for the Flexible Retirement Planner. I have been a Monte Carlo cheerleader for decades ever since my military days when participating in war games planning exercises.
An especial thank you to those MFO members who contributed additional Links and opinions. Good decision making demands open and fair debate that exposes all options.
Monte Carlo analysis is a relatively modern statistical methods addition. It is rooted in the uncertainties associated with the development of the atomic bomb in the 1940s. John von Neumann and Stanislaw Ulam are usually credited with pioneering formulations.
Monte Carlo analysis has penetrated many military, industrial, and scientific disciplines. It actually received financial planning attention rather late in its brief history. Today, anyone seeking this planning tool for that purpose has the luxury of many excellent choices. It’s good to have choices.
I retired in 1994. In the early 1990s I searched without success for such a tool. Not finding one, I programmed my own retirement Monte Carlo code. Somehow (I don’t recall the source), I became aware that Nobel Laureate Bill Sharpe was also working in this arena. I contacted him for advice and he responded with first-aid suggestions several times.
A little later, Professor Sharpe became a founding father of Financial Engines. Financial Engines is powered by an excellent Monte Carlo code. It went public in 1996. Since that introduction, it has developed working relationships with the big three mutual fund houses (Fidelity, Vanguard, T. Rowe Price) as well as powerhouse financial institutions like JP Morgan and Northern Trust. The tool has been extensively tested and is constantly being improved in terms of options and basic modeling.
Be alert that these codes use different ways to estimate future returns. Of course, they all use a random selection approach. Some programs use actual returns from the markets and randomly select from that database. Others use statistical mean, standard deviation, and correlation coefficient models when drawing from the returns grab-bag. The referenced Flexible Retirement Planner deploys this approach, but it allows its users several alternate options.
In my code, I too chose the statistical model method. Even in the 1990s, I was a little skeptical and unhappy with the model since it did not include the shocking outlier years (before Taleb dubbed these events Black Swans). The beauty of Monte Carlo modeling is that these outliers can be easily incorporated into the analysis with the addition of a few subroutines. I made the necessary changes using past “Black Days” data to guide the statistics and including some multiplier factors to exaggerate the impact.
The inclusion of these disastrous days did degrade portfolio survival probabilities, but only at the margins. Given the uncertainty of the events, their infrequency, and the ad hoc way I modeled these rare events, I finally discounted that segment of the analysis in my retirement decision. I interpreted the outlier outcomes as noise.
Monte Carlo codes as part of the retirement planning toolbox have been accessible since 1996. Monte Carlo procedures were initially challenged by advisors who were a little short on a mathematical and/or scientific background. Most of these reluctant advisors were finally converted given the power and success of the tool. I will not name names, but many respected financial institutions were participants in this eureka story. Monte Carlo based tools are now universally applied in the retirement planning industry.
I encourage you to join the parade. In the end, you might not embrace the output, but it can do no harm because the final decision is always yours to make. It’s good to be King.
Best Wishes.

Frankly, I think you can take the entire "second category" and eliminate it. I have been underwhelmed by all of these "tactial allocation" "alternative investment" and long-short funds, with the possible exception of Marketfield (MFLDX). They invariably:
1. give mediocre to poor performance over an entire market cycle.
2. have ridiculously high expense ratios which, when compounded over several decades ---
which is what you are talking about prior to your intended retirement date ---- become
quite substantial.
3. underperform several of the best balanced (MAPOX, OAKBX, etc.) and go-anywhere/do
anything" funds (FPACX) without substantially changing the volatility of one's portfolio.
And I agree with MikeM: you are making things unduly complicated and micromanaging
your portfolio without a clear-cut reason or realistic anticipated result.

Hi Heather. I remember you posting a while back on this portfolio. What I think I remember was your dedication and hard work to create what you thought was best for you. So, if you are happy with this then that's whats important.
But since you asked, in my opinion, if this is a retirement account with a 20+ year target, you may be way to conservative "and complicated". Most of the funds you chose seem to be top-notch, at least right now. Time will tell if those alternative funds like PAUIX and AQMIX pan out. Maybe they could have a sleep well affect - if you are 5 years from retirement. I would be concerned having so many bond funds myself. 40% in bonds along with the "flexible" and "alternative" funds you think you need are also heavy in bonds themselves! Not sure why OSTIX and TTRZX wouldn't be a suitable combination on their own.
Another thing that jumps out is I don't see any small cap fund exposure. Or much straight stock funds at all for that matter. Why not use index funds for some or most of your equity exposure and maybe a couple managed funds for possible alpha - or conserving principle as you hope. I guess I'll stop there. You asked so I spoke. This might be an okay allocation for a 55 year old, but again, way to complicated and conservative for 20+ years out IM<HO. Over 20 years, the portfolio allocation will be what drives 90% of your returns, not the funds you choose. And over 20 years the short term volatility of equity won't mean much either.
But, as always, if this feels right for you, go with it. Obviously know one knows you better then yourself. And obviously you put a lot of work into this. I do notice you took PRPFX out of the equation.

Hi msf,
Thank you again for "being on top of things" to help us sort out the facts.
As you would have read in this thread, a portion of this discussion found the words for "drawdown", meaning investment portfolio downside loss limits and RMD becoming intermixed. I replied to this confusion from my wording and initial misunderstanding of Bob C's. reply.
As you note, too; RMD may not be monies that are needed, but the IRS rules/regs will cause this event. I am 5 years away from the RMD, and have looked at the numbers; which indicate about a 3.7% RMD the first year and the rate moves slightly upward each year, going forward. Hopefully, this house will not have a "real" need for the monies; but perhaps we will be able to stimulate the Michigan economy with "cash injections". :)
---SS: Another complex area of retirement that deserves an indepth review from those nearing retirement age. Thank you for your information about this area.
---State taxes/Roth conversions. The new MI pension tax is a strange duck of legislation, that is targeted towards the main cluster age of the baby boomers. These tax dollars (it is argued) are to be used as an offset to lost tax revenue from a change in the MI business tax. I suspect that the magical spreadsheet calculations are tailored to look nice going forward; but MI is 20 years too late for attracting major business projects. MI did have a fairly attractive climate for pension taxes, but this is now impaired.
The couple noted in this thread will likely further investigate Roth conversions. That will be a topic for them and a tax professional to sort, among other estate matters.
---Medicare. Thank you for the notation regarding the Medicare Advantage plans. I'll have to check, but I am recalling that these plans have restrictions as to an individual not being able to use their doctor of choice, etc.
Lastly, these issues and areas are complex; but can be sorted to the greatest available benefit. And yes, there will be some luck (health, accidents, investment returns, etc.) involved, eh?
msf, thank you again.
Take care of you and yours,
Catch

Great Reading. Not much specificlly on bonds. Deals with: (1) Money market fund reform, (2) Retirement funding mess, (3) Expected returns going forward, (4) Spitzer and previous fund scandals, (5) Concentration in the fund industry, (6) and, as usual, fund expenses.
I disagree a bit on point #3. I don't view 8% annual return for a large well-managed pension fund as an unreasonable expectation over multi-decade periods going forward. He seems to infer that 5-7% is more likely,
My favorite exchange from the interview:
Phillips: " ... When I look at some of the firms out there, I see more of your DNA in a place like T. Rowe Price or American Funds than I do in some of the upstart, very specialized or leveraged index funds. What would your counsel be to someone: Would you rather have them buy a lower-cost actively managed fund than a high-cost index fund?
-
Bogle: I guess the answer to that, since I believe that cost is the single most important factor, is absolutely yes, provided the [active fund] had reasonable diversification."