Cheap downside protection, too good to be true?

[Agahnim_575]

After how unpredictable the market's been these past few years, I'm skeptical when investment firms say protection is "cheap." I'm five years from early retirement and don't want to throw money at something unnecessary. Has anyone found a practical way to hedge without killing returns?

 

[Donbun]

My aunt then if I could remember correctly was in a similar boat and ended up using a mix of short term treasuries and a small allocation to protective puts. It’s not perfect, but I guess it gives some downside cushion without dragging too much on performance

 

[mama.bear]

After how unpredictable the market's been these past few years, I'm skeptical when investment firms say protection is "cheap." I'm five years from early retirement and don't want to throw money at something unnecessary. Has anyone found a practical way to hedge without killing returns?

I'd genuinely say to focus on diversification and low cost options rather than fancy hedges. Index funds across different sectors or geographies, a mix of bonds for stability, and maybe a small allocation to gold or other non-correlated assets can provide some downside protection

 

[Master Jon]

If you’re that close to retirement, shift toward lower risk hedges like using a small portion in put options or conservative bond ladders. Even a modest allocation can dampen volatility without eating returns too much

 

[Agahnim_575]

Thanks @Donbun and @Master Jon for the suggestion on using puts. It's an approach I'd like to test on a small scale over the next quarter. In your experience, is it more cost effective to use longer dated puts or do you get better results by rolling shorter term ones more frequently?

 

[Alan]

That's a great question about hedging strategies, I'd love to hear what's worked for others in similar situations