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In retirement, and really in life, I like to avoid the big mistake but with investing it is tough to do. I guess you can either buy puts to try and lessen to blow of a big 30-50% drop in the market and a very slow recovery or just reduce the % of money in equities but not much else. Right now despite what some are saying, it seems like we are dealing with significant inflation in most areas of life but with lowering interest rates which means things like treasuries, CDs and other "safe" investments are losing to inflation.

I suppose adding to gold holdings and maybe more international stocks are the best paths to go forward.


Any other ideas?

I would submit that
adding to gold holdings and maybe more international stocks are the best paths
is the opposite of avoid[ing] the big mistake.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” – Peter Lynch

"More Money Has Been Lost Avoiding Risk Than at the Point of a Gun"


Gold? I was a gold bug several decades ago, at the time my first kid was born. My head got straightened out long before the 29 year-long recovery got, um, recovered. I'd rather do bitcoin. https://testfol.io/?s=g1Uwki6fyIm

International stocks? Have you been keeping track in the news of what's happening with the European economies?
Also:
"Google AI Overview:
While a generalized "mass migration" of investments to the US is not occurring, several trends show the US attracting a significant amount of international investment. Foreign direct investment (FDI) has seen substantial inflows"

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lessen to blow of a big 30-50% drop

Roger Nusbaum:
" ... effective is simply defined as avoiding the full brunt of a large decline. Aside from my belief in its effectiveness, the 200-day SMA is simple to explain and understand.
No one rule is always correct. they all give false signals."
"The moving average timing strategy makes the majority of its money by avoiding large, sustained market downturns. To be able to avoid those downturns, it has to accept a large number of small losses associated with switches that prove to be unnecessary. Numerically, more than 75% of all of MMA’s trades turn out to be losing trades."

Straight SMA has too many sell signals. Better is GTT timing which looks to two FRED statistics of the economy to decide when it ignore an SMA sell signal.
IMHO

Better is GTT timing which looks to two FRED statistics of the economy to decide when it ignore an SMA sell signal.

Pardon my ignorance, but what is GTT timing?

There are many, many ways to hedge. However, when you get into the various hedging options, they perform differently and work or don’t work so well depending on what thing or combination of things is going on. To use an analogy, we do not have one medicine that fixes “sick”, we have many that target sicknesses.

One thing is fairly clear. If you want to keep it simple and narrow down to just stock/index options (e.g. puts) or cash, then it’s better to simply lighten up your equity and have more cash. Puts are very expensive insurance.

The other thing that is near certain, hedging is usually just a tradeoff. Less return for less drawdown.

If you are interested in hedging possibilities in an accessible fashion Google Random Roger’s Blogspot. It is an interesting site to read. I don’t invest in most of what one can read about there, but there have been a couple of useful ideas that I would never have thought of.

Growth & Trend Timing.

https://www.philosophicaleconomics.com/2016/01/gtt...

51 page PDF

Key info is on page 46. "The above construction of GTT–using the dual signals of real retail sales growth and industrial production growth–is the preferred “recession-timing” construction shown in the beginning of the piece. As you can see, the strategy on that construction consistently outperforms everything, by a very large margin."

Do not use UNRATE (unemployment rate), since that is subject to political pressure.

“If you want to keep it simple and narrow down to just stock/index options (e.g. puts) or cash, then it’s better to simply lighten up your equity and have more cash. Puts are very expensive insurance.”

Yes, that’s my perspective as well. I’ve always been in range of 95% quality equities and have never hedged. As noted by Gemini AI:

“Based on historical data from 1926 to 2023, the S&P 500 had a positive return over 5-year rolling intervals approximately 93.62% of the time.”

Even though a S&P index does Not dominate my portfolio, I like the probabilities of U.S. equities appreciating over the moderate-long-run & we can roll with some short-term gut punches. I suspect Buffett and Munger did not personally use puts/insurance. Btw, in Vegas Blackjack, I never take insurance either. :)

WTF?!?

<< Growth & Trend Timing. >>

I note that the 20-fold 30-year return of the S&P 500 in the previous Jason Zweig thread assumes Long-term Buy & Hold.

intercst

“Based on historical data from 1926 to 2023, the S&P 500 had a positive return over 5-year rolling intervals approximately 93.62% of the time.”

Even though a S&P index does Not dominate my portfolio, I like the probabilities of U.S. equities appreciating over the moderate-long-run & we can roll with some short-term gut punches.

Ken Fisher recently had a youtube video "Is Now a Good Time to Invest in Stocks?" https://www.youtube.com/watch?v=IRAIQeunHyA

Key point that he and others have made for a long time:
"the fact is, in the long term, stocks tend to rise—and they tend to rise about two out of three time periods, regardless of what kind of time period you pick, whether it's days, quarters, years, five-year periods—they tend to rise a lot more than they fall.
So, therefore, the odds are that it's an okay time to invest."

"<< Growth & Trend Timing. >>"
I note that the 20-fold 30-year return of the S&P 500 in the previous Jason Zweig thread assumes Long-term Buy & Hold.

After studying this stuff for a long time, I have come to the conclusion that "timing" is primarily an old person's game.

Every mechanical timing scheme I've examined reduces the overall long-term gains while also reducing the volatility.
A young person who is investing for retirement that is decades away should prefer the gains, not the volatile journey.

An old person who is living off his portfolio should care much more about the volatility than the long-term gains. Few retirees even have a particularly long term. And drawdowns for living expenses in a down period of volatility can exhaust the portfolio before the end of their life.

Although, for example William Shatner who is currently 94 years old, at 65 he *did* have a long-term.

I need to sit down and look at what I have invested and what would happen if there is a 20%, 40%, 60% drop in the market. How much harm it would cause, if any.

Since the beginning of the year I went into international and also gold which both have paid off well. My domestic stocks allocation is pretty low.

To lock in some higher interest rates I got a couple of multi-year guaranteed annuities for 3 yrs and 5 yrs, both paying over 5%. This will be money I can use at that time for expenses and prior to collecting social security. I'm not much into insurance products but I've previously bought a couple and they worked out.

I'm not sure I'll be here in another 30 years. More concerned with the next 10-20 years.

Thanks
Rich

I need to sit down and look at what I have invested and what would happen if there is a 20%, 40%, 60% drop in the market.

It's not really the drop that matters. It's the drop combined with projected withdrawals. The former recovers in time. The latter if severe enough will not recover. There's a whole body of literature and much discussion on Bogleheads and other finance forums regarding this challenge.

To lock in some higher interest rates I got a couple of multi-year guaranteed annuities for 3 yrs and 5 yrs, both paying over 5%.

Suggest taking a look at the PIMCO bond+ / income CEFs, such as PDO, PDI, PAXS etc for professionally managed higher yielding funds. 9%+ yields. Worth a corner of our portfolios in a declining interest rate environment.

FC

Suggest taking a look at the PIMCO bond+ / income CEFs, such as PDO, PDI, PAXS etc for professionally managed higher yielding funds. 9%+ yields. Worth a corner of our portfolios in a declining interest rate environment.

FC


Thanks.

While 99.9%+ of the time I don't buy things people talk about, it is always worth looking at them and once in a while something interests me, or causes me to go down a path where I do find something I want to get.

While I don't have any crypto stuff in general, I did buy BLOK earlier this year and that has done well. I don't usually buy stuff like that anymore. I didn't want to buy actual crypto currencies but thought tech that they use might be useful.

Thanks
Rich

I like to avoid the big mistake but with investing it is tough to do

I've been thinking similarly. I'm retired for just over 3 years, no pension, no social security (yet), so we live solely from investments and their return.

you can either buy puts to try and lessen to blow of a big 30-50% drop in the market

I've looked at the numbers and this becomes very expensive very quickly. And, worse, as volatility increases (perhaps as a presage to the "big drop"), those puts become even more expensive. Very roughly, puts to protect 30% downside, while eating the first 15% downside, will cost about 0.6% a month. That comes to 7.2% a year. If you strategically roll them, which is the prudent thing to do (but requires more effort), then the cost will vary somewhere around 0.35% a month, or 4.2% a year. These are VERY rough numbers, mostly back of the envelope kind of stuff. Others may have better numbers, and better calculators, for this kind of thing.

just reduce the % of money in equities

This might (just might) be fine in the latter years of retirement, perhaps for someone 75+ with a time horizon of 10-15 years. But it isn't fine for someone in their early 60s that likely has a 30 year time horizon. In that case, it essentially amounts to "market timing", and only a tiny percentage of people can get the timing right.

with significant inflation in most areas of life but with lowering interest rates

I see the same thing that you are seeing. However it seems like one of the immutable laws of economics is that you can't have sustained inflation and low interest rates at the same time. It just doesn't work. Add to that "law" the fact that our government is spending voraciously, and creates more and more debt almost endlessly, and the other immutable law of economics, "supply and demand", also results in higher interest rates.

adding to gold holdings

Adding gold can help, but you can only add a limited amount of gold before suffering very low long-term returns. Again, maybe okay for a 10 year time horizon, but not okay for a 30 year time horizon.

international stocks

International equity holding can definitely dampen volatility, it may even add some return during periods of a weak dollar. But once the dollar turns stronger, and the US economy continues its outperformance compared to most other economies, long-term it becomes a loser. Besides, how do you decide where in the world to invest? In sclerotic Europe, you will likely suffer very low returns. In China, you could have high returns, but once they become too high, government is likely to step in and grab a big piece of those returns. Other parts of Asia might be good, but have less developed capital and equity markets. And most other places in the world (South America, Africa, etc) are simply too unstable for long term investments.

I don't know what the answer is, of if there even is an answer, but it is interesting to discuss it. Perhaps the answer is simply to create a portfolio that is somewhat more resistant to downside shocks, things like dividend aristocrats, staples, etc.

Watch unemployment. If the Felon is able to carry out his plans, there will be potentially millions added to the unemployment rolls. You can't grow an economy that way. In which case, the US economy won't be outperforming anything for the foreseeable future.

I suspect we'll be seeing that reality in the stock market soon. Unemployed people can't spend money. If money isn't moving through the economy, the economy tanks.

Watch unemployment.

Might as well watch chicken entrails.
Or the Queen in a 3-card monte game.

Any statistic that is subject to political pressure (and games) is useless. Unemployment data gets revised and gets tweaked due to politics all the time.

The things to look at are statistics that DON'T get touted on the TV news or Yahoo news.

Things like Industrial Production: Total Index (INDPRO) and Real Retail and Food Services Sales (RRSFS)
https://fred.stlouisfed.org/series/INDPRO
https://fred.stlouisfed.org/series/RRSFS

Ever seen either of them on the 6:00 news? No.

The God Emperor is doing just fine. Just what we voted for.

I don't mind timing. Over at Bogleheads some people there act as if you decided to play Russian roulette. No one can get the exact top or bottom but at times the playing board tilts in certain directions and you need to play the odds and will often do well.

For example I thought it was clear that international stocks and gold would do well. One reason being that it was obvious the current administration wanted to devalue the dollar. It was stated multiple times. Or when interest rates got near 0%, it made zero sense to lock in those rates via treasuries. Some people learned the hard way that bond funds go down, sometimes significantly when rates go up.

I don't see it as a problem and reducing stock investments to 25-40% at times. I have mostly ETFs (SP500, NASDAQ, international) but also some stocks like Google, BRK, etc.

I don't know how much longer it will continue but I looked at my numbers and despite being conservative with my investments and spending a bit more than expected, my portfolio is up over 10% over the last couple of years. Obviously it would have been much higher if I wasn't spending it down or if I was 100% in stocks but at this age, I have no plans to do that short of winning/inheriting a bunch of money.

Thanks
Rich

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