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HCAL and Hamilton ETFs: A Growth Story

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Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog)

In May 2020, during the early days of the pandemic and while bank stocks were depressed, we presented a webcast entitled “Credit Cycle is Coming – What to Expect.”

During that webcast, we (correctly) predicted that during the expected downturn, the new loan loss accounting would deepen the credit cycle for the Canadian banks and importantly shorten its duration to 2-3 quarters (versus the historical duration of a credit cycle of 4-6 quarters).

Two quarters later, in October, we followed up with a presentation/webcast entitled “Canadian Banks: Cycle is (Basically) Over,” explaining why we believed the cycle was ending, and that the upside from earnings normalization was material.

Demonstrating our conviction, we launched HCAL: the Hamilton Enhanced Canadian Bank ETF, Canada’s first modestly levered ETF on October 14, 2020. We argued that its higher yield and growth potential relative to the Canadian banks created an excellent opportunity for long-term investors to take advantage of the looming recovery. We also noted that notwithstanding its modest leverage of 25%, its volatility profile was not meaningfully different than owning an individual Canadian bank stock[1].

In the year that followed, Canada’s Big Six bank stocks recovered much faster than the market anticipated, due to an improving macro environment and rapid normalization of earnings supported by large reserve releases. In 2021, HCAL rose more than 51%, outperforming the Solactive Equal Weight Canada Banks Index by over 20%[2].

HCAL’s success marked an important milestone in our growth and helped pioneer a new category in Canada, demonstrating that modest leverage, when applied thoughtfully to high-quality stocks and trusted sectors, could enhance long-term returns.

Since inception, HCAL has generated an annualized return to investors of 30.3%, with a higher yield and similar volatility profile to the Big Six Canadian banks (more below).

As a result, HCAL now has over $1 billion in assets under management (AUM), making it the seventh member of the Hamilton $1 billion-and-over club.

In Canada, Banking is King

Known for their consistent dividends and wide ownership, Canada’s Big Six banks are considered among the most reliable blue-chip companies in the country and the backbone of the economy and stock market.

Put simply, for every $100 you invest, you get approximately $125 exposure (net of financing costs), and this approach has delivered higher monthly income and higher long-term returns since HCAL’s inception when compared to the Canadian bank index, specifically the Solactive Equal Weight Canada Banks Index (“Canadian Bank Index”.)

HCAL vs. Canadian Bank Index — Growth of $100K[3]

A Symbol of Hamilton Innovation and Rigour

Born out of inventive thinking during a time of uncertainty for the banking sector, HCAL has grown to more than $1 billion in assets under management and become an important part of Hamilton ETFs’ growth and story. Its success reflects our focus on developing thoughtful, differentiated investment solutions, which is key to the Hamilton ETFs ethos.

“As an ETF provider, you want to offer products that make your clients money, it can’t just be about inflows to you. We always ask: is this a good product? Does it add value and choice to investors?” said Executive Chairman and Co-Founder Robert Wessel.

Some of the factors that have made HCAL stand out:

  1. Owning blue-chip Canadian banks: HCAL provides exposure to the Canadian banks, one of Canada’s most trusted sectors with an uncommonly long record of dividend sustainability.
  2. Modest leverage/enhanced structure: HCAL borrows 25% at institutional borrowing rates and invests approximately 125% in the HAMILTON CHAMPIONS™ Canadian Bank Equal-Weight Index (HEB), which owns the Big Six banks.
  3. Similar volatility to an individual Canadian bank stock: Since inception, the increase in volatility from the enhanced structure roughly offsets the decline in volatility from diversification. As a result, HCAL has had a volatility profile roughly equal to owning any single Canadian bank stock (see chart below).

The outcome?

HCAL has provided investors with strong returns over its 5-year track record. Since inception, it has provided investors with both a higher long-term return than the Big Six banks, at 30.3% annualized return (see table below) and higher yield with similar volatility to the Big Six Canadian banks.

Hamilton ETFs: Pioneers of Enhanced ETFs

Launched in October 2020, HCAL was Canada’s first “enhanced” ETF followed by the second, the Hamilton Enhanced Canadian Covered Call ETF (HDIV), which launched in July 2021. When creating HCAL, we chose 1.25x exposure, which we believe is a “Goldilocks” level of leverage, because our analysis and back-testing of the strategy suggested higher long-term return potential while maintaining a volatility profile similar to that of an individual Canadian bank stock[6]. Continue Reading…

Bull Markets don’t die of Old Age … They get Slaughtered

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Image courtesy Shutterstock/Outcome

By Noah Solomon

Special to Financial Independence Hub

Yes, I’m stuck in the middle with you
And I’m wondering what it is I should do
It’s so hard to keep this smile from my face
Losing control, yeah, I’m all over the place

Clowns to the left of me, Jokers to the right
Here I am, stuck in the middle with you

  • Stuck in the Middle With You, by Stealers Wheel

Caught between the Rock of FOMO and the Fear of FOL

With the current bull market now into its fourth year and many global stock indices at or near record levels, investors could be forgiven for wondering how much upside there can be from here and when the party will end.

While almost nobody with whom I have spoken believes that a bear market is imminent, they are concerned that it is becoming more likely. Despite this increased wariness, people are also cognizant that running for the hills could entail foregoing considerable gains should markets continue their trajectory. They are trapped between the “rock” of FOMO (fear of missing out) and the “hard place” of FOL (fear of losses). Buffett best described this recurring dilemma in his statement:

“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

This month, I discuss whether the current bull market has reached a stage where it is something to be feared. To this end, I will ascertain whether it represents an outlier from a historical perspective with respect to its longevity, magnitude, and valuation. I will also discuss the catalysts that have brought an end to previous bull markets and whether any such “markers” are lurking in the shadows.

It’s not a Question of IF, but WHEN

As the following table illustrates, bear markets have hardly been uncommon.

I have no idea when the next bear market will arrive or how severe it will be. For what it’s worth, I don’t think anybody else does either. However, unless you believe that bear markets have become extinct, markets will continue to suffer periodic episodes of malaise. As the saying goes, “You don’t need to know when something will happen to know that it will.”

Looking for the Signs: Mapping the Present to the Past

From a purely statistical perspective, some measures suggest that the current bull market may have considerable life remaining. However, there are also some signs that have portended the demise of its predecessors.

In terms of length, the current runup in equities does not appear long in the tooth. As of the end of last month [June], it has been 1357 days since the end of 2022’s bear market in mid-October of 2022. By contrast, the average duration of bull markets since WWII has been 1905 days.

With respect to returns, the present bull market appears similarly unalarming, with the S&P 500 Index producing a total return of 123.2%, as compared to an average return of 177.4% for all previous bull markets in the postwar era. However, this average is heavily skewed by the bull run that included the late 1990s tech bubble, during which the index produced a total return of 582.1%. Once this extreme data point is removed, the average bull market return falls from 177.4% to a far more modest 140.6% that makes the current bull market appear considerably less youthful.

From a rate-of-appreciation perspective, the current bull run appears somewhat ahead of itself. In its 1357 days of existence, the S&P 500 Index has delivered a total return of 123.2%, as compared to an average return of 104.8% over the same period during the three previous bull markets. Only the post-global-financial-crisis bull run had a greater rate of ascendance, returning 125.4% over its initial 1357 days. However, when equities troughed in March 2009, the forward P/E ratio of the S&P 500 was approximately 11. Once investors became comfortable that the world was not collapsing, bargain basement prices and hyper-stimulative monetary policies served as rocket fuel for stock prices. In contrast, the current bull run began with a P/E ratio of over 16 and current rates are particularly accommodative, which makes this bull market’s pace of gains appear somewhat anomalous.

Perhaps the most striking feature of the U.S. market is its strength over an extended period. With the exception of the short-lived Covid Crash and the relatively shallow and short bear market of 2022, markets have been on a largely uninterrupted winning streak. Annualized returns over the past 10 years through the end of 2025 are 14.68%, as compared to an average of 10.97% for all rolling 10-year periods in the postwar era. In a worst-case scenario, reversion to the long-term mean would require a 44% decline, while a more benign path would necessitate subpar returns over an extended period.

Lots of Steak. But also, some Sizzle

Don’t get me wrong:  if earnings growth had kept pace with stock prices over the past ten years, I would not be particularly concerned that stocks have gotten ahead of themselves.  After all, it is widely understood that the S&P 500 Index has become increasingly dominated by a handful of mega cap tech stocks that have delivered phenomenal earnings growth. Continue Reading…

Dogs of the TSX Dividend Stock Picks

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By Kyle Prevost, MillionDollar Journey

Special to Financial Independence Hub

The “Dogs of the TSX” dividend investing strategy for Canadian stocks has been a focus of mine for the past 14 years. I don’t follow the “Dogs” strategy with a majority of my portfolio, but it is a key factor when I look at my relative weighting of Canadian stocks at the end of each year. My key Dogs pick for 2024 and 2025 was Power Corp – and man did they make me look smart last year! (More on that in a second…)

I want to make it clear that the Dogs of the TSX is not something that I created. In fact, it’s actually an American idea. Michael B. O’Higgins wrote a book called the Dogs of the Dow back in 1991, and the idea was later adapted to the Canadian market. I first came across the “Dogs” method of stock picking when MoneySaver magazine started a column titled BTTSX – short for Beating the TSX – dividend stock strategy. (Click here to skip directly to my 2026 picks).

The theory behind the Dogs of the TSX strategy is to look for solid cash-flow-positive stocks that have fallen out of favour for one reason or another. In other words, you’re looking to take advantage of short-term market inefficiency when it comes to the pricing of blue-chip Canadian stocks. A low price and a high dividend results in a high dividend yield.

The chart below illustrates the total return (dividends plus price capital gains) versus the TSX 60 benchmark over the years. Looking at 2025, our Dogs of the TSX portfolio of 10 stocks was very similar to the overall TSX 60 index. In fact, the average return lead that the BTTSX strategy has over 3- and 5-year periods is fairly minor. That said, when we look out over the longer terms, we see consistent outperformance in the range of 2-3% per year.

dogs of tsx vs benchmark2025

If you had $100,000 invested 30 years ago, the constant difference in compounding would have left you about $2 million richer today had you followed the Dogs of the TSX BTTSX strategy.

When we look back over the last year, the banks had a great year, and the telecommunications companies continued to get beat up. Consequently, we’re going to lose TD off of the list this year (its share price has finally caught up to its dividend payout).

In its pure original form, the Dogs the TSX strategy simply involved ranking the companies in the Toronto Stock Exchange 60 index (aka: TSX 60) by their dividend yield. The highest yield gets the top spot. Then you simply invest equal amounts in all top ten dividend yield stocks.

The idea is that investing in companies that have relatively high free cash flow – but relatively low share prices – is an excellent way to systemically outperform the broader market. No need to pick stock winners with any sort of fancy algorithm – just choose dividend stocks that are out of favour and consequently have high yields.

The average yield for the stocks making the 2026 Dogs of the TSX is about 5.26%. That’s down about 1% from last year – showing that valuations on these companies have raced ahead of their free cash flow and dividend payouts. (In theory, it could also be the case that these companies cut their dividends, but since only BCE did that, we can eliminate that theory.)

In my own implementation of the BTTSX strategy I often eliminate Real Estate Investment Trusts (REITs), and any stocks that have cut dividends OR have insanely high payout ratios (foreshadowing a future dividend cut). Those rules helped me avoid the Algonquin disaster in years past. I didn’t trim much of my BCE holdings before the cut, and I have to admit that I’m getting nervous about Telus: but haven’t pulled the trigger yet.

You’ll notice that my Dividend Dogs of the TSX list has a lot in common with my Best Canadian Dividend Stocks list that I update monthly. There’s obviously a lot of overlap in selecting value-driven, stable, Canadian company stocks.

Top Canadian Dogs of the TSX Pick for 2026: Emera (EMA)

My 2024 and 2025 Dogs of the TSX picks were identical to one another: Power Corp (POW).

While I looked pretty average in January last year, I look pretty darn smart today! That’s because Power Corp saw a total return of over 75% last year!!

In fact, the share price has done so well, that it has outpaced the dividend, and dropped POW right off the BTTSX list for 2026. The biggest driver was Great-West Life’s robust earnings. On top of that, IGM has quietly stabilized its asset base, and Wealthsimple continues to expand its footprint, with more rumours swirling about that Schedule 1 bank licence approval. Investors are finally pricing in the fact that Power Corp isn’t just a stodgy old financial holding company. It’s a well-run, diversified business with growth levers in both traditional finance and the fintech space.

The other stock I highlighted as a Dogs of the TSX stock to watch was TD Bank: and again, TD did so well (total return of about 70%!) that it’s not on the list this year!

It is nearly impossible to duplicate those results going forward. Those two picks both hit the perfect tailwind, and while I believed they were significantly undervalued 12 months ago, I would have told you that you were crazy if you said they’d have total returns of more than 50%, nevermind 70%!

Now, I’m not nearly as bullish on the overall market going into 2026 as I was in 2025. I don’t see any screaming “buy now” deals out there. That’s why my 2026 Dogs of the TSX pick is Emera.

It’s definitely not a stock that’s going to light up Reddit boards. What it is, is a regulated utility with a high starting yield, visible growth, and a US-expanding business mix that I think the market is still undervaluing.

At its core, Emera is a regulated electric and gas utility operator. More than 90% of its earnings come from regulated sources, and roughly 96% of its assets sit inside rate-regulated frameworks. That price stability is exactly what you want when you’re building a dividend-focused portfolio in a market that feels a bit stretched.

Emera operates across Canada, the U.S., and parts of the Caribbean, but the business is much simpler than the geographic footprint suggests.

The short version is this: Florida’s data center growth is the story. Canada is secondary. Everything else is noise.

Emera’s crown jewel is Tampa Electric, which sits under its TECO Energy subsidiary in Florida. That operation benefits from population growth, constructive regulation, and a steady stream of capital investment tied to grid hardening, electrification, and storm resilience. If you believe Florida continues to grow and data centers continue to put pressure on electrical grids (and all signs point that way), Emera has positioned itself very well.

One of the reasons Emera stands out to me right now is management’s five-year, $20 billion capital plan, announced late in 2025. This isn’t vague guidance. It’s a detailed roadmap that extends 7–8% consolidated rate base growth through 2030, with nearly 80% of that capital earmarked for Florida.

That’s meaningful growth for a regulated utility. And importantly, it’s growth that regulators expect and allow utilities to earn returns on.

Canadian assets (which are mostly through Nova Scotia Power) do introduce some political and regulatory friction. But when I look at where Emera is allocating capital, it’s clear management understands where the best risk-adjusted returns are coming from. The payout ratio is pretty darn high, and the balance sheet carries too much debt for my liking. That said, with interest rates coming down in the US, and regulations coming off the books, I like the short- and medium-term prospects.

In a market where many stocks feel priced for perfection, Emera feels priced for caution. That’s what I’m looking for in 2026.

June 2026 Update: So far so good, Emera. It’s up about 7% on the year, which means that it is slightly outpacing the overall TSX 60 index. When you consider that its dividend is higher than that of a TSX 60 ETF, the gap opens up a bit more. American assets and earnings continue to perform well (as I figured they would). So while it’s not performing as well as my Toromount Industries Dividend King pick, or as well as Power Corp (which just continues to power on after last year’s incredible run, up 13% so far in 2026), Emera continues to add steady dividends and capital gains to my portfolio.

One thing to note in regards to Power Corp (which still holds a prominent place in my TSX Dogs Portfolio after its big move last year) is that its Wealthsimple subsidiary continues to post explosive growth. While I don’t at all like the direction the company is going from a user perspective, it is undeniably finding new ways to monetize its young customer base. The company recently made waves by saying it was going to be one of the first Canadian companies to bring predictive markets (think online betting like Kalshi or Polymarket down in the States) to Canada. If casinos are a license to print money, online casinos are a license to print money right across an entire country!

Visit DSR & Get Our Exclusive Discount

Dogs of the TSX Dividend Stock Strategy Implementation

Here is the step by step procedure of how this strategy is implemented: Continue Reading…

The renewed case for Global Investing

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Franklin Templeton

By Stephen Dover, CFA, Franklin Templeton Institute

(Sponsor Blog)

Any consideration of emerging markets must begin with the case for global investment strategy. The decision to allocate capital internationally is not just about geographic diversification. Rather, it is increasingly driven by fundamental shifts in absolute and relative returns that drive global capital flows, by the discovery of new investment opportunities, and by the need to identify and manage concentration risk.

This section establishes the reasons why active international allocation strengthens institutional portfolios that also reinforces the rationale for emerging market allocations.

In an extended period of “US exceptionalism”—roughly spanning the 15 years from the global financial crisis to the middle of the current decade — investors increasingly gravitated to US equity and credit markets. That was understandable, given the superior returns — in absolute and risk-adjusted terms — delivered by US financial assets.

Importantly, superior returns on US assets were driven by superior fundamentals, including growth, institutional solidity, vast market liquidity, innovation and historic levels of profitability.

At the same time, however, US-based equity returns became more concentrated, as mega-
capitalization stocks accounted for a growing share of widely followed market-capitalization indexes.
Partly driven by concerns about concentration risk and partly because of improving returns in other
markets, investors have more recently begun to look for opportunities in other markets.

Over the past year, European, Japanese and emerging equities, and particularly emerging debt, have episodically produced superior returns to those found in US equity and fixed income markets. Those outcomes have begun to raise awareness of global opportunities, among them in emerging markets.

Renewed interest in global investing stems from other factors as well. Economic and monetary policy
divergence is becoming more significant. Prior to the US-Iran War, the Federal Reserve (Fed) was
biased to cut rates, the European Central Bank (ECB) had paused its easing cycle, the Bank of Japan
(BoJ) had already cautiously begun to hike rates, and various emerging central banks were prepared
to cut rates amid falling inflation. Those divergences in policies had contributed to a weakening of
the US dollar since early 2025, which in turn boosted investor interest in non-US markets, including
in emerging markets.

With the outbreak of the war and the impairment of shipping via the Strait of Hormuz, policy
perceptions have again shifted. The Fed and emerging central banks are now (mostly) on hold, the
ECB and the BoJ are inclined to tighten their monetary policies. Unsurprisingly, volatility, correlation
and returns have shifted markedly.

But the underlying point remains: Divergence in the conduct of monetary policy creates opportunity for tactical re-allocation. And it isn’t just about monetary policy. In many respects, fiscal policy divergence is even more notable.

In the United States, large structural budget deficits are forecasted over the next decade.

Meanwhile, Japan’s new government is promising more fiscal stimulus as well.  So, too, are Germany and the European Union.

In contrast, over the past decade many emerging countries have been pursuing more disciplined,
orthodox fiscal policies, with the upshot that their sovereign credit fundamentals are improving in
absolute and relative terms. That trend lends support to secular declines in risk premia and should
manifest in even lower nominal and real interest rates, as well as stronger emerging currencies.
Directly, that boosts emerging debt returns, but it also lends greater resilience to many parts of the
emerging complex.

As noted, global markets — including emerging markets — have recently exhibited episodes of
outperformance relative to US equity and fixed income returns. That is important, because for most of
the past 15 years US exceptionalism has been dominant. So much so, indeed, that if one compares the
efficient frontiers of investing with and without emerging markets since 2010, it is clear emerging
market allocations had almost no positive impact on portfolio returns, adjusted for risk, over the past 15
years.

But we believe those historic results are not likely to persist. Owing to improving emerging market
fundamentals, which we describe in detail in the next section of this paper, absolute and relative
expected returns are shifting in their favor. Using our estimated year-ahead returns across all
markets — developed and emerging, public equity and debt — a clear upward and leftward shift in the
efficient frontier is apparent when comparing a developed market only to a blended emerging and
developed portfolio. We believe emerging markets (alongside other non-US developed markets) are
therefore poised to contribute to improved portfolio performance in the year ahead: and most
probably for longer.

EMs are undergoing a profound transformation, one that is not cyclical in nature but structural, durable and increasingly self-reinforcing. The traditional narrative of emerging markets as externally dependent, volatility-prone economies is being reshaped by a new set of underlying forces that are redefining their role in the global economy.

EMs have generally shown significant resilience this decade, facing down a series of shocks arising from the COVID-19 pandemic, the inflationary outcome of the Russia-Ukraine war and the US Fed’s sharp interest-rate hikes during 2022-2023, and last year’s substantial tariff volatility. Not only did EMs survive this period, but many have thrived.

As world trade reconfigures and global actors realign geopolitically, EMs have found themselves generally well-placed to benefit from these global shifts: including some that are likely to benefit under the new tariff regime. This compares to earlier years when EMs would often face crises (whether debt, balance of payments and/or in banking systems) from global shocks.

The fact that EMs are in a favorable position now is largely a result of policy choices that have situated them handsomely to face a rapidly changing world economy. In this regard, we note three significant global regime changes that we believe EMs are now well-placed to benefit from: structural improvements in EMs, global trade econfiguration, and a shift in the US dollar’s ability to attract global capital inflows.

Regime change: EMs are structurally sounder

Policy responses with respect to both monetary and fiscal policy have improved significantly across EMs over the past couple of decades. Adoption of sound, credible policies and nurturing of institutions (such as inflation targets, fiscal rules and independent central banks) have helped policy formulation and improved the market’s perception of the credibility of EM policymakers. Continue Reading…

Book Review: Rethinking Investing

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Amazon.ca

By Michael J. Wiener

Special to Financial Independence Hub

 

I liked Charles Ellis’ book Winning the Loser’s Game so much that I had to read his latest: Rethinking Investing.  It is very short at just over 100 small pages, but is packed with good advice.  Some of it is specific to U.S. tax laws, but most of it is useful for Canadians.

Ellis takes on three huge areas of personal finance.  The first is your portfolio allocation, or what you should invest in.

The second is your savings plan, and the third is your “spending rule,” or how to spend your assets during retirement.

A detailed treatment of these areas could easily run to thousands of pages, so this book is necessarily at a high level.  Ellis wants you to get the broad ideas right, so that you won’t make big mistakes as you fill in the details.

Ellis calls compounding investment returns “your power curve.”  He explains that most of your investment growth comes at the end, which provides motivation to begin early.  Saving is “your first priority.”

Saving

He offers thirteen specific suggestions for saving money, such as use employer matching, automate deductions from pay, invest bonuses, buy preowned cars, consider a smaller house, “self-insure for auto damages under $10,000 — or whatever you can comfortably afford to pay in the unlikely event of a major accident” — and use term life insurance.

Unlike recent popular advice to focus only on big expenses, Ellis says that “Lots of small-expense items can add up and cut your potential savings.”

Investing

Ellis repeats the main themes of Winning the Loser’s Game to explain why low-cost index investing is the way to go.  “The growing market dominance of expert professional investment managers … has made the market harder and harder to beat.”

There are three factors slowing down the “widespread adoption of indexing.”  Referring to index investing as “passive” has negative connotations for most people.  “Nobody wants to be known as passive.”  The second factor is that “most investors find it hard to believe that talented active managers with superb information won’t beat the market.”

These active managers “fought against indexing as though they and their careers were seriously threatened: as they surely were and certainly are!”  The third factor comes from the media, who know “that indexing’s persistent successes would not make for compelling or even interesting copy.”

When investors make active choices on market timing, they tend to perform poorly.  Unfortunately, Ellis points to reports from DALBAR for evidence of this pattern.  While it’s true that retail investors make poor market timing choices on average, DALBAR’s methodology for computing their losses is nonsense.

Bond allocation

Ellis makes an interesting pitch for investors to own more stocks and fewer bonds.  He asks investors to include the following as part of their bond allocation: “home equity, the present value of your Social Security benefits [CPP and OAS in Canada], and your future estimated savings plus any likely inheritance.”

While I think many people would be better off with a lower bond allocation during their working years, I have to push back on the future estimated savings and inheritances.  Maybe government workers can treat future savings as bond-like, those in the private sector have a lot of uncertainty in their future savings.

As for an inheritance, I see huge uncertainty in most cases.  A parent may end up needing the money for elder care, or may give it to someone else, or may have less money than you think.  The money I will leave to my sons is mostly invested in stocks, and they will get what’s left after all my spending.  The amount they will get does not have bond-like attributes.

All that said, if thinking about home equity, government payments, future savings, and an inheritance helps people tolerate the short-term swings in stock prices, then maybe Ellis is right to give this advice, even if it isn’t all technically correct.

Retirement spending rule

Ellis encourages people to think about drawing from their savings in retirement like a university endowment.  “First, average the year-end values of your assets over the prior several years (preferably more than five years) to dampen the impact of market fluctuations.”  Then choose a prudent annual withdrawal percentage, “likely 4–5%.”

“For example, if you settle on a 5% rate of withdrawal and a six-year moving average of the year-end value of your assets, a 30% drop in the stock market would lead to only a 5% reduction in your payout that year.”  This approach offers an alternative to “having a portfolio laden with low-return bonds.” Continue Reading…