Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Playing Defense with Sector ETFs

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Here’s how an equally weighted portfolio of healthcare, utility, and consumer staples ETFs could provide better downside protection and reduce volatility.

Image courtesy BMO ETFs/Getty Images

By Erin Allen, Director, Online Distribution, BMO ETFs

(Sponsor Blog)

The U.S. stock market, particularly the S&P 500 index, isn’t as uniform as it might seem. While you may think of it as a homogenous entity, it’s far from reality.

The S&P 500 can be broken down into 11 Global Industry Classification System (GICS) sectors: information technology, health care, financials, consumer discretionary, communication services, industrials, consumer staples, energy, utilities, real estate, and materials.

Each sector groups together companies that operate in the same industry and offer similar products and services. Historically, different sectors have also shown varying levels of sensitivity to market and economic conditions.

Some are cyclical, meaning they typically do well during economic expansions but struggle in downturns. On the other hand, some sectors are considered defensive, as their revenues and earnings remain stable regardless of economic cycles.

One well-known investment strategy that takes advantage of these differences is sector rotation, where investors shift their money between sectors based on macroeconomic indicators like GDP growth, interest rates, and inflation.

Source: SPDR Americas Research. ++/– indicates the best/worst two performing sectors. +/- indicates the third best/worst performing sectors. The Energy sector did not make the top/bottom three sectors during any cycles, as it is less sensitive to U.S. economic cycles but more driven by global supply and demand of crude oil. For illustrative purposes only. 1

However, for risk-conscious investors, another approach involves overweighting defensive sectors — particularly health care, utilities, and consumer staples — to provide better downside protection and reduce portfolio volatility.

What makes a sector defensive?

A sector is considered defensive when its companies provide goods or services that consumers continue to purchase regardless of economic conditions.2

For example, when the economy weakens, a consumer might delay buying a new car or upgrading their phone. These are discretionary purchases: non-essential items that can be postponed until financial conditions improve.

In contrast, even during a recession, people still pay their water and gas bills and continue buying household essentials like groceries and personal care products.

The underlying economic principle at play here is elasticity. In economics, elasticity measures how much the quantity demanded of a product changes in response to price or income changes.

Goods with inelastic demand see little fluctuation in consumption, even when prices rise or consumer income declines. This makes sectors with inelastic demand more stable during market downturns.

  • Utilities: Electricity, water, and gas are necessities that households and businesses must pay for, regardless of economic conditions.
  • Consumer Staples: Essential items like food, personal care products, and household goods remain in demand even when discretionary spending drops.
  • Health Care: Medical services, prescription drugs, and insurance are critical expenses that people prioritize, often regardless of cost.

How defensive are these sectors?

One way to quantify how defensive a sector has historically been is to look at its beta, a measure of volatility relative to the broader market3.

The market itself has a beta of 1.0, meaning any stock or sector with a beta below 1.0 tends to be less volatile and moves less than the overall market during upswings and downturns.

When analyzing long-running sector ETFs, the historical five-year betas confirm that health care, consumer staples, and utilities have lower volatility than the broader market.

The Health Care Select Sector SPDR Fund (XLV) has a beta of 0.644, The Consumer Staples Select Sector SPDR Fund (XLP) comes in even lower at 0.575, and The Utilities Select Sector SPDR Fund (XLU) has a beta of 0.746. This suggests that all three sectors historically experience smaller price swings compared to the S&P 500.

Further supporting this, research from State Street Global Advisors examined periods of steep market drawdowns. Between 1999 and 2022, there were 11 instances where the S&P 500 declined by 10% or more in a single quarter7.

They found that an equally weighted portfolio of health care, consumer staples, and utilities delivered significantly smaller losses than both the S&P 500 and the Russell 1000 Value Index.

 Morningstar direct. Data as of 6/30/227

This demonstrates how overweighting defensive sectors has historically provided better downside protection in times of market stress versus broad market indices.

The ETFs for the job

BMO’s lineup of SPDR Select Sector Index ETFs includes three options that align with the defensive sectors discussed earlier. These ETFs provide targeted exposure to U.S. health care, consumer staples, and utilities, ensuring investors can overweight these segments without exposure to the rest of the S&P 500. Continue Reading…

Navigating Volatility with Asset Allocation ETFs

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Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

The S&P 500 was down 3.53% in the year-to-date period as of mid-afternoon trading on Wednesday, March 19, 2025. Markets in the United States and across the globe have been hit with turbulence while the threat of tariffs has ramped up trade policy tensions. Earlier this month, we’d suggested that investors might consider taking it back to the basics.

In this piece, I want to explore why striking a defensive posture and pursuing diversification in your portfolio could provide peace of mind going forward.

The macroeconomic environment today

There are elevated risks that have led to uncertainty in the markets today. We are now two full months into Donald Trump’s second Presidential term. It already feels much longer than that to many Canadians. Investors may want to prepare for elevated volatility in the near to mid-term as there appears to be no immediate relief in sight when it comes to prickly trade tensions between allies and adversaries alike in the geopolitical sphere. Global trade policy uncertainty, a measurable index that quantifies policy risks, is the highest it has been since Trump’s first term.

Valuation concerns have been added to the risks and uncertainty. This is particularly true in the U.S. with regards to big tech. Investors have started to question the pace of earnings growth, as well as the strength and confidence of the consumer. A March report from the University of Michigan Consumer Sentiment Index showed it falling to 57.9. That is the lowest level since November 2022. It also represents a 10.5% drop from the same time in February 2025. Consumer sentiment had declined by 27.1% – or 21.5 points – in the year-over-year period. That is the largest annual decline since May 2022.

Between tariffs, geopolitics, valuations, and the economy, investors are being presented with an increasingly challenging and noisy backdrop.

Advantages of Asset Allocation funds

The biggest advantage that Asset Allocation funds offer investors is diversification. Diversification, it has been said, is the only “free lunch” in investing. Diversification does not eliminate risk, but it does spread out risk broadly. That has the potential to create more robust portfolios.

Asset Allocation exchange-traded funds (ETFs) help investors better diversify their holdings. These ETFs also provide the discipline to stay invested in the market to help manage the market gyrations that all investors inevitability experience. Staying invested in markets, especially in times of heightened volatility, is historically what sets investors up for long-term investing success. Moreover, asset allocation strategies offer investors the benefit of the package. While many investors may tweak exposures through individual ETF holdings, many can benefit from the “one-ticket approach” offered by asset allocation ETFs.

Asset allocation strategies in 2025

The Harvest Diversified Equity Income ETF (HRIF:TSX) allocates to other Harvest Equity Income ETFs – which overlay an active covered call strategy on a portfolio of sector-focused equities – to generate attractive equity income across a well-diversified sector mix.

Meanwhile, the Harvest Diversified Monthly Income ETF (HDIF:TSX) represents the same portfolio of Harvest Equity Income ETFs. However, HDIF employs modest leverage at approximately 25% to amplify returns and income.

Notable sectors in these ETFs include defensives like health care, utilities, real estate investment trusts (REITs), and it is complemented by growth sectors such as technology and industrials. The use of the covered call writing strategy transforms market volatility into higher levels of cashflow. These ETFs are one-ticket globally diversified equity income exposures, offering attractive overall yields.

A traditional balanced asset allocation portfolio

The traditional “balanced” investment portfolio is composed of 60% equities and 40% bonds. In 2024, Harvest launched the Harvest Balanced Income & Growth ETF (HBIG:TSX) and the Harvest Balanced Income & Growth Enhanced ETF (HBIE:TSX). These ETFs incorporate Fixed Income ETFs into the mix, aiming to replicate that 60/40 asset allocation. These Fixed Income ETFs include intermediate and long duration US Treasuries. Continue Reading…

The Risks and Rewards of Investing in Technology Companies

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Image by unsplash

By Devin Partida

Special to Financial Independence Hub

While investing in technology companies can be lucrative, it’s also risky. With great risk comes great reward, so the saying goes. However, not everyone has the luxury of risking their savings. Is there a way to maximize returns while minimizing risks?

Volatility is the Name of the Game in the Tech Sector

The COVID-19 pandemic was a catalyst for exponential growth. Venture capital (VC) activity set records in 2021. In the United States, VC-backed businesses raised around $329.9 billion, almost doubling 2020’s $166.6 billion in funding. Approximately $774.1 billion in annual exit value was created that year.

The potential for high returns is tempting, but this trend has slowed as peoples’ reliance on technology has waned. Startups are burning through their cash reserves. Those looking to make money from the tech sector should be strategic about their investments.

In the tech sector, volatility can make investors disgustingly rich — or cause them to lose everything. Technological advancement, driven by fierce competitiveness, happens fast, frequently disrupting the status quo. This allows unknown disruptors to rise to the top quickly.

Take DeepSeek, for example. A Chinese artificial intelligence company built an open-source large language model (LLM) of the same name to compete with ChatGPT for a fraction of the cost. NVIDIA stock — which has risen 285 times higherover the last 10 years — was down nearly 17% on the day this new competitor was unveiled.

Rumor has it DeepSeek was built for drastically less with subpar technology, which makes its disruption all that more consequential. While analysts expected OpenAI’s revenue would exceed $11.6 billion in 2025, it may not be so lucky. The AI companies dominating the market have just been undercut, affecting investments thought to be relatively safe.

How Rapid Innovation can lead to Substantial Gains

The tech sector thrives on innovation because technology goes hand in hand with modernity. The industry is also fiercely competitive, driving research and development. Continual reinvention provokes disruption, making this landscape fertile ground for dramatic, abrupt growth. Often, firms don’t have to fight hard to break into new markets.

Investing in a Volatile, High-Growth Sector is Risky

Market volatility won’t always work in your favor. Even industry giants — seemingly unshakable leaders — can fall to a previously unknown disruptor. Think back to DeepSeek’s impact on NVIDIA. Everything from changing market conditions to regulatory changes can quickly sour a strong investment.

Take Zoom, for example. Zoom didn’t see widespread adoption until the COVID-19 pandemic when it ousted Skype as the most well-known videoconferencing platform. Its share price peaked at $559 in October 2020. One month later, Pfizer and BioNTech announced a vaccine candidate against COVID-19. The next day, it dropped to $403.58. Since then, it has further plummeted, remaining just above $50 for much of 2023 and 2024. Continue Reading…

“Unretirement” — more than one in four near-retirees plan to work in Retirement to make ends meet

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My latest MoneySense Retired Money column has just been published. You can find it by clicking on the highlighted text here: Why “unretirement” may be the fate of so many Canadians.

Even before the Tariffs threats emerged under Trump 2.0, Canadian seniors were starting to find the economic uncertainty and rising living costs to be unmanageable. No surprise then that many seniors approaching Retirement Age are delaying their exit from the workforce.

According to a report by HealthCare of Ontario Pension Plan, 28% of unretired Canadians aged 55-64 say they expect to continue working in retirement to support themselves financially.  Here’s a screenshot from the HOOPP survey:

 

The Healthcare of Ontario Pension Plan (HOOPP) commissioned Abacus Data to conduct its sixth annual Canadian Retirement Survey in the spring of 2024.  The latest survey finds “persistent high interest rates and a rising cost of living continue to have a significant negative impact on Canadians’ ability to save and manage the cost of daily life, threatening their retirement preparedness.” While all Canadians are struggling, “women and those closest to retirement are especially hard hit with lower savings and higher levels of financial stress.”

While most Canadians are struggling to save amidst a high cost of living, HOOPP finds women are particularly affected. Half (49%) of all Canadian women have less than $5,000 in savings and almost a third (28%) have no savings (compared to 33% and 17% of men, respectively), similar to the 2023 results

 

The MoneySense column also looks at more recent Retirement surveys that also reveal anxiety about rising costs of living. One is from Bloom Finance Co. Ltd., conducted by founder Ben McCabe after Trump’s Tariffs started to kick in this year.

A Bloom study conducted with Angus Reid found 46% of Canadians thinking of working part-time in Retirement. That’s in line with a Fidelity survey in 2024 that found half of Canadians plan to delay Retirement. According to the Bloom Report [in March 2024], 67% of Canadian homeowners over 55 were concerned their savings would not sustain their quality of life through retirement. Only 29% considered downsizing or alternative living situations to access their home equity earlier than expected. 59% of the same cohort agreed accessing micro-amounts of their home’s equity would help maintain their desired living standard. Continue Reading…

How Pursuing Financial Independence has Positively Impacted our Stress Levels

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Image by Pexels: Count Chris

Navigating the complexities of personal finance can be overwhelming, but strategic approaches lead to significant stress reduction. This article delves into the transformative power of  Financial Independence, drawing on the expertise of seasoned professionals. Gain actionable insights on how to fortify financial health and secure a more serene state of mind.

  • Automate Investments and Minimize Unnecessary Expenses
  • Prioritize Savings to Build Financial Cushion
  • Build Financial Resilience for Future Security
  • Automate Finances to Improve Sleep Patterns
  • Pay Off Debt to Reduce Mental Strain
  • Diversify Income to Ease Financial Stress
  • Maintain Safety Net for Peace of Mind
  • Pursue Financial Independence for Strategic Decisions
  • Financial Stability Empowers Value-Based Choices

Automate Investments and Minimize Unnecessary Expenses

Before discovering Financial Independence, every surprise expense felt like a mini heart attack. A sudden car repair or an unplanned medical bill would throw my whole month into chaos. I used to track my expenses obsessively, but it felt more like watching a sinking ship than steering it.

When I embraced the principles of Financial Independence, everything changed. I automated my investments to ensure consistent growth, minimized unnecessary expenses, and started treating my net worth like leveling up in a video game. Each step forward brought a tangible sense of progress, like gaining “health points” for life’s challenges.

The real difference came when the unexpected happened. For instance, when my car needed a major repair last year, I calmly paid cash instead of scrambling for a solution. That moment solidified my newfound confidence: I was prepared, not panicked.

Pursuing financial independence has been transformative for my stress levels. It’s not just about the numbers-it’s about turning fear into opportunity and anxiety into control. Every step toward independence feels like reclaiming a piece of peace. — Ahmed Yousuf, Financial Author & SEO Expert Manager, CoinTime

Prioritize Savings to Build Financial Cushion

Breaking free from the paycheck-to-paycheck cycle was one of the most transformative changes in my life, and it significantly reduced my stress and anxiety. Early on, I found myself constantly worrying about covering expenses, with little room to plan ahead. It felt like I was stuck in a cycle of survival, with no opportunity to build stability or security for the future. That constant financial uncertainty weighed heavily on me, affecting my focus, decision-making, and even my health.

The turning point came when I decided to prioritize savings. Even with modest means, I began setting aside a small percentage of each paycheck into a high-yield savings account. At first, it required discipline, sacrificing small luxuries like dining out or unnecessary purchases, but over time, the effort began to pay off. Watching my savings grow gave me a sense of control that I had never felt before. Instead of reacting to emergencies, I started feeling prepared for them.

A defining moment came during a time of professional uncertainty when layoffs were happening at my workplace. Previously, the prospect of losing a job would have left me in a panic, consumed by questions about how to pay for rent, bills, or necessities. This time, however, I had built a financial cushion that gave me peace of mind. Knowing I had several months of living expenses saved, I was able to remain calm, evaluate my options, and focus on finding the right path forward instead of making decisions out of desperation.

That experience taught me the profound power of financial stability. It not only reduced my anxiety but also allowed me to approach challenges with clarity and resilience. Building that security was a key step toward greater personal and professional confidence, reinforcing my commitment to the values of preparation and intentionality. — Sean Smith, CEO & ex Head of HR, Alpas Wellness

Build Financial Resilience for Future Security

Pursuing Financial Independence has had a profoundly positive impact on my stress levels and anxiety by creating a sense of security, freedom, and control over my future. The process of building financial resilience has allowed me to approach challenges with more confidence and reduced the mental burden of living paycheck to paycheck.

How It Reduced Stress:

  • Peace of Mind: Knowing I have a financial cushion reduces the worry about unexpected expenses, such as medical bills or job loss.
  • Freedom to Make Choices: Financial independence provides the ability to take calculated risks, whether in career changes, starting a business, or investing.
  • Clear Goals: The structured process of saving, investing, and reducing debt brings a sense of purpose and direction, alleviating financial uncertainty.

In 2023, a major opportunity arose for me to transition from a salaried role to building my company. While exciting, the leap into entrepreneurship came with inherent risks, including the loss of a stable income. However, my pursuit of financial independence over the years had equipped me with:

  • An emergency fund covering 12 months of living expenses.
  • A diversified portfolio generating passive income.

This financial safety net allowed me to focus on growing the business without the anxiety of immediate financial pressure. Instead of stressing over daily operational costs, I was able to make thoughtful decisions about hiring, marketing, and product development. The result was not only professional growth but also improved mental health, as I could prioritize long-term success over short-term survival.

Pursuing financial independence isn’t just about wealth: it’s about reducing uncertainty and empowering yourself to lead a balanced, fulfilling life. It’s one of the most impactful ways to mitigate stress and foster a sense of control. — Kalpi Prasad, Finance Partner, Renown Lending

Automate Finances to Improve Sleep Patterns

Reducing financial stress has profoundly improved my overall well-being, and one of the most noticeable changes has been in my sleep patterns. Before I began focusing on financial stability, my nights were filled with worry, whether it was about unexpected bills, looming due dates, or just the general uncertainty of not having a financial plan. I often found myself lying awake, replaying scenarios about how I might manage in case of emergencies. This mental turmoil not only disrupted my sleep but also impacted my ability to fully show up for others during the day, especially in my personal and professional life.

One of the most transformative steps I took was automating my finances. By creating a system where a portion of my income automatically went into savings and setting up automatic bill payments, I removed the risk of late fees and the constant fear of forgetting due dates. For instance, I prioritized building an emergency fund by setting aside a small percentage of my income every month. Slowly but surely, watching that fund grow gave me a sense of security I hadn’t felt before. My recurring expenses were handled without the stress of constantly monitoring them, which freed up mental space for more meaningful pursuits.

This sense of order allowed me to sleep peacefully for the first time in years. Knowing that my financial house was in order provided a deep sense of relief, allowing me to let go of the endless cycle of “what-ifs” that had previously kept me awake. A pivotal moment for me came when an unexpected family expense arose. In the past, I would have spiraled into worry, trying to figure out how to manage. Instead, I was able to handle the situation calmly, knowing I had prepared for moments like this. That experience reinforced how much my financial independence was improving my life.

Now, I wake up rested, focused, and ready to continue serving others, which has always been my greatest passion. Recovery taught me the importance of building stability in all areas of life, and Financial Independence has become a key part of that journey. It’s a reminder that taking small, consistent steps toward stability creates a foundation for lasting peace and purpose. — Tyler Bowman, Founder & CEO, Brooks Healing Center

Pay off Debt to Reduce Mental Strain

Paying off debt was a transformative milestone in my journey toward Financial Independence and significantly reduced my stress and anxiety. The weight of monthly payments was a constant source of mental strain, creating a cycle of worry that seemed impossible to break. I vividly remember how overwhelming it was to see interest charges pile up, making progress feel out of reach. It often felt like no matter how much I tried, I was stuck in a loop that only deepened my stress.

To address this, I took a methodical approach, prioritizing high-interest debts and creating a structured repayment plan. Each payment became a small victory, reinforcing my determination to push forward. It wasn’t always easy, but focusing on the long-term goal of freedom kept me motivated even during challenging moments. The day I cleared my debt was nothing short of life-changing. The relief I felt was profound, like a weight I had been carrying for years was suddenly gone. Continue Reading…