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.

Canadians’ quest for Financial Independence

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An RBC poll finds Canadians believe they’ll need almost $850,000 to ensure an independent financial future

By Craig Bannon, CFP, MBA, TEP

(Special to Findependence Hub)

For many Canadians, Financial Independence is the ultimate goal: a future where they can live comfortably, support themselves and their families and enjoy their desired lifestyle without the constant stress of striving to make ends meet.

However, with ongoing market fluctuations, a higher cost of living, and overall economic uncertainty, reaching that milestone may feel more challenging than ever before. Many individuals find themselves trying to navigate a complex financial landscape, where saving for retirement and other financial goals requires careful planning and informed decision-making.

Findings from the recent RBC Financial Independence Poll indicate that Canadians believe they need an average of $846,437 to ensure an independent financial future : which they variously described as “having a nest egg large enough to enjoy my retirement,” “not living paycheque to paycheque” and being “debt free.”  In some regions, that number is even higher: respondents in the Prairies, for example, estimate they’ll need an average of $958,535. Among generations, Gen X (aged 45 to 60) anticipates needing over a million dollars to achieve Financial Independence.

 

Investing a Key Strategy for Growth

With such ambitious targets, investing has become a crucial strategy for many Canadians. Nearly half (49%) of poll respondents say they invested in 2024, with Gen X and Millennials participating at similar rates. But concerns linger, with nearly half of all respondents (48%) calling out market volatility and investment performance as a key worry, with this concern jumping to over half (54%) for Millennials.

However, while markets fluctuate, one constant remains: the value of having a strong financial plan based on one’s goals, with a long-term investing strategy to implement, to help investors stay the course through market ups and downs. The encouraging news: 51% of Canadians say they have a financial plan, either formal or informal. Those with a plan report feeling more confident (42%) and reassured (30%) about their financial future.

Staying the Course and Seeking Professional Guidance

For those hesitant to re-start – or begin – investing, waiting for the ‘perfect’ moment to invest may mean missing out on valuable growth opportunities. Time in the market, rather than timing the market, is important. The sooner you can invest and the longer you can be invested, the greater the opportunity to potentially benefit from the gradual growth that markets and economies can experience over the long term. Continue Reading…

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…