My mom has a german retirement portfolio called "Riester-Rente". Portfolio is mix of bonds and an international fund (DE0008491051).
As part of legal compliance, they need to make sure your portfolio value is never below what you paid in. Therefore if the market drops like 40% in case of my mom, they "sell low" all of your fund shares and buy bonds with it. If that happens they also never buy back in for you (you have 0 control!), so you hold bonds forever. (stupid imo)
My mom has still 20 years+ to retire and wants to hedge this downside. So she basically needs a payout of 40% of her current fund shares value, if and only if the fund DE0008491051 drops 40% from today. As long as her retirement Account still holds the fund shared, everything is ok; she just wants to protect against the downside of liquidating at a low price.
- Need to protect from downside of MSCI World-like fund
- If and only if fund drops 40%
- In this case want to get the 40% (or less) as money
Idea: I basically thought she could buy "Protective puts" on her normal depot outside of her retirement account (Thought of Put Options on MSCI World with a strike price of sth. like (CurrentPrice-30%) ). Having looked up, it seems like the premium for that is something like 25-35% of the insured amount. That seem's not worth it. Is a cheaper option?