You have cash coming in every month?
Thanks to both of you. So, when you say you have some SPY shorts, I am assuming that you are hedging? If you are able to, can you explain how you decide with what amount of money you hedge by buying these presumably shorter dated puts? I am mainly just holding index funds and then 50% cash…I am getting this uneasy feeling of potential market drawdown, and thinking if I should sell 50% of my index funds and bring it to 25% portfolio…but my wife and my better sense says I am needlessly panicking and probably crazy thing to do, considering we dont need the money for another 20 years! And every classic textbook also says timing the market is a fool’s errand…So, just wanted to see how the more seasoned, balanced investors deal with these sort of feeling whenever there is ever increasing noise of very high valuation and a recession just around the corner. The choice of using timing to come out of the market would have been amazing one in 2022, but a very bad one in 2023 and 2024, and I erred on both occasions! Thanks for your thoughts!
The trading account has 32 individual names and 65 positions. I have short puts, short calls (I sell naked calls), spreads, all sorts of things. See below, My bad day the portfolio declined by 5% and on a good day it increased by 8.4%. These are not on a small sum. So it is very volatile. A 2% decline is par for the course on this account. This is my lab, I test all sorts of ideas.
Few things will go into my long term portfolio. There are names I am holding over 17 years there. That is unhedged.
The reason I am saying this is, you know your portfolio, the names, what kind of risk tolerance you have and what your goals are. So accordingly you act.
No one knows exactly what is going to happen in the future. If you are worried then reduce the position. Just to give an example, last year I got bullish on small cap ($IWM) and have insane allocation to it. So far, a massive disappointment and I am living with it. But, if the pain is too much to bear then I would just sell some. Hedging didn’t work for me, I came to a conclusion it is better to sell than hedge. Because the market move is often much beyond your hedge.
Life is not perfect, so is investing. Don’t beat yourself. There is nothing you can do about the past. Just focus on the future. Remember Cash is also an allocation and now it is earning at least 4% to 4.5%.
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Thanks Kingran. That’s really helpful. What% of your portfolio do you hold in cash? Thanks
Cash is transient position for me. Most of the cash will get deployed soon.
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Good call.
Just saying, since you expected this to be a possible outcome, if I were you, I would have bought a put spread, so my risk is limited and if it works I make money.
I didn’t think enough about that at that time, I should have. Otherwise, I would have placed that bet. Live and learn. 
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