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Hi gang,

I have got a great education going through this site and messageboard. Thanks for the fantastic work on asset allocation and Safe Withdrawl Rates.

I had a question regarding whether this board has studied insuring the portfolio against catastrophic losses by buying Puts or by other mechanisms. Given that withdrawl from portfolio in really bad years hurts the most, it might be worthwhile to buy some insurance protection against that.

Could this be done by buying puts against the ETFs?
Whether premium paid to buy puts is worth it or is it a drag on the PF? Does it make sense in short term / mid term / long term?
Does it at all increase SWR?

Since I have not purchased any Puts or LEAPS so I might be way off base here. Any pointers are much appreciated.

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No. of Recommendations: 1
Insuring your portfolio at all times is likely to be costly. Furthermore, if your money is in an IRA, your options are limited.

Timing the market with something like TimingCube


does make sense, and you can see their record, making only 2-4 trades/year. Not perfect, but sure beats buy and hold.

There are a number of market timing algorithms on my site, and you can look at the code. They are written in Trade, and use the Fasttrack database.

There is a lot more Trade code on Dexter French's site:

Many of the Trade files are experimental in nature, so do not expect too much. People put these forward for comment and improvement.

One thing you can do is to hedge. If you have a collection of stocks, a trading system, or a collection of funds that you believe will beat the market at least by going down less in bad times and going up more in good times, you can use the ProFunds "short" funds, leveraged 2X, to hedge.

That is to say, when the market timing signal says to sell, you put half as much as your equity into the leveraged short funds. This should make your portfolio approximately "market neutral".

Currently I am about 50% invested, with 1/3 of that in the short Profunds and the remainder in a stock trading system. Yesterday my stocks went up a tiny amount, while the major indices went down. So I made a little on the stocks, and a bit more on the short funds.

Check out the ProFunds site:

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