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.

Q&A with John De Goey

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John De Goey, courtesy MoneyShow

The following is a question-and-answer session conducted via email with advisor John De Goey following his recent talk at the MoneyShow in Toronto, which we reported here.  Some of the questions and answers also appeared in my recent MoneySense Retired Money column here.

Jon Chevreau, Findependence Hub:  How defensive do you think low-volatility ETFs (i.e., BMO’s, iShares, Harvest) are?

John De Goey: Let’s say the market pulls back by 25%. If you can handle that, then you don’t need a low-volatility ETF. In short, low-volatility products are more defensive than market  (cap)-weighted products, but it all depends on how investors react and behave when things go south.

Chevreau Q2.) Most of those are overweight utilities, consumer staples and healthcare stocks. Do you advocate that investors do this themselves with sector ETFs?

De Goey – I generally don’t recommend buying utilities as a stand-alone product/strategy. That said, if you already own cap-weighted products and want to be more conservative, it would likely be more tax effective to simply add utilities rather than sell cap-weighted products in order to buy low-vol products. Same net result, but less tax on the way.

Jon Chevreau, courtesy MoneySense

Chevreau Q3.)  If U.S. stocks are so richly priced, do you advocate owning a Value U.S. ETF to compensate, or simply sell down some U.S. or and add more International/Canada? Or other factor funds?

De Goey – I recommend getting out of the U.S. entirely. If you cannot do that then, at the very least, I’m worried that there’s an AI bubble much like what we saw with .com a quarter-century ago.

Chevreau Q4.) What range of asset allocation do you recommend for retirees, especially those who are middle-of-the-road and risk-averse?

De Goey: I think all portfolios should have alternatives. Pension plans like CPP, OMERS and HOOP all have over 33% in alternatives. But for MOR retail investors, I’d opt for something like 20% alternatives, 30% income, and 50% equity.

Chevreau Q5.)  Can investors and especially retirees rely on global Asset Allocation ETFs to keep them out of too many over-valued U.S. stocks?

De Goey: I wouldn’t use the word ‘rely.’ Such products will soften the blow, but right now the U.S. represents almost 2/3 of global stock market capitalization. So, if all your stocks were in a single global ETF or mutual fund with a cap-weighted mandate, you’d have massive exposure to a massively over-valued market.

Chevreau Q6.)  What about annuitizing a portion of an RRSP/RRIF? Continue Reading…

Protecting your Nest Egg: A Guide to Safely buying Big-Ticket items in Retirement

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Image via Pexels: Jalmar Tõnsau

By Devin Partida

Special to Financial Independence Hub

As you transition into retirement, you deserve to treat yourself to big-ticket items like a new vehicle, an upgraded appliance or a memorable travel experience.

Smart planning ensures you do so without putting your financial security at risk. Below are several strategies to budget, save and make informed purchases while preserving your nest egg for a comfortable retirement.

Anchor your Retirement Plan with Realistic Budgeting

Start by identifying your income and expenses. Track your monthly fixed costs — like housing, insurance and utilities — along with flexible spending, such as dining out, travel and hobbies. Review six months of spending to estimate your monthly average and spot opportunities to trim nonessential costs. This frees up money for purchases that truly matter.

Check your withdrawal rate as well. The classic “4% rule” suggests withdrawing 4% of your portfolio in the first year and then adjusting for inflation. Financial calculators or advisors can help you tailor a sustainable strategy to your lifestyle.

Prioritize Big Purchases within a Savings Plan

Set clear goals and classify purchases as short-term versus long-term. Write down when you want an item, how much it will cost and what you have already saved. Separating priorities helps you stay on track. Here are some examples:

  • Appliances: Replace older units before they break during retirement years.
  • Vehicles: Lock in financing while still employed or before fixed income makes borrowing tougher.
  • Home upgrades or travel: Save gradually, pay in cash or use carefully considered low-interest funding.

Consider the Timing of your Purchase

Some purchases are less costly when made before retirement. Long-term care insurance typically costs less when purchased earlier, such as in your mid-50s rather than your mid-60s.  Major home repairs like a roof replacement, heating system or appliance upgrades are easier to fund while employment income is steady, helping you avoid straining retirement cash flow.

Build Resilience against the Unexpected

Health care expenses, emergencies and fraud can quickly drain savings, so planning ahead is vital. Even with Medicare or provincial coverage, out-of-pocket costs for prescriptions, dental work or long-term care often arise. Keeping an emergency fund in a liquid account helps cover major surprises like home repairs or medical procedures without touching investments. Continue Reading…

Retired Money: Are pricey U.S. stock valuations a threat to new Retirees? Plus David Chilton on retiree market timing

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My latest MoneySense Retired Money column looks at the currently near record high valuations of U.S. stocks and the risks that may pose to those in the Retirement Risk Zone. Full column can be accessed by clicking on the highlighted headline: Why retirement planners are getting defensive. 

Retirement Club co-founder Dale Roberts recently posted a typical anxious link to a Globe & Mail column by Dr. Norman Rothery, (CFA) which suggested the current environment of Trump-inspired Tariffs and global Trade Wars, are causing plenty of anxiety for this group.

In the piece posted under Managing Risk in Retirement – and headlined With today’s market, investors close to retirement face precarious times – Rothery said investors on the cusp of retirement are “facing peril from a combination of the unusually lofty U.S. stock market and political uncertainty that’s disrupting world trade.”

U.S. stocks trading at “worrying levels”

The U.S. stock market is “trading at worrying levels,” based on several Value factors, Rothery said: the S&P 500 Index is “trading at a cyclically adjusted price-to-earnings ratio (developed by Robert Shiller) near 39, which is above its peak of 33 in 1929 and it is approaching its top of 44 in late 1999, based on monthly data. Similarly the index’s price-to-sales ratio is approaching its 1999 high. A broader composite measure that includes many different market factors indicates that the U.S. market’s valuation is at record levels. “

Rothery, who also publishes StingyInvestor.com, concluded that it’s “likely that the U.S. stock market will generate unusually poor average real returns over the next decade or so.” Unfortunately, the U.S. stock market now represents about 65% of the world’s market by market capitalization based on its weight in the MSCI All-Country World Index at the end of August. So if the U.S. market flops, “It’ll likely take the rest of the world with it – at least temporarily,” Rothery cautioned.

This could impact recent retirees just beginning to draw down portfolios, due to “sequence of returns risk.” That means that those in the so-called Retirement Risk Zone  who suffer early losses could down the road be in danger of outliving their savings. Rothery also reference the famous 4% Rule of financial planner and author William Bengen: the theory that investors in a 55/40/5 portfolio should be able to sustain retirement savings for 30 years provided the annual “SafeMax” withdrawal not exceed 4% a year (actually 4.7%) after adjusting for inflation. Bengen just released a new book titled A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, which the Retired Money column plans to  review next month.

What recent Retirees can do to lower their risk

Retirement Club members anxiously posed questions on the related chat room about whether they should be moving to cash and bonds, gold or other alternatives to U.S. stocks. To this, Dale Roberts – who also runs his own Cutthecrapinvesting blog – warned against getting too defensive but agreed a move to a 70% fixed income/30% stocks allocation might work for some nervous early retirees. Personally, he has trimmed back on his US growth stock exposure and added to defensive ETF sectors like consumer staples, healthcare and utilities. He also mentioned a US equity ETF trading in Canadian dollars: XDU.T

Advisors and their clients suffer from Optimist bias

Advisor John De Goey came to a similar cautious stance in a recent (Sept 12) speech at the MoneyShow in Toronto, archived here on YouTube. Titled Bullshift and Misguided beliefs (see this recent Hub blog) De Goey expanded on his usual themes of advisor bullishness and complacent investors, also articulated in his book Bullshift. Continue Reading…

Common mistakes to avoid in Long-term Financial Forecasts

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Dodge costly financial forecasting pitfalls that derail your Financial Independence plans. Canadian retirees need these proven strategies now.

By Dan Coconate

Special to Financial Independence Hub

Planning for Financial Independence requires careful financial forecasting, but many Canadians approaching or already in their golden years make costly errors that jeopardize their financial security.

Understanding common mistakes to avoid in long-term financial forecasts helps protect your hard-earned wealth and maintain the lifestyle you’ve worked decades to achieve.

Ignoring Inflation’s Compounding Impact

Many retirees don’t realize how much inflation can reduce their buying power over time. For example, with just a 2% annual inflation rate, $100,000 today will only be worth about $67,000 in 20 years. In Canada, this is even more concerning as healthcare and housing costs are rising faster than average inflation.

Quick Tips:

  • Factor 2-4% annual inflation into all projections
  • Account for healthcare inflation potentially outpacing general rates
  • Consider variable inflation rates across different expense categories

Overlooking Healthcare Cost Escalation

Provincial health coverage doesn’t eliminate all medical expenses. Dental work, prescription drugs, vision care, and long-term care facilities often involve major costs that many forecasts overlook. These expenses tend to increase with age, potentially leading to budget shortfalls just when you’re least able to return to work, making financial planning essential.

Underestimating Longevity Risk

Life expectancy in Canada continues to rise, with many individuals now living well into their 90s and beyond. This shows the importance of careful financial planning, especially since early retirement may not be sufficient if you live 30 or more years without employment income.

Women, in particular, face unique longevity challenges, often outliving their male partners and needing to manage finances independently for extended periods. Planning is essential to ensure financial stability throughout these longer retirement years.

Using Static Return Assumptions

Market volatility creates sequence-of-returns risk, where poor early performance devastates long-term outcomes despite average returns meeting projections.

A portfolio losing 20% in year one of Financial Independence faces dramatically different outcomes than one gaining 20% initially, even with identical long-term averages.

Managing Market Volatility

Consider dollar-cost averaging withdrawals and maintaining 2-3 years of expenses in conservative investments to weather market downturns without selling equities at depressed prices. Continue Reading…

Ride the Right Waves: Balancing Broad and Targeted Exposure with Sector ETFs

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Flexibility without stock-picking: Sector ETFs offer diversified access to industries like tech, health care, and energy, without the need to select individual companies.

Diversification and precision: Broad ETFs provide market-wide exposure, while sector ETFs let you overweight specific industries based on your market view.

Tactical or strategic: Use sector ETFs for short-term tactical calls or long-term structural tilts (e.g., overweighting defensive sectors for cash flow).

Image courtesy BMO ETFs

By Michelle Allen, BMO ETFs

(Sponsor Blog)

There are many strategies investors can use in their portfolios. One of the most popular strategies is making tactical tilts with sector ETFs.

Sector ETFs – like the new BMO SPDR Select Sector Index range – allow investors to focus on the parts of the market they believe will outperform, such as health care, financials, technology, or industrials.

These ETFs make it simple to increase exposure when certain sectors are expected to perform strongly or dial it back to buffer portfolios when economic conditions change, and are available in both unhedged1 and hedged-to-CAD2 versions.

In this article, we explore how sector behaviours shift across different economic environments, and how tactical tilts using sector ETFs can help investors pursue outperformance.

What is tactical investing?

Tactical investing refers to the process of adjusting portfolio allocations in response to market conditions or economic signals.

While a long-term investor might stick to a static asset allocation, tactical investors“tilt” or increase their exposure toward sectors or asset classes that they believe are poised to outperform over shorter time frames.

Sector ETFs are ideal tools for tactical investing. They allow investors to quickly and easily overweight specific sectors without the need to pick individual stocks. At the same time, they can also be used to create more balanced portfolios as they can be used to diversify portfolios that are concentrated in certain industries.

Sector performance can change dramatically each year

Sector performance often mirrors the dynamics seen across different asset classes and individual stocks: the top performers tend to change from year to year as shown in the table below3.

Over the past five years, we’ve seen sectors like information technology, consumer discretionary, and communication services lead the market in 2020 and 2021, only to become some of the worst performers in 2022. That year saw a massive rotation into energy, a sector that had significantly lagged in 2020.

Chart 1 – S&P 500 Sector Performance 

 Table 1 – S&P 500 Average Sector Returns

Source: Novel Investor (as at March 31, 2025)

Chart 2 – Asset Class Returns

Index and sector 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.

What drives these rotations? One of the key concepts is the economic cycle, which typically moves through four broad phases:

  1. Recession: A period of economic contraction marked by falling gross domestic product and weak demand.
  2. Recovery: Growth begins to rebound as consumer and business confidence, and spending, return.
  3. Expansion: Economic activity strengthens, employment rises, and output reaches new highs.
  4. Slowdown: Growth decelerates, signaling a potential shift back toward recession.

S&P 500 sector performance during phases

Understanding how sectors behave during different phases of the economic cycle is key to making informed tactical tilts. Here’s a snapshot of average S&P 500 sector performance across the four main stages of the U.S. business cycle (based on historical data from 1960-2019)4: Continue Reading…