> What do you think the cost would be for protective puts per $1M of equity exposure of a portfolio on a monthly basis? "Bubble Insurance" if you will.

I expect that would not be a cost-effective way of attaining the risk profile you'd be looking for.

I expect there won't be a more cost-effective way of managing your portfolio risk than by simply adjusting your split of broadly-diversified equities vs bonds.

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intrasight 2 hours ago | parent [-]

My homeowners insurance isn't "cost-effective" either but I still do it. I think the reason that investors don't is because they are greedy or irrational or both.

That was the message that I got from a financial podcast I listened to a couple weeks ago anyway.

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Marsymars an hour ago | parent | next [-]

I'd content that homeowners' insurance is quite cost-effective, because there isn't a cheaper alternative to hedge your risk.

I'm saying that for the cost of buying puts to hedge against equity downside in a retirement portfolio, for any given level of risk, you'd probably be better off just selling some of the equities and buying bonds instead.

e.g. try and find any equity-focused ETF with downside protection that generally outperforms a bog-standard stock/bond split total-market ETF for whatever measure of volatility/downside protection that you want.

	▲	kipchak 14 minutes ago \| parent [-]
		I think the risk for increasing your bond exposure as compensation would be if instead of a low growth/low inflation scenario (Bonds do well) there's a low growth+high inflation scenario (1940s, 1970s, 2022) and the negative correlation between stocks and bonds doesn't hold.

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duzer65657 an hour ago | parent | prev [-]

investors are irrational but actually tend to go the other way - too risk adverse. I'm not sure what a "greedy" investor is, TBH.