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You could just buy deep out of money SP500 puts expiring in 1+ year. That way you would be "insured" against the bubble popping. The thing is, every dollar you
by kvuj 6mo ago
You could just buy deep out of money SP500 puts expiring in 1+ year. That way you would be "insured" against the bubble popping.
The thing is, every dollar you spend on insurance is a dollar (and its interest) you lose. Furthermore, we don't know when it will pop. 1 year? 5 years?
The more reasonable solution is probably gradually reduce exposure to US markets by selling SP500 shares and turning to Europe and emerging markets ETFs. No need to cash out 401k.
- timmmmmmay 6mo agoYou should backtest this strategy over the last 20 years before you make serious decisions off of the vibe from internet comments
- kvuj 6mo ago20 years is not enough. If you just look at the past 20 years, the US has had exceptional returns compared to the rest of the world. The thing is, historically, high PE ratios like what we're seeing in the US do not correlate with short term returns that are as high. Expected future returns decrease as the PE ratios go up in a pretty linear fashion. https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/guide-to-the-markets/guide-to-the-markets-slides-us/equities/gtm-peratio/ https://am.jpmorgan.com/us/en/asset-management/institutional...
- ai_slop_hater 6mo agoWhat's the point of backtesting? Does backtesting say anything about the future?
- unsnap_biceps 6mo agoThe point of backtesting is to allow you to do what you want to do with a veneer of being data driven.
- alasdair_ 6mo agoWhy 20 years? Just because we know, post hoc, the usa outperformed other places in the last 20 years, in no way means the next 20 years will be the same. If you want a different point to backtest from, try Japan in the 80s and early 90s