Molson Hart

Inflation in my investment portfolio scares me. At the same time, all the solutions to it also scare me. Real estate is a captive asset. Bitcoin is unproven with many catastrophic downsides. Stocks are volatile. Gold?

You can manage a lot of those risks by position sizing. And the perceived riskiness of things can be altered by reframing (sounds goofy, but it's powerful). Gold is probably a suboptimal bet for most of your portfolio.

You mean by not overconcentrating my assets in any one category of inflation-hedged asset? How would you reframe the risk?

Yep. Re: reframing, I was thinking about your worry about stock volatility. Stocks are slices of real businesses. If VIAHART were publicly traded, its quoted price would be volatile. Does that hypothetical bother you? No way, because you see the cash flows from your business.

If you see stocks as merely businesses and you focus on their fundamental cash flow attributes, much of the volatility in prices becomes much less bothersome as prices fluctuate far more than fundamentals.

While I've never lived through a recession or a significant stock price downturn, it's not the psychology of volatility that bothers me. It's a pragmatic issue. If stocks are my inflation-hedged asset in a downturn, I can't sell them to buy underpriced assets.

RE and cash, then. But, as you pointed out before, the downturn may not come for a long time. So you want a mix of different assets roughly scaled to your confidence in each scenario occurring. Another factor to consider: How cyclical your businesses are.