Best hedges against market crashes?

[RetireJapan]

So basically you're 100% in equities? It makes sense if you know that you will not be forced to sell during market downturns but since markets appear overheated right now, I feel I should have some kind of hedge to take advantage of next crash which may occur sooner than later.

Investment accounts are 100% equities. We have a fair amount of cash too, between my accounts, my wife's accounts, and her business' accounts. Basically there is no need for us to touch the investments for the foreseeable future.

[RetireJapan]

When there actually is a crash, buying into it is incredibly difficult. It's easy to sit and imaging "taking advantage" of a crash, but buying something where the price is dropping every day is extremely counter-intuitive.

I'm ashamed to say that I tend to not notice price movements much. I only look at my account once a month or so, so I pretty much missed last March's excitement

And as adamu says, we had other problems last year that prevented us using our cash to invest as we had planned. Too much uncertainty around the future and what Covid would do to my wife's business.

[mighty58]

I'm PROUD to say that I tend to not notice price movements much. I only look at my account once a month or so, so I pretty much missed last March's excitement

Fixed that for you

[mighty58]

Completely agree that a "hedge" is not necessary for those playing the long game.

As for what I wish I had in March 2020 ... well, hindsight is 20/20 so just look at the returns since then and pick the highest. The question is a bit pointless as such, but Bitcoin is the obvious answer. But that doesn't mean those who went 100% Bitcoin were geniuses... they were lucky. Because, again, hindsight is 20/20.

[TokyoWart]

I don't think we've seen the equity markets fall enough this year to count as a "crash" but as an example of how bonds are not necessarily a good hedge consider:

Even with the recent fall the S&P 500 index is still up around 8% year-to-date

https://money.cnn.com/data/markets/sandp

The US 7-10 year Treasury index is down 5% year-to-date:

https://www.spglobal.com/spdji/en/indic ... /#overview

Both indexes are falling right now but the bond index I think is falling a little faster because this is partly an inflation scare. I realize there are many other equity indexes besides the S&P 500 and bond indexes besides 7-10 year US Treasuries but these are two of the largest representatives of the equity vs bond asset classes.

[goodandbadjapan]

I too have quite a big cash buffer. I've actually never sold anything (unless you count cashing in one of those rubbish off-shore plans a few years back) and try to keep enough in cash to survive at least a year or two. Which makes me ask: I do have some bonds, but while I'm keeping a cash buffer anyway, do I really need bonds at all?

[RMA]

I too have quite a big cash buffer. I've actually never sold anything (unless you count cashing in one of those rubbish off-shore plans a few years back) and try to keep enough in cash to survive at least a year or two. Which makes me ask: I do have some bonds, but while I'm keeping a cash buffer anyway, do I really need bonds at all?

I'm also having a cash buffer so I am not keeping any bonds. The interest rates are not that attractive to incentivize putting money in bonds and I would rather keep cash to take the advantage of market crashes. However I am worried about the inflation, the way all central banks are printing money inflation is much closer than it appears so I am going unorthodox way, i.e., putting some money in precious metals. I really wish it protects me from inflation and does not drop more than equities or recover earlier than equities in next market crash.

[TJKansai]

Perhaps not in most of Japan, but real estate seems to be a good bet in inflationary times. Countries that are growing always need additional housing and office space. That said, which properties to own takes some real insight.

And of course, COVID put a big pin in the commercial office space balloon.

[RMA]

Perhaps not in most of Japan, but real estate seems to be a good bet in inflationary times. Countries that are growing always need additional housing and office space. That said, which properties to own takes some real insight.

And of course, COVID put a big pin in the commercial office space balloon.

Real estate is a good bet but it's not for everyone. I so wish to invest in real estate but I feel like I don't have landlord's personality. Also it's Japan where there is not much appreciation and I'm worried what if I don't get tenants, I still have to pay the mortgage hence I couldn't muster the courage to invest in real estate. Real estate for personal use has it's other pros and cons and in my case the pros don't outweigh the cons but much margin.

[TJKansai]

I have had REITs for 25 years (mostly in my ROTH) and for a long time they were as good or better than the SP500. That hasn't been true the last 5 years though.