How to lower risk…

**Readers Have Questions About Stocks. An Economist Replies.**
**by Peter Coy, The New York Times, Jan. 21, 2022**

**...“Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life,” by the Boston University economist Laurence Kotlikoff. ...**

**...There are several 30-year periods over which stocks barely rose in inflation-adjusted terms, and many 20-year periods in which they outright declined. ...“Over longer horizons, the chance of losing money in the stock market is substantially reduced.” That’s true. But if you do lose, it can be disastrous. ...**

**I introduce “upside investing” in my new book as a safe and simple way for risk-averse investors to play the market. The idea is to treat all your money now in stocks and all the money you’ll add to your stock holdings as if you will lose every penny of it. Then invest your remaining money in safe assets, i.e., TIPS — Treasury Inflation Protected Securities. This sets a floor to your living standard. Until you withdraw money from the stock market, you spend only the floor amount. This way, if your stocks crash and burn before you sell them, your living standard won’t be impacted....** [end quote]

Actually, I-Bonds are better than TIPS in a rising interest rate environment since the prinicpal of TIPS will decline if they are sold before maturity. Not so for I-Bonds – their principal is always returned at par even though interest will be reduced if they are cashed in before 5 years.

Kotlikoff also advises owning one’s home and likens it to an inflation-protected annuity you might buy from an insurance company. A home is a real asset. I consider a home to be “one house unit” regardless of its market price since all the houses are rising or falling at the same time. I don’t include the dollar value of my house in my net worth since I have to live somewhere.

I just ordered the book on my Kindle since my library doesn’t have it. It sounds like Prof. Kotlikoff is saying a lot of what I do anyway, but it’s worth taking a look for new low-risk ideas.