No. of Recommendations: 4
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.
