This is EXACTLY what I said to my advisor last week- and he scoffed and hand-waved at bonds, said they weren't worth it. "Yeah, well right NOW, I thought, but what about when the market turns someday and there's no hedge?"
Not that I'm advocating a no-bonds strategy, but there is no guarantee that bonds will provide any hedge against the market turning someday, this time around. There are some signs that bonds simply aren't going to play the role they once did - indications that bonds are back to playing the role they played in the mid-1950s.
I personally have moved a small amount of my bond exposure into floating-rate bonds, but I think that's a pointless gesture as well. I don't think there really is going to be any hedge anymore. There's going to be volatility at every turn, except for investments that pay less than the rate of inflation.
He was pushing me to go more into large-sector international, which to me is pretty highly correlated with large-sector US, but again, hand-waving.
It is definitely alchemy, though there is some reason to believe that American economic strength is being spread around the ever-increasing-in-size developed world.
I wasn't comfortable with this advice, but when I compare the performance of the American Funds that I am in vs. a comparable Vanguard fund, say, VTSAX, I find that in many cases the American Fund has indeed outperformed the VG fund to a degree, but I'm not sure how this stacks up when accounting for the impact of fees.
Most of the comparisons account for the fees. AMCPX seems to do a little better than VTSAX, and it does so by taking a few more risks than are implicit in VTSAX. By contrast AWSHX seems to do a little worse than VTSAX - no surprise, it takes a bit less risk. You're not going to see an overwhelming impact of a difference of 0.6% in fees in any short period. It is only over the long-run that that fee eats away at any advantage the managed fund may have. The difficulty here is that these two funds, AMCPX and AWSHX, are actually rather good funds. If they were crappier funds, the impact of the fees would perhaps be more apparent.
CWGIX, of course, needs a different comparison, VTIAX perhaps. And when we start digging into this, we hit on my big problem with index funds: In the international arena, I don't think all of Jack Bogle's theories pan out, at least not yet. Maybe it is because there is less of an efficient marketplace internationally or some such. Whatever it is, I have chosen to invest domestically in index funds, and internationally in actively-managed funds. I prefer Artisan but CWGIX is good too.
I think with AEPGX you begin to go off the rails a bit: You're getting sector-specific (with probably no good reason, especially since you're in CWGIX). It is one thing to acknowledge that an international equities index fund may not be the right way to gain international exposure, but there's no good reason to get sector-specific, I feel. And I think similar concerns can be expressed with regard to some of the other funds you have there.
The other weirdness in my portfolio is that I also don't like bond index funds, for reasons probably similar to why your financial adviser is waving you off of bonds overall. While I don't agree with the adviser's recommendation, the caution I think is warranted, and for that reason I want most of the decisions about which specific fixed-income assets I'm invested in put into the hands of an expert, so most of bonds exposure is now coming from VWENX.
