Wildcat, the put thing is hard to discuss in detail. I don't always carry them. I purchase and carry them when I would otherwise probably sell all my stocks and have to pay the taxes. I have made very small use of puts in my tax sheltered accounts- I just sell stocks if I don't like the risk/ reward. (Risk/ reward is subjectively determined by me for me.)
As to strikes- at a time like now when I am pretty negative on technicals and seasonals /cycles as well as valuations, I have some strikes that are pretty close to the money. VIX is so low that they still don't cost much. If they all expire worthless, I will still be way ahead of selling stock and paying tax; though not ahead of forgoing the insurance altogether. But of course if the market does go down (something that we tend to forget can happen) I will be way ahead. At the last big top, I carried puts on QQQ (now QQQQ) from about August 99 into the Jan2000 expiration. So they expired worthless; I gave up because I was tired of being wrong and watching my time value evaporate. Luckily I did have some semiconductor puts with later expirations that got some of my money back. Lesson learned- try to control my greed. Idiots can stay in control of markets very much longer than one would ever expect. So this time around, since the possible win is less than in 2000, I keep my bets smaller, and plan to stay short into the Jan07 expiration, unless I close out profitably in Q4 06.
Regarding investing styles, yes, I have always done it this way. I would be too embarrassed to disclose how little earned income I have ever had. Basically, my retirement was from investing, not saving. As long as I am in good health, I will continue, though probably more conservatively since a big error would cost too much at this point.
I think a young person with a good job and not a lot of money can do fine with any of the standard asset allocation approaches, in that even a big % loss will be swamped by subsequent additions to the portfolio. On the other hand, I believe a young person with an inheritance or other large chunk of money should pay attention to valuation.
A retired person can lose a lot fast, and it cannot be recovered. A retiree with little or no non-portfolio generated income needs to be enterprising and or very conservative. Retirees with secure pensions are in a better place than workers. It really doesn’t matter what they do. They can’t lose their income; they can’t lose lose their job. They can shoot for the moon if they want, and try to accumulate serious wealth. Or they can sleep all day, or travel or become one with the universe.
Ha