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.

Vanguard is cautious on behalf of Retirees

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Image coutesy MoneySense/Freepik

My latest MoneySense Retired Money column has just been published. Click on hypertext for full column: Why Vanguard’s ETF aimed at retirees is currently cautious in its asset allocation.

The column originated from a mid-January Vanguard Canada briefing with two of its economists held for the Canadian media in downtown Toronto. You can find at least two news stories on the web filed shortly after the event by Bloomberg News and Investment Executive.

While the general thrust of the press conference was on the opportunities for Canada in A.I. and materials stocks (chiefly gold and silver miners), the Q&A allowed me to probe Vanguard about something that has intrigued me for the past year: As a semi-retired investor who recently started a RRIF, I regard one particular Vanguard ETF as a big part of my core portfolio, along with low-volatility ETFs from BMO ETFs, and income-oriented ETFs from vendors you may see in blogs  on this site.

After the Liberation Day craziness of April 2025, I became more defensive, though my Asset Allocation is not (yet) to the point the Rule of Thumb that your age should equal your Fixed Income: that would suggest in my case I should have 28% in Equities and 72% Fixed Income.

One core fund for retirees is VRIF, the Vanguard Retirement Income Fund, which is one of several funds often mentioned by the Retirement Club (see this introductory blog on the Club co-founded by blogger Dale Roberts of  . ) It trades on the TSX under the ticker symbol VRIF.

The screenshot below from Vanguard’s brochure shows VRIF’s holdings of Vanguard ETFs and performance to the end of 2025.

 

I first started a position in VRIF soon after its launch in 2020.  At the time, its Asset Allocation seemed to be around 50% stocks to 50% bonds, spread around all geographies in the normal proportions.

However, as 2025 proceeded I noticed that VRIF had begun steadily to cut back on its equity exposure and raise its Fixed Income, almost to the point of 30/70.  I’ve also noticed various YouTube videos from Vanguard’s U.S. parent that suggest similar caution: a cutting back from the big US growth mega cap stocks and a move more to other developed and emerging economies around the world.

If you read the VRIF launch news release, it emphasizes the objective is to provide income-seeking investors with a “targeted 4% annual payout.” That happens to be in line with William Bengen’s famous 4% Rule, which is “fine with me,” as I quipped at the media briefing.

In response to my query, Vanguard Canada spokesman Matthew Gierasimczuk said VRIF’s asset allocation varies over time” but the goal is the targeted 4% Return: Vanguard sees a “more optimistic outlook on bonds and Fixed Income: better to lock in without risk of equities.”

Kevin Khang, Vanguard

Then Kevin Khang, Vanguard’s head of global economic research  [pictured left] reiterated that the ETF seeks to fund a “certain level of payout: bonds in our view can achieve the desired certain level of payout” and “the US stock market is pretty expensive for obvious reasons: the US is reasonably valued and bonds are very normally valued; which is a new thing.” From 2009 to  2022, since the Great Financial Crisis, bonds in general didn’t pay much, which upset people in 2022-223 when rates went up but now they are reasonably valued: relative to inflation they are paying a decent Real Return.”

Here’s the sector weightings for VRIF at the end of 2025:

Vanguard rates its volatility as “low.” Notice the weightings of certain sectors often overweighted in pure low-volatility ETFs (like those from BMO and Harvest): Health Care, Consumer Staples and Utilities. As you can see above, the weightings in more volatile sectors like Technology and Financials is much higher.

For the MoneySense column I was subsequently referred to Head of Product for Vanguard Canada, Aime Bwakira. The rationale for VRIF’s high fixed-income exposure appears to be one of not taking more risk than you need to take, a stance which is apt for the retirees VRIF caters to. Bwakira confirmed Vanguard “has been leaning more heavily toward bonds — particularly higher quality and corporate bonds — than in past years while staying within its equity guardrails” of a minimum 30% and maximum 60%.  This positioning “reflects the current environment and the results of our capital markets projections.”

3 reasons Vanguard is boosting Fixed Income in VRIF

The rationale is three-fold:

First is higher interest rates. Bonds — especially corporate bonds — are paying more than they did for many years post the 20008 Great Financial Crisis (GFC): “This makes them well‑suited to support VRIF’s 4% income target without taking on unnecessary stock-market risk. VRIF includes corporate bond exposure specifically to help enhance yield for investors.

Second, given today’s market outlook, the fund’s model has shifted toward fixed income because bonds “currently provide a more favourable balance of expected return and risk.”  I was also referred to  Vanguard’s current VCMM 10-year projections (VCMM = Vanguard Capital Markets Model) for various asset classes. It’s also published in the US for US investors Vanguard Capital Markets Model® forecasts | Vanguard.

Dated January 22, 2026, the document states that “Even at current stretched valuations, rising earnings growth could provide momentum for stocks in the near term. However, our conviction is growing stronger that long-term prospects for U.S. equities are subdued. Our model anticipates annualized returns of about 3.9% to 5.9% over the next 10 years.” It adds that “Our muted long-term return projection for U.S. equities is entirely consistent with our more bullish prospects for an AI-led U.S. economic boom.”

The third and most important point raised by Bwakira is that “a higher allocation to bonds helps VRIF deliver reliable cash flows, which is central to its mandate. Because income needs don’t disappear during market volatility, VRIF prioritizes stability and sustainability in its payout. VRIF aims to maintain the value of an investor’s initial investment over the long term. Tilting toward bonds during periods of elevated equity market uncertainty helps protect investors from large drawdowns while still supporting the payout.”

VRIF is one popular source of Retiree income at the new Retirement Club

This common-sense caution has not gone unnoticed by Canadian retirees seeking stable income. VRIF is a well-regarded ETF members of the Retirement Club, founded by Cutthecrapinvesting blogger Dale Roberts and partner Brent Schmidt. One of the club’s monthly Zoom presentations in the autumn of 2025 highlighted VRIF among several other income sources for retirees. Roberts has long championed VRIF, as in this blog on his site originally written after the launch, and subsequently updated: most recently in this version. Continue Reading…

Are your “Diversified” ETFs actually Concentrated ?

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By Erin Allen, CIM, BMO ETFs

(Sponsor Blog)

For the most part, when searching for a passive index ETF, you’ll typically encounter products that are weighted by market capitalization. In a market-cap-weighted ETF, a company’s size (calculated by multiplying its share price by the number of outstanding shares) determines how much influence it holds within the index1.

You can see this clearly in widely held U.S. equity ETFs. Take BMO S&P 500 Index ETF (ZSP) as an example. After accounting for the top 10 holdings, the remaining 490 companies make up about 59.49% of the portfolio. That means the top 10 stocks alone represent roughly 40.51% of the ETF’s total weight2.

The concentration becomes even more pronounced in indices like the Nasdaq 100 or the BMO NASDAQ 100 Equity Index ETF (ZNQ) which already has a reputation for heavy exposure to technology companies. In that case, the remaining 90 stocks together account for only 48.58% of the index, while the top 10 holdings make up over half of the entire portfolio3.

Chart 1 Compares top holdings of ZSP – BMO S&P 500 Index ETF to ZNQ – BMO NASDAQ 100 Equity Index ETF

Source: BMO Global Asset Management as of January 30, 20264

Supporters of market-cap weighting say it allows winners to keep running. As a company grows and becomes more valuable, it naturally takes up more space in the index. Over long periods, this approach has benefited from the success of dominant firms that continue to compound.

At the same time, that same feature can make some investors uncomfortable. In the context of 2026, buying a broad market ETF can effectively mean committing a large share of your capital to a relatively small group of mega-cap stocks that are trading at expensive valuations.

Fortunately, the choice is not limited to market-cap weighting or sitting in cash. Equal-weight strategies offer a different way to construct an ETF. Instead of assigning weight based on size, equal-weight ETFs give each constituent the same allocation, regardless of how large or small the company is.

Understanding how these two approaches differ, along with their respective advantages and limitations, is key to choosing the structure that best fits your goals.

How Equal-Weight ETFs work

To see how equal weighting works in practice, it helps to look at a concrete example. Rather than staying in the U.S. market, consider the Canadian utilities sector and compare two different index construction methods applied to the same group of stocks.

A common benchmark is the S&P/TSX Capped Utilities Index. This index tracks 14 Canadian utility companies and weights them by market capitalization, subject to a 25% cap on any single holding.

As of January 31, 2026 the four largest holdings dominated the portfolio. Fortis accounted for 23.35% of the index. Brookfield Infrastructure Partners made up 14.47%. Emera represented 12.61%, and Hydro One came in at 10.84%. Together, those four companies made up more than 60% of the entire index.

Utilities are often viewed as defensive businesses with sensitivity to interest rates and stable cash flows. But instead of making a sector-wide allocation, most of the portfolio’s risk and return ends up tied to a small handful of companies.

An equal-weight approach produces a very different result. The Solactive Equal Weight Canadian Utilities Index holds a similar group of utility stocks, but each company is given the same weight at each rebalance. With 13 holdings, BMO Equal Weight Utilities Index ETF (ZUT)5 allocates roughly 7.7% to each stock, regardless of company size5.

The practical effect is a more balanced exposure across the sector. Smaller or mid-sized utilities receive the same attention as the largest incumbents, and portfolio outcomes are less dependent on the performance of one or two dominant names.

Equal-Weighting for U.S. Stocks

Equal weighting is not limited to Canadian sector ETFs. Entire equity markets can be constructed this way, including the U.S. market. There is a long history of data comparing the S&P 500 Total Return Index with its equal-weight counterpart – the S&P 500 Equal Weight Total Return Index .

Chart 2: Comparing the S&P 500 Total Return Index vs the S&P 500 Equal Weight Total Return Index.

Source: YCharts, as of January 21, 20266 Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results

Over time, both versions have gone through periods of outperformance and underperformance relative to each other. But from the start of the available data through today, the equal-weight version has delivered higher cumulative returns.
That outperformance tends to show up during periods when smaller and mid-sized stocks outperform large caps.

On the downside, they are also less exposed to drawdowns driven by a small group of very large stocks at the top of the index. However, equal weighting does not have to mean owning a modified version of the S&P 500. Canadian investors also have access to broader U.S. market solutions.

One example is the BMO MSCI USA Equal Weight Index ETF – ZEQL. This ETF tracks an index that includes the same companies as the MSCI USA Index, but weights them equally rather than by market capitalization. At each quarterly rebalance, every stock is reset to the same allocation. The practical effect, generally speaking, results in higher yield and lower valuations.

Chart 3: MSCI USA Equal Weighted Index (USD) Index Performance and Fundamentals

Source: MSCI as of December 31, 2025 7  Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.

Continue Reading…

Most Common Hiccups that New Businesses face

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Plenty of businesses fail in year one. Learn the most common hiccups new business owners face, from cash flow to planning, and how to avoid them.

By Dan Coconate

Special to Financial Independence Hub

Image by Rido, Adobe Stock

Starting a new venture generates excitement and anxiety in equal measure. You have a vision, but turning that vision into reality requires more than just passion.

Statistics reveal that many small businesses fail within their first year. This often happens because founders overlook fundamental operational requirements.

By identifying potential pitfalls early, you position your company for longevity and stability.

 

Overlooking a Solid Business Plan

Many entrepreneurs view business plans as outdated or unnecessary paperwork. This is a critical error. A business plan serves as your roadmap. It details your goals, strategies, financial forecasts, and market analysis. When you skip this step, you make decisions based on guesswork rather than data.

Furthermore, investors and lenders require this document before they provide funding. Without a clear plan, you cannot measure progress or identify when you veer off track. Take the time to document your strategy before you spend a dime.

Mismanaging Financial Resources

Cash flow problems sink viable businesses every day. You might have high revenue on paper, but if the cash isn’t in the bank when bills come due, operations stall. New owners often underestimate startup costs or mix personal and business finances.

To avoid this, you must create a strict budget. Monitor your expenses weekly. Establish a buffer for unexpected costs. Financial discipline in the early stages determines whether you survive the lean months that almost every startup encounters.

Failing to Define a Niche

Trying to appeal to everyone usually results in appealing to no one. You must identify exactly who needs your product or service. A scattergun approach wastes valuable marketing budget and dilutes your brand message.

For instance, if you start your sewer jetting business, you focus your marketing efforts specifically on property managers, plumbers requiring sub-contractors, and local councils rather than generic advertising to the broad public. Understanding your specific market allows you to spend advertising dollars efficiently and speak directly to the pain points of your ideal customer.

Refusing to Delegate Tasks

Founder’s syndrome traps many smart people. You might believe no one can do the job as well as you can. While you may possess high standards, attempting to handle every task leads to burnout. You cannot effectively act as the CEO, the janitor, the accountant, and the salesperson simultaneously.

Successful leaders identify their weaknesses and hire support. Delegation allows you to focus on growth rather than administrative maintenance. Consider outsourcing these common functions to free up your time:

  • Payroll and accounting services
  • Social media content creation and community management
  • Website maintenance and IT support
  • Legal compliance and contract review

Resisting Market Changes

The marketplace evolves constantly. Customer preferences shift, technology advances, and competitors introduce new solutions. Businesses that refuse to pivot lose relevance quickly. You must listen to customer feedback and observe industry trends with an open mind.

Rigidity leads to obsolescence, while flexibility leads to growth. If data shows that a product isn’t working, or a service needs adjustment, you must act fast.

Build Resilience for Success

Every business faces obstacles during its infancy. The most successful entrepreneurs anticipate these challenges and prepare for them. By securing your finances, planning strategically, and building a support team, you navigate these early hiccups effectively. Treat every setback as a learning opportunity, and you will build a company that stands the test of time.

Dan Coconate is a local Chicagoland freelance writer who has been in the industry since graduating from college in 2019. He currently lives in the Chicagoland area where he is pursuing his multiple interests in journalism.

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…

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…