All posts by Financial Independence Hub

QMVP: Rethinking how you Invest in Technology

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Courtesy Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog)

Technology plays a central role in driving innovation, productivity improvements, and long-term economic growth, making technology companies a core component of many equity portfolios. However, how investors access technology exposure can meaningfully influence long-term outcomes.

Not all tech ETFs provide the type of exposure investors might expect. Many traditional technology indices rely on market-cap weighting, which focuses on company size rather than business quality. This can lead to meaningful exposure to companies with high valuations but less proven business models, while also concentrating portfolio risk in a small number of large stocks. The HAMILTON CHAMPIONS™ U.S. Technology Index ETF (QMVP) was launched to address these challenges by providing exposure to the most profitable U.S. technology companies, while managing concentration risk, all at a low annual management fee of 0.19%.

Outperformance from Tech Champions

QMVP tracks the Solactive HAMILTON CHAMPIONS™ U.S. Technology Index (“Tech Index”), which was designed to identify “Tech Champions,” the most profitable companies whose businesses are fundamentally driven by technology. By emphasizing profitability and managing concentration risk through a modified market cap-weight exposure[1], the Tech Index seeks to capture the long-term growth of the sector in a more balanced way.

Historically, this approach has led to strong performance. The Tech Index that QMVP tracks has shown significant outperformance relative to the Technology Select Sector Index, illustrated by the growth of $100,000 invested since inception in 2006.

QMVP — Index Outperformance[2]

Building a Better Tech Index

The Tech Index was built around two core principles:

  1. An emphasis on profitability, which tends to favour large, established technology companies with proven business models.
  2. Management of concentration risk, limiting overreliance on a small number of large holdings.

Emphasizing Profitability over Size

Most technology indices, including the Technology Select Sector Index, are market-cap weighted, meaning companies with larger market values represent a greater share of the index. As a result, companies with high valuations may receive significant representation regardless of how profitable their businesses are.

The Tech Index behind QMVP takes a different approach by selecting U.S. tech companies with the highest gross profits, emphasizing established businesses while excluding more speculative names with high valuations but limited earnings history.

Managing Concentration Risk

In addition to which companies are selected, how they are weighted within an index can meaningfully affect portfolio performance and risk. Traditional market-cap weighted technology indices are often heavily influenced by a small number of mega-cap stocks, resulting in concentrated exposure to just a few names.

The Tech Index behind QMVP is designed to manage this risk through a modified market-cap weighting approach, with individual holdings weighted between 2% and 6% at each quarterly rebalance. This structure helps prevent overreliance on any single company and promotes a more balanced technology allocation.

Where QMVP Fits in a Growth-Focused Portfolio

We believe QMVP can serve as a low-cost, core U.S. technology holding for investors focused on long-term growth, offering a more disciplined way to invest in technology today. Continue Reading…

The Optimal Path to Long-term Outperformance

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By Noah Solomon

Special to Financial Independence Hub

Image courtesy Khürt Williams/Outcome

Well, I won’t back down
No, I won’t back down
You could stand me up at the gates of Hell
But I won’t back down

No, I’ll stand my ground
Won’t be turned around
And I’ll keep this world from draggin’ me down
Gonna stand my ground
And I won’t back down

  • I won’t Back Down, by Tom Petty

It is well understood that people with a lower tolerance for risk must accept lower returns than those who have a greater tolerance. By the same token, investors who are willing to bear more risk can expect to reap higher returns than their more conservative peers.

However, this does not change the fact that any rational person, regardless of their tolerance for risk, would prefer higher rather than lower returns given the amount of risk they are willing to take. Similarly, they would prefer to experience lower rather than higher volatility given their target rate of return.

These self-evident truths beg the following question: For any given level of risk tolerance, what is the optimal path to achieving higher returns? In this month’s missive, I will explore various paths to accomplishing this objective, including their respective strengths and weaknesses.

Live by the Sword, Die by the Sword

If managers try to outperform their benchmarks then by definition they must hold portfolios which are different than their benchmarks, either in terms of its individual assets, their respective weightings within the portfolio, or both.

However, holding a portfolio which differs from its benchmark constitutes the proverbial double-edged sword. The pursuit of great performance can just as easily be wrong or right. If you strive for performance which is far better than the norm, you must hold a portfolio that exposes you to the risk of being far worse. Moreover, over the long term, it is highly likely that you will assume both roles in equal proportion or worse.

The long-term effects of oscillating between strong outperformance and strong underperformance are illustrated in the table below, which incorporates the following data:

  • Monthly returns for the TSX Dividend Aristocrats Index ETF (the benchmark that S&P Global uses to evaluate dividend-focused Canadian equity funds) going back to 2008, which is the first full calendar year of the fund’s existence.
  • Monthly returns over the same period for an “Alternator Fund” which switches every twelve months between underperforming the index by 5% and outperforming it by 5%.

Benchmark Portfolio vs. Alternator Fund: 2008-2025

A symmetrical combination of well above and below average returns produces a long-term record that is characterized by slightly lower returns, higher volatility, and larger losses in challenging markets. The punchline is that managers who strive to consistently outperform by a substantial margin every year are highly likely to deliver subpar results over the long-term.

Slow and Steady Wins the Race

Legendary investor Howard Marks once recalled a discussion he had in 1990 with the director of a major mid-West pension plan. During the conversation, he learned that the plan’s stock portfolio had far outperformed the S&P 500 Index over the past 14 years. Even more striking than its headline performance was the path that it had followed to achieve it.

Notwithstanding that the plan’s returns in any given year had never placed below the 47th percentile or above the 27th percentile, its portfolio’s performance over the entire fourteen-year period placed it in the 4th percentile.

The proverbial moral of the story is that if you swing for the fences and attempt to be in the top 5% or 10% every year, you will fall victim to the double-edged sword, delivering long-term returns that are (at best) mediocre and that are accompanied by high volatility. By contrast, if you deliver performance that is slightly above average on a realistically consistent basis with particular emphasis on outperforming in bear markets, (1) your long-term outperformance will be substantially better than average, and (2) you will be subject to lower volatility and shallower losses in challenging markets.

Munger’s Inversion and the “When” of Outperformance

The late great Charlie Munger, investment guru and longtime Buffett partner, stated, “Invert, always invert.” This statement describes his inclination for taking a given scenario and reversing it to evaluate the ramifications of the opposite scenario. Munger used this approach, which spotlights what to avoid rather than what to seek, to solve complex problems.

Outperformance not only stems from how often and by how much you outperform or underperform, but when you do so. With respect to long-term compounding and wealth creation, it is far more important to outperform in bad times than in good times. Continue Reading…

Preparing your Portfolio for Retirement? Income is SO Yesterday

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By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to Financial Independence Hub

Billy and Akaisha at Caleta Beach, Mexico

We’ve written about this for years in our books.

When preparing for retirement, designing your portfolio for income is over-rated. Oh, it feels good bragging about how much money you make each year, but then you also quiver about the taxes you owe each April.

What’s the point?

To make it – then give it back – makes no sense.

With today’s interest rates, people are being forced to look elsewhere.

Our approach 3 decades ago

When we retired 36 years ago, having annual income was not on our minds. Knowing we had decades of life-sans-job ahead of us, we wanted to grow our nest egg to outpace inflation and our spending habits as they changed too. Therefore, we invested fully in the S&P 500 Index.

On the day we left the working world the S&P 500 closed at 312.49.

We will get back to this in a minute.

500 solid, well-managed companies

The S&P Index are 500 of the best-managed companies in the United States.

Our financial plan was based on the idea that these solid companies would survive calamities of all sorts and their values would be expressed in higher future stock prices outpacing inflation. After all, these companies are not going to sell their products at losses. Instead they would raise their prices as needed to cover the expenses of both rising resources and wages, thereby producing profits for their shareholders.

How long has Coca-Cola been around? Well over 100 years and the company went public in 1919 when a bottle of Coke cost five cents.

Inflation cannot take credit for all of their stock price growth as they created markets globally and expanded their product line.

This is just one example of the creativity involved in building the American Dream. The people running Coke had a vision and have executed it through the years. Yes, “New Coke” was a flop as well as others, but the point is that they didn’t stop trying to grow because of a setback.

Coca-Cola is just one illustration of thousands of companies adapting to current trends and expanding with a forward vision. Continue Reading…

Why your Grandparents’ Investment Strategy may no longer be enough

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Image by Unsplash

By Devin Partida

Special to Financial Independence Hub

The investment playbook has changed. It may have performed well for the last several generations, but finding financial stability is a different game in the 2020s. The best practices established by your grandparents have become obsolete. Therefore, you should look to new financial horizons to establish financial freedom in a way that is more accommodating to modern dynamism and volatility.

How traditional Investment Strategies fail to adapt

The contemporary investing landscape is different from that of the last several decades. The techniques of previous generations are less viable. While you may ask your parents or grandparents for investing advice, their strategies could minimize your wealth generation and financial opportunities.

Most of your grandparents likely maintained a portfolio that followed a simple framework:  the 60/40 rule. Place 60% of your money in reliable stocks or index funds and the rest in high-interest-rate bonds. Today, this is far from the portfolio diversity modern experts want to see. These kinds of portfolios are only growing 2.2% a year now, so professionals are recommending even more varied investments, including precious metals, collectibles, venture capital and private equity, to name a few.

Past portfolios worked alongside robust pensions that were once common in the workforce. It is less common now for this type of security to supplement a 60/40 portfolio. These factors, combined with lengthening lifespans, mean nest eggs are ill-equipped to make it through potential market downturns and the entire length of your retirement. If you are living in retirement longer than previous generations, then the money has to work for you longer.

Why Economic Shifts demand a different Investment Approach

Interest rates have collapsed, and bond prices are mostly trending less than in previous decades, making them unsuitable for outpacing inflation. This reality is why people are seeking even more places to put their money.

The democratization of investments, such as the rise of cryptocurrencies, has also made market understanding more complex. Pair this with exchange-traded funds (ETFs), real estate investment trusts, non-fungible tokens and more, and you have the most enigmatic market history has ever seen: long gone are the days of just relying on blue-chip stocks.

Additionally, retirement savings have become more of a personal responsibility as the number of pension plans has decreased by millions since 1975. An IRA or a 401(k) is the more common route nowadays, as they are cheaper and less risky for employers. Now, many could view their investments as a replacement for what could have been a pension.

Ultimately, the set-it-and-forget-it model of your grandparents’ investment strategies is missing the wealth-generating opportunities you need to prepare for retirement in this climate. The rising cost of living, the financial influence of technological advancements and geopolitical tensions are only a few other factors that could shape how you divert your money.

Ways to Adapt to increase Risk Tolerance and Wealth

You can diversify while still embracing security. It will allow you to prepare for the unexpected. For example, your grandparents’ generation likely faced fewer natural disasters, as climate stressors have increased in recent years. In 2024, natural disasters caused at least $368 billion in economic damage worldwide, affecting people and their financial well-being.

These are the best ways to consider external factors outside of your control while taking advantage of how the investor market looks today.

Craft your Investment Goals

Many choose to work with a financial adviser, but you should start planning by identifying short-, medium- and long-term goals. These could involve buying a house, starting a business or building for retirement. Each goal has a time frame, allowing you to make informed decisions about your risk. At this stage, evaluating the stability of your job, debt and household expenses is critical. Continue Reading…

10 lessons I’ve learned from 25 years of investing

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Image courtesy Tawcan/Unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

I started DIY investing while I was in university. Back then, I bought a few stocks based purely on recommendations. Honestly, I didn’t have a clue what I was doing. I didn’t know much about stock valuation, how to read quarterly and annual reports, or understand company fundamentals.
Since our financial epiphany, I have become far more knowledgeable about investing. Writing about investing and posting new articles on this blog is one way for me to demonstrate that I understand different investing concepts.

After 25 years of investing, here are 10 important lessons I have learned:

1.) Increase the savings gap

Investing is all about saving money, investing that money, and waiting for it to grow.

To save money, one needs to commit to saving money. Living below your means or spending less than you earn is a common concept in the Financial Independence Retire Early (FIRE) movement. But I believe it’s more than just spending less than you earn. It’s about committing to continue increasing your earning power (i.e. income) while decreasing or maintaining your spending.

The difference between your income and spending is what I call the savings gap, or some people call it the savings rate. The bigger the savings gap, the more money you can save and invest toward your investment portfolio.

When you are starting on your investment journey, you really need to rely on injecting fresh capital into your investment portfolio for it to grow. The compounding effect won’t really pick up until your investment portfolio becomes sizable (say $100k or more). This is like rolling a snowball down the hill. If you start with a tiny snowball, it will take longer to increase the size and the speed of the snowball. If you start with a bigger snowball and can add more snow to the snowball as it rolls down the hill, you can increase the size and speed faster.

So increasing your savings gap will drastically propel the growth of your investment portfolio. Work hard on increasing the savings gap without depriving yourself.

2.) Learn to automate

Over the years, I have learned that the less I get myself in the way of our saving & investing journey, the better. Therefore, I focus on automating as many things as possible.

Whenever we receive a paycheque, a certain percentage is automatically moved to our financial freedom account and it is used for investing. We also automate how much money is moved to the different investment accounts each month.

On the other hand, we also automatically move different percentages of money to the different accounts like Play, Give, and Long Terms Savings for Spending. 

To take advantage of the power of compounding, we enroll in both synthetic and fractional drips with our online brokers so dividends are reinvested and additional shares are purchased automatically.

Some investors I know automate the buying and rebalancing process as well. For example, they would auto-purchase ETFs or stocks every second week or every month. Some use Passiv to auto-rebalance their portfolio until the desired allocation is met (note: we don’t auto purchase or auto rebalance but it’s a worthwhile automation).

3.) Ignore the noise

Nowadays, it’s easy to find news and stock analysis on the internet. Doomsday predictions are everywhere, so it’s easy to react and sell your investment on emotion. Similarly, you can get sucked into hype and fads easily and invest a significant amount of money when you get excited about an idea.

More than ever, it’s important to ignore the noise.

Remember, the stock market is like a roller coaster. It has its ups and its downs. Please do not freak out about the recent pops or drops. We can’t control the market, so why pay attention to all the noise and react to emotion or feeling stressed out about the news? The market is cyclical, bull markets come and go, so do bear markets. There are always ups and there are always downs, too. There’s no other way around it.

The key thing to remember is that the stock market has a tendency to go up over the long term. In fact, a historical long term return is 10% without accounting for inflation.

So ignore the noise and focus on your long-term investing strategy.

4.) Keep it simple

I used to trade on technical and chart analysis. The moving averages, channel breakouts, support & resistance, seasonality, stochastic, and head and shoulders are some of the technical analysis tools I have learned and used over the years. When using these analytical tools to trade stocks, things can often get complicated and it could take time to decide whether to buy or sell. These technical analyses typically require regular monitoring of the stock market, which can be very time consuming.

Over time, I learned that it is best to keep it simple. The idea of hedging your consumption became one of the fundamental pillars of our investing strategy: invest in companies that produce products that we use daily. The harder it is to switch and replace that product, the better. Or the more we and others complain about the product, but find it nearly impossible to find an alternative, the better.

I also learned not to focus overly on the quarter-over-quarter performance. Rather than looking at the micro trends and quarterly performances, we keep it simple by focusing on the macro environment. Are people still buying new iPhones and finding it hard to switch to Android? Are more and more people using credit cards for purchasing rather than cash? Are people relying more and more on their phones and data plans for their everyday tasks?

While technical and chart analysis are still helpful, I learned it is far more important to focus on the simple things like company fundamentals, profitability and product pipelines to understand whether it makes sense to continue investing in the said stocks or not.

Another way to keep things even simpler would be investing in one of the all-in-one ETFs like XEQT or VEQT. This way, you don’t even need to do any research on the companies you own. You simply buy shares of these all-in-one ETFs regularly and dollar-cost-average over time.

5.) Having the right expectations

Unfortunately, many investors believe they can make big profits and multi-baggers in a very short term. They like excitement and if they don’t trade regularly, their hands get “itchy” from lack of action.

This is where having the right expectations is extremely important.

The reality is, investing should be as boring as it can be. There shouldn’t be any excitement at all. It takes years for a stock or an ETF to compound and provide a solid return. Therefore, it’s vital to have the right expectations. You probably aren’t going to get a +100% return every single year. Tracking the historical average, between 8-10%, is totally OK. But don’t forget that the market goes up and down, so you will have a bad year occasionally.

6.) Best investment to buy

What is the best investment to buy? Yes, I have written about the best investment in the world and the best way to invest. In reality, there’s no such thing.

Dividend investing is not the best investment strategy in the world. Dividend investing is also not the best way to invest.

Index investing is also not the best investment strategy in the world. Index investing is also not the best way to invest. Continue Reading…