For those without the subscription like I have, here are the key ways to navigate any stock market bubble that might be forming.
Curious to get your thoughts on what you are thinking about and doing as we head into 2026 …
1.) Cut back on dividend reinvestment plans/DRIPs. In doing so, you are raising your cash/cash equivalents pile. (I have been doing that since 2024.) From the article: “Rather than purchase more shares at these possibly elevated prices, I will accumulate some cash and deploy as opportunities present themselves,” one reader said.”
2.) Trim individual stock holdings. While holding individual stocks can be amazing for income and growth, I know they also expose me to some concentration risks: company or sector risks. So, to avoid that, I can trim individual holdings and simply index invest: instead. From the article: “I have felt a U.S. equity bubble has been forming for over a year now. In January, I decided to sell all my individual U.S. stock holdings and move the funds into my S&P 500 ETF,” one reader said.” (Yup, see link below, what I have done.)
3.) Hold more cash. Aligned to #1, and have done this as well. We’re about 90% equities and 10% cash/cash equivalents entering retirement in spring 2026. I may even increase my cash allocation from here since almost all DRIPs are turned off for cashflow now…
Related to #2:
What approaches are you taking? Other steps? Happy to read and learn more…
Consider “bucketing” to manage withdrawals: Set a portion of your RRIF aside in something with no or very little risk that can be used for withdrawals. That way, the advisor suggests “…if the overall market takes a downturn, clients aren’t forced to sell investments at a loss because they need the cash.”
Consider funding the TFSA with unspent money: “Just because you are taking the money out of a RRIF account doesn’t mean you have to spend it.” Yes, correct. This is why I set up my parents’ RRIF withdrawals, annually, early in the year: so whatever they don’t need to spend from their RRIF each year can go directly to their TFSAs, where money can continue to grow tax-free for any longevity spending or other emergency needs down the line.
Simple concepts that can also apply to RRSP withdrawals too for any early retirees… Continue Reading…
The only investment benchmark that truly matters is whether you’re on track to meet your financial goals
Canva Custom Creation: Lowrie Financial
By Steve Lowrie, CFA
Special to Financial Independence Hub
We all like to know how we’re doing. It’s human nature. Whether it’s checking your golf handicap, your step count, or your investment portfolio, we’re wired to compare.
When it comes to investing, though, comparing can quietly pull you off course.
A client once asked me, “How’s my portfolio doing compared to the market?” It’s a fair question. But the real question is: how do you define the market?
In my experience, that definition changes over time. When one area of the world is outperforming, that’s suddenly what everyone calls “the market.” Over the last decade or so, U.S. stocks have led the way, so many people now define the market as broad U.S. stock indices like the S&P 500, or even narrower ones such as the NASDAQ, which is largely a measure of technology stocks. But in the decade before that, Canadian stocks did significantly better than U.S. stocks, so back then “the market” meant the TSX Index.
So, the idea of “the market” shifts with whatever happens to be doing best lately. That’s a moving target, and it makes for a poor benchmark.
Here’s the truth: unless your goals, timeline, and tolerance for risk are the same as that shifting version of “the market,” the comparison doesn’t tell you very much. In fact, it can distract you from what truly matters.
The Problem with Traditional Investment Benchmarks
Every night, the financial news tells us how some financial market did that day. The TSX was up. The S&P 500 hit a record. Bonds bounced back.
It’s easy to wonder, “Am I keeping up?”
But those numbers have nothing to do with your life. They’re designed to measure markets, not people. They don’t know when you want to retire, how much income you will need, or how much you can save. The list goes on.
When you start judging your progress against those numbers, you’re borrowing someone else’s scoreboard. It might look objective, but it’s not built for your personal situation.
That’s what we call tracking-error regret: the uneasy feeling that your portfolio is “falling behind” when it isn’t mirroring a benchmark or your friend or neighbour’s latest success story. That feeling often leads investors to make changes that feel smart in the moment but work against their long-term goals.
Setting Personal Investment Benchmarks that actually matter
There’s nothing wrong with measuring performance. The key is to measure what matters.
Ask yourself questions like:
Am I on track to retire when I plan to?
Can I fund the life experiences that matter most to me?
Do I have the financial flexibility to enjoy life without worrying about every headline?
If the answer is yes, you’re succeeding. That’s your true benchmark.
Remember, you can beat an index, or outperform a family member, friend, or colleague, but that doesn’t necessarily mean you’ll meet your financial goals.
It’s not about beating an index. It’s about building the life you want and staying on the path that gets you there.
A Road Trip worth taking: Planning your Financial Journey
Imagine you’ve always dreamed of doing a ski road trip through Western Canada. You plan a route from Calgary to Vancouver, hitting some of the best slopes along the way: Banff, Revelstoke, Big White, Whistler.
It’s not the fastest or cheapest way to get from point A to point B. You could fly to Vancouver in a couple of hours for a fraction of the cost.
But that’s not the point, is it?
The goal of your trip isn’t efficiency. It’s the experience itself: the mountain views, the fresh snow, the time with friends.
That’s exactly how a good investment plan works. It’s designed around your goals, not someone else’s shortcut (which, over time, may end up as a long cut). Your journey might look different from someone else’s, but if it takes you where you want to go, it’s the right route.
The Dangers of Portfolio Comparison and Tracking-Error Regret
When you compare your portfolio to an index or to what someone else is doing, you are like the skier who keeps checking flight prices mid-trip. You will always find a cheaper, faster, or flashier option. But constantly changing direction will make it impossible to finish the journey you started.
Comparison is powerful. It plays on our emotions, especially when markets are volatile or when others seem to be “winning.” But most of the time, those comparisons leave us feeling anxious rather than informed.
Any five- or six-year-old can look at two numbers and tell you which one is bigger. In fact, they will tell you that in a second. That is the easy part. The harder part, the adult part in an investing context, is not only spotting the bigger number, but understanding why one number is bigger than another. Continue Reading…
Pleased to meet you Hope you guess my name
But what’s puzzlin’ you
Is the nature of my game
Sympathy for the Devil, by The Rolling Stones
By Noah Solomon
Special to Financial Independence Hub
Historically, bonds have offered investors two main benefits. Firstly, their yields provided a reasonable, if unspectacular return. Secondly, they offered diversification value, muting overall portfolio losses during bear markets.
In my view, it is the second attribute that is the most important. In relative terms, bonds are not particularly useful for providing investors with strong long-term returns (that’s equities’ job!). So, by process of elimination it follows that the primary function of bonds is their diversification value.
When comparing equity strategies, one should compare their relative returns, volatilities, Sharpe ratios, drawdown characteristics, etc. However, given bonds’ primary purpose of providing diversification, an extra layer of diligence is required when evaluating bond strategies. Specifically, you should analyze their differing correlations to equities, and by extension their varying abilities to offset stock price declines during challenging environments.
There is no Free Lunch Part I
Economist and Nobel Prize recipient Milton Friedman famously stated, “There is no such thing as a free lunch,” which means that every choice has a cost, even if it’s not immediately obvious.
Traditional bond mandates each have their individual advantages and pitfalls with respect to returns, risks, and diversification properties. In terms of the tradeoff between risk and return, history strongly suggests that there is no clear free lunch to be had.
Risk vs. Return by Bond Type: 2000 – 2024
As the above table illustrates, there is a clear relationship between the returns of the various segments of the bond market and the maximum losses that they have sustained over the past 25 years. If you want extra return, you can reasonably expect to suffer larger losses in bad times. That being said, large losses in bond holdings are generally not what investors want or expect.
There is no Free Lunch Part II
Not only is there no free lunch with respect to the tradeoff between risk and return, but there is also none when it comes to diversification value. Higher returns are not only associated with larger losses but are also associated with higher correlations to equities.
Return vs. Correlation to Stocks by Bond Type: 2000 – 2024
Bonds that offer higher returns have a greater tendency to move in tandem with stocks, thereby providing less ability to mitigate stock losses during bear markets. In contrast, lower-return bonds possess greater diversification properties and thus are better equipped to offset stock-price declines during times of equity market turmoil.
None of the above: Sometimes there’s Nowhere to Hide
Notwithstanding the fact that higher-return bonds have on average suffered more severe losses and offered less diversification value than their lower return counterparts, these relationships have exhibited significant variations across different bear markets. Continue Reading…
Learn the key differences between Canadian Depositary Receipts (CDRs) and American Depositary Receipts (ADRs), and how each structure helps Canadians access international stocks.
Image courtesy BMO/Getty Images.
By Erin Allen, CIM, BMO ETFs
(Sponsor Blog)
Investing outside of Canada sounds simple. Just buy shares of Apple, right? But if you’ve ever tried, you know it’s not that straightforward. You’ll need U.S. dollars, your brokerage will likely charge a steep currency conversion fee, and you’ll be exposed to foreign exchange (FX) risk the entire time you hold the stock.
That’s where depositary receipts come in. Canadian Depositary Receipts (CDRs) and American Depositary Receipts (ADRs) are two ways to buy foreign stocks without directly trading on an international exchange. They’re designed to make global investing easier: but they work differently.
In this article, we’ll break down the differences between CDRs and ADRs, which could help you determine which one makes more sense for your portfolio.
Canadian Depositary Receipts (CDRs)
CDRs are a homegrown solution designed to make global stocks more accessible to Canadian investors. Listed on a Canadian exchange and priced in Canadian dollars, CDRs give you exposure to foreign companies: without needing to exchange currency or worry about FX fluctuations.
What makes CDRs unique?
CDRs come with a built-in notional currency hedge. That means the value of the receipt adjusts for movements in the Canadian–U.S. dollar exchange rate (or other foreign exchange rate depending on the stock), helping reduce the impact of currency swings on your return. It’s a structural feature that’s automatically factored into the pricing of each CDR, so you don’t need to manage it yourself.
Another feature is fractional share access. Most CDRs are initially priced around CAD $10 per unit, making them more accessible than buying full shares of blue-chip companies like Tesla or Berkshire Hathaway in U.S. dollars. This structure makes it easier to build diversified portfolios: even with modest amounts of capital, which makes them particularly beginner-friendly.
Why consider CDRs?
Because CDRs trade on a Canadian exchange and in Canadian dollars, there’s no need for currency conversion, which means no currency conversion fees and the impact of currency movements is managed through a built-in notional hedge.
They also streamline global access: the current lineup includes U.S. giants, international developed-market companies.
And you can buy them at any major Canadian brokerage, just like any other Canadian-listed ETF or stock.
Notable examples in BMO’s CDR directory include ex-Canada companies like:
ASML Canadian Depositary Receipt (CAD Hedged) (Ticker: ASMH)
LVMH Canadian Depositary Receipts (CAD Hedged) (LV)
Nintendo Canadian Depositary Receipts (CAD Hedged) (NTDO)
Honda Canadian Depositary Receipts (CAD Hedged) (HNDA)
Tesla (TSLA) BMO Canadian Depositary Receipts (CAD Hedged) (ZTSL)
Berkshire Hathaway (BRK/B) BMO Canadian Depositary Receipt (CAD Hedged) (ZBRK)
With lower dollar-per-share amounts and built-in currency hedging, CDRs are designed to simplify international single-stock investing for Canadian portfolios.
American Depositary Receipts (ADRs)
ADRs are the original gateway to international investing for North American investors. Introduced nearly a century ago, ADRs were designed to make it easier for U.S. investors to buy foreign stocks: without dealing with foreign exchanges, unfamiliar regulations, or foreign currencies.
How ADRs work
ADRs trade in U.S. dollars on major U.S. exchanges like the NYSE and Nasdaq. Each ADR represents shares of a non-U.S. company, held by a U.S. depositary bank. These banks issue the ADRs and handle the underlying foreign shares.
There are two types of ADRs:
Sponsored ADRs are backed by the foreign company itself and often come with better disclosure, liquidity, and alignment with investor interests.
Unsponsored ADRs are issued by banks without the direct involvement of the company. These tend to be less liquid and may not offer the same level of investor information. They trade exclusively on Over-The-Counter (OTC) markets making them very hard to retail investors to access.
Unlike CDRs, most ADRs do not include currency hedging. Your returns will reflect not just the performance of the stock, but also any gains or losses from exchange rate movements between the foreign currency and the U.S. dollar.
Why investors use ADRs
ADRs are widely accepted and highly liquid, with a long track record. They provide convenient access to hundreds of international companies, particularly from developed and emerging markets in Europe, Asia, and Latin America.
But for Canadian investors, there are some added frictions. Because ADRs are priced in U.S. dollars, you’ll need to convert Canadian dollars to buy and sell them. That introduces currency conversion costs and FX risk, which can eat into returns.
For Canadian investors, ADRs still remain a viable route to global diversification. But they come with a few more moving parts compared to Canadian-listed alternatives that need to be accounted for.
CDR vs. ADR: Side-by-side comparison
Feature
CDR
ADR
Currency
CAD
USD
Exchange
Cboe Canada / TSX
NYSE / NASDAQ
Currency Hedge
Yes (notional hedge)
Typically, no
Fractional Access
Yes
Varies
Accessibility for Canadians
High
Limited
Investor considerations: a checklist
When deciding between a CDR and an ADR, the best choice often depends on your specific needs as a Canadian investor. Here’s a checklist of key factors to think about:
✓ Portfolio diversification with local convenience
Both CDRs and ADRs give you access to global stocks, but only CDRs let you do it without leaving the Canadian market. You can trade them in Canadian dollars, through your regular Canadian brokerage account, during local market hours.
✓ Currency risk management
CDRs include a built-in notional hedge that helps offset the effects of exchange rate fluctuations. ADRs, on the other hand, generally leave you fully exposed to currency movements. If FX risk is something you’d rather not manage, CDRs offer a more hands-off approach. Continue Reading…
Since launching in October 2020, the Hamilton Enhanced Canadian Bank ETF (HCAL) has provided investors with a simple way to get more from one of Canada’s most reliable sectors, the Big-6 banks. By adding modest 25% leverage to an equal-weight portfolio of Canadian bank stocks, HCAL has delivered strong results over the past five years, offering investors enhanced income and growth potential from a sector known for its stability and consistent dividends.
Five years of Enhanced Growth & Income
HCAL’s structure is straightforward: for every $100 invested, HCAL borrows ~$25 at institutional borrowing rates and invests it back into the same six banks, providing roughly 1.25x exposure to the sector. This approach has supported higher monthly income and higher long-term returns since HCAL’s inception when compared to a non-levered Canadian bank portfolio, specifically the Solactive Equal Weight Canada Banks Index (“Canadian Bank Index.”)
HCAL vs. Canadian Bank Index — Growth of $100K [1]
Long-Term benefits of Modest Leverage
Over time, the power of compounding is a key driver of returns, and modest leverage can amplify that effect. In HCAL’s case, the 25% leverage applied to Canada’s largest banks has contributed to meaningfully higher long-term returns. The leverage is realized at institutional borrowing rates, typically lower than those available to individual investors, and HCAL can be held in registered accounts, providing access to the benefits of low-cost leverage in accounts where margin isn’t normally available. Continue Reading…
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