I think I'm asking for the impossible here... But is anyone trying to hedge risk in their personal finances?

I'm not a real "investor" (index funds only) but I am feeling more willing to forgo gains to be more risk averse just based on my own neuroses.

Maybe I cash out and buy T-bills? Gold? Bullets? What's the non-crazy person equivalent?

Why is that an impossible question? I've moved from investing mostly in the SP500 (which is something like %25 big AI companies) to investing into other indices which are not so AI-heavy -- healthcare, infrastructure, etc. I've also put a lot into TSLS (inverse etf for tesla), because I think it is particularly overvalued. I still have a fairly high risk tolerance, but trying to reduce the amount that I'm tied to AI. I'm sure there are even better ways this could be done, but this is a fairly simple way to do roughly what I want.

Edit: Notably, you don't have to fully stop investing in the SP500. If you were previously 60% weighted towards the SP500, you can still reduce your exposure by changing that to 20%, or something like that.

It’s probably most important to take a long term view of asset allocations, stick to the plan, and be tax efficient. Once you cover that off, the tactical positions can maybe help a touch.

Diversification is the bedrock of portfolio management, meaning owning a range of assets that collectively perform acceptably under a range of scenarios. But it’s generally not sexy, not something you catch individuals bragging about - avoiding permanent loss of capital.

Think about what risk you’re willing to take, in the context of your job/career prospects, current investments etc.

These are things for you to decide. Wouldn’t trust anyone who says buy x without knowing your individual circumstances.

What I can say is there are consistent patterns for many successful investors, and the media will tend to focus on the outliers / lottery winners, which by definition are difficult to emulate / replicate. Be wary of survivorship bias and the narrative fallacy.

I have been 'raising cash' by selling stuff in my portfolio that seems high risk and is up. I've learned from the past that I end up feeling physically unwell when the portfolio sinks and stays low for a year, some days 1-5% which make me stop looking. Now I'm reducing my risk exposure - yes, that means not literally 'cash' but either a money market fund and a tax-free bond fund. For years I had a lot of gold miners and a gold mining index which only recently popped, I thought that was a 'hedge' but now I am convinced the only hedge is cash or if you know what you are doing, options. Everything is prone to pops and crashes, from big giant index funds, to gold, to bitcoin, to large caps, all the stuff people said was supposed to be a hedge.

For this round I've bought (well, bought and sold, and now waiting to buy via an order) puts on a semiconductor ETF. Since I own some of the stocks, if it goes sky high still I win, if it crashes I win, and if nothing happens I'll have to sell it 30 days before it expires to avoid the theta decay, which starts to really bite in that last month.

No one knows anything - which is the environment I'm learning to operate it.

A very conservative investor, say a boglehead or a 'value investor' would tell you to buy in an index fund and not look, unless you know for sure what you are doing and have done insane research on a company and it's priced low. They would say, buy VTI or VOO if you don't need the money within 5 years, and stop looking at it. Oh, and DCA into it versus all at once.

If you look at most stock markets over a very long timeline, on average it goes up because the economy is growing. So a very broad portfolio of stocks or ETFs.

Gold is only for very rich people if you want to have something in the case the whole economy goes to the bin.

Bullets if you are paranoid.

It’s pretty unpopular, but a properly designed whole life insurance policy is a good stable, growing asset. You can borrow against it at reasonable rates, and it makes a good rainy day fund and risk buffer. You can generally annuitize them later if you wish, providing a stress reduction in retirement which is correlated with longer life, iirc, though that could simply be due to selection bias.

Property. It is the one thing they cannot produce more of.

During covid you probably wanted a 70/30 split so you didn't get eaten by inflation, but I think 60/40 is probably a safer bet for the average person right now. I'd consider pulling back to 50/50 over the next 6 months to a year so you can loss harvest and skip the capital gains. I'd also consider moving money you don't expect to need anytime in the next decade into real estate.

I'm not really an investor btw, this is just my intuition. I'm curious what others here are doing.

Diversification is the only free lunch on risk management

I've always used value-tilted indexes, and am hoping that they will suffer less when the bubble pops. With that and a healthy dose of fixed income (which I chose years ago based on an assumption that the equity portion of the portfolio could drop 50% in a downturn at any time) I'm trying to stick to the plan and not try to time the market. Even though it very much feels like the bubble is near its peak (if not just past it!) I do still believe on some level that market timing is a fool's game, so I'm trying to stay convinced that the steps I've already taken are all one can rationally do.

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