Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Vanguard finds Canadians’ 50% allocation to home market higher than the recommended 30%

A just-released study from Vanguard Canada on Home Country Bias shows that Canadians have about 50% of their portfolios allocated to Canadian equities: well beyond what is recommended for a country that makes up less than 3% of the global stock market.

As the chart below shows, Vanguard recommends just 30% in Canadian stocks but notes that the domestic overweight is slowly decreasing as investors move to global and U.S. equities.

Vanguard says home country bias is not unique to Canada: Americans behave similarly with respect to the U.S. stock market. But as you can see from the chart below, because the U.S. makes up more than half of the global stock market by market capitalization, the gap between its relative overweighting is far less dramatic than in Canada. Canada’s home country bias is almost as pronounced as in Australia (a similar market to Canada in terms of resources and financial stocks), and Japan is not far behind.

However,Vanguard adds, “overall, Canadians and investors in other developed countries are trending towards a greater appetite for diversification through global equities.”


Too much Canada can be volatile

So what’s wrong with having too much Canadian content (both stocks and bonds)? Vanguard says portfolios overweight Canadian equity can be volatile because the domestic market is too concentrated in just a few economic sectors. “Relative to the global market, Canada’s market is concentrated within a few large names. It is also significantly overweight in the energy, financials and materials sectors, and significantly underweight in others.” Continue Reading…

June Checkup: Healthcare & Technology

Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

The United States stock markets have delivered positive returns through much of 2024, continuing the positive momentum that was established in the previous year.

However, that performance has increasingly been powered by a smaller segment of large-cap companies. Indeed, readers have undoubtedly heard about the outsized performance of the “Magnificent 7” in the tech space over the past year. If we strip out the “big six” of Amazon, Meta, Nvidia, Microsoft, Apple, and Alphabet from the S&P 500, we have experienced three calendar quarters of negative earnings growth across the rest of the market.

Investors took profits in the month of April. Demand resumed in the month of May, but with a broader range of equities. Nvidia continued to show its dominance, but there were other sectors and stocks that were able to catch up with the leaders to close out the first half of 2024.

The summer season is historically slow in the markets. Harvest’s portfolio management team expects volatility to persist for both bonds and equities. Moreover, the team emphasizes that this summer is a key moment to stay active, attentive, and invested. A prudent strategy in this environment involves looking under the surface for opportunities while generating cash flow from call options to support total returns.

June Healthcare check up

The healthcare sector pulled back slightly in the month of May 2024. Negative moves in the healthcare sector over the course of May 2024 were driven by stock specific events. Macroeconomic data sets impacted the healthcare sector in line with others. Within healthcare, the managed care subsectors experienced volatility earlier in 2024 and changes to reimbursement structures impacted valuations in the near term. The Tools & Diagnostics sub-sector has also proven volatile due largely to a slower-than-expected recovery in China.

Regardless, there are still very promising opportunities in the GLP-1 drug category space for diabetes and obesity. The uptake of these drugs in the U.S. has been significant at a still-early stage in their lifespan. A recent study from Manulife Canada found that drug claims for anti-obesity medications in Canada rose more than 42% from 2022 to 2023.

Harvest Healthcare Leaders Income ETF (HHL:TSX) offers exposure to the innovative leaders in this vital sector. This equally weighted portfolio of 20 large-cap global Healthcare companies aims to select stocks for their potential to provide attractive monthly income as well as long-term growth. HHL is the largest active healthcare ETF in Canada and boasts a high monthly cash distribution of $0.0583.

Harvest Healthcare Leaders Enhanced Income ETF (HHLE:TSX) is built to provide higher income every month by applying modest leverage to HHL. It last paid out a monthly cash distribution of $0.0913 per unit. That represents a current yield of 10.44% as at June 14, 2024.

Where does the technology sector stand right now?

Investors poured back into technology stocks in May 2024 after taking profits in the month of April. However, they were more discriminating than in previous months and showed a preference for hardware stocks, specifically semiconductors.

Nvidia maintained its leadership position. It has soared past a $3 trillion market capitalization in the first half of June 2024. However, other AI-related tech stocks encountered turbulence which may give some investors pause around the broader bullish case for AI. Continue Reading…

Noah Solomon: The Times they are A-Changin’

Shutterstock/ Photo Contributuor PHLD Luca.

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
And you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’

  • Bob Dylan © Sony/ATV Music Publishing LLC

By Noah Solomon

Special to Financial Independence Hub

In this month’s commentary, I will discuss both how and why the environment going forward will differ markedly from the one to which investors have grown accustomed. Importantly, I will explain the repercussions of this shift and the related implications for investment portfolios.

The Rear View Mirror: Where we’ve been

After being appointed Fed Chairman in 1979, Paul Volcker embarked on a vicious campaign to break the back of inflation, raising rates as high as 20%. His steely resolve ushered in a prolonged era of low inflation, declining rates, and the favourable investment environment that prevailed over the next four decades.

Importantly, there have been other forces at work that abetted this disinflationary, ultra-low-rate backdrop. In particular, the influence of China’s rapid industrialization and growth cannot be underestimated. Specifically, the integration of hundreds of millions of participants into the global pool of labour represents a colossally positive supply side shock that served to keep inflation at previously unthinkably well-tamed levels in the face of record low rates.

It’s all about Rates

The long-term effects of low inflation and declining rates on asset prices cannot be understated. According to Buffett:

“Interest rates power everything in the economic universe. They are like gravity in valuations. If interest rates are nothing, values can be almost infinite. If interest rates are extremely high, that’s a huge gravitational pull on values.”

On the earnings front, low rates make it easier for consumers to borrow money for purchases, thereby increasing companies’ sales volumes and revenues. They also enhance companies’ profitability by lowering their cost of capital and making it easier for them to invest in facilities, equipment, and inventory. Lastly, higher asset prices create a virtuous cycle: they cause a wealth effect where people feel richer and more willing to spend, thereby further spurring company profits and even higher asset prices.

Declining rates also exert a huge influence on valuations. The fair value of a company can be determined by calculating the present value of its future cash flows. As such, lower rates result in higher multiples, from elevated P/E ratios on stocks to higher multiples on operating income from real estate assets, etc.

The effects of the one-two punch of higher earnings and higher valuations unleashed by decades of falling rates cannot be overestimated. Stocks had an incredible four decade run, with the S&P 500 Index rising from a low of 102 in August 1982 to 4,796 by the beginning of 2022, producing a compound annual return of 10.3%. For private equity and other levered strategies, the macroeconomic backdrop has been particularly hospitable, resulting in windfall profits.

From Good to Great: The Special Case of Long-Duration Growth Assets

While low inflation and rates have been favourable for asset prices generally, they have provided rocket fuel for long-duration growth assets.

The anticipated future profits of growth stocks dwarf their current earnings. As such, investors in these companies must wait longer to receive future cash flows than those who purchase value stocks, whose profits are not nearly as back-end loaded.

All else being equal, growth companies become more attractive relative to value stocks when rates are low because the opportunity cost of not having capital parked in safe assets such as cash or high-quality bonds is low. Conversely, growth companies become less enticing vs. value stocks in higher rate regimes.

Example: The Effect of Higher Interest Rates on Value vs. Growth Companies

The earnings of the value company are the same every year. In contrast, those of the growth company are smaller at first and then increase over time.

  • With rates at 2%, the present value of both companies’ earnings over the next 10 years is identical at $89.83.
  • With rates at 5%, the present value of the value company’s earnings decreases to $69.91 while those of the growth company declines to $64.14.
  • With no change in the earnings of either company, an increase in rates from 2% to 5% causes the present value of the value company’s earnings to exceed that of its growth counterpart by 9%.

Losing an Illusion makes you Wiser than Finding a Truth

There are several features of the global landscape that will make it challenging for inflation to be as well-behaved as it has been in decades past. Rather, there are several reasons to suspect that inflation may normalize in the 3%-4% range and remain there for several years.

  • In response to rising geopolitical tensions and protectionism, many companies are investing in reshoring and nearshoring. This will exert upward pressure on costs, or at least stymie the forces that were central to the disinflationary trend of the past several decades.
  • The unfolding transition to more sustainable sources of energy has and will continue to stoke increased demand for green metals such as copper and other commodities.
  • ESG investing and the dearth of commodities-related capital expenditures over the past several years will constrain supply growth for the foreseeable future. The resulting supply crunch meets demand boom is likely to cause an acute shortage of natural resources, thereby exerting upward pressure on prices and inflation.
  • The world’s population has increased by approximately one billion since the global financial crisis. In India, there are roughly one billion people who do not have air conditioning. Roughly the same number of people in China do not have a car. As these countries continue to develop, their changing consumption patterns will stoke demand for natural resources, thereby exerting upward pressure on prices.
  • Labour unrest and strikes are on the rise. This trend will further contribute to upward pressure on wages and prices.

A Word about Debt

The U.S. government is amassing debt at an unsustainable rate, with spending up 10% on a year-over-year basis and a deficit running near $2 trillion. Following years of unsustainable debt growth (with no clear end in sight), the U.S. is either near or at the point where there are only four ways out of its debt trap:

  1. Raise taxes
  2. Cut spending/entitlements
  3. Default
  4. Stealth default (see below) Continue Reading…

Best high-yield Canadian HISA ETFs: Should I invest in them?

Image courtesy Tawcan/Unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

Earlier this year, I discussed three key reasons why we don’t invest in GICs and have no plan to invest in them any time soon. After reading that article, a few readers asked about Canadian high-yield high interest savings account (HISA) ETFs or cash-alternative ETFs.

Does it make sense to invest in one of these ETFs like CASH, HSAV, or PSA?

I get it, putting your hard-earned cash in the stock market can be considered risky for those risk-averse Canadians. More importantly, what should you do with short- or medium-term savings to allow such money to work extra hard for you?

Due to the shorter timeline, investing money that you need in the short or medium term in the stock market simply doesn’t make sense, because you might get caught by market volatility and a downturn and be forced to sell when you’re in the red.

Given that GICs force you to lock your money in for a set period and therefore are restrictive, these high-yield HISA ETFs can be quite enticing for some Canadians

Here are the best high-yield Canadian HISA ETFs available today.

Why you should keep some cash reserve

I believe it’s important to keep some cash reserves. How much cash reserves you set aside will depend on many different factors:

  • Are you working or are you retired?
  • If you’re working, do you have a relatively high savings rate to give you extra cash flow every two weeks?
  • Do you have any debt?
  • Do you have any big expenses planned for the next year?
  • How much money do you need in your banking account to make you sleep well at night?
  • Let’s also not forget that most banks have a minimum requirement for chequing & savings accounts or you’d have to pay a monthly fee.

This is why personal finance is personal. I can’t tell you how much is the right amount to set aside for your cash reserve or how much money you should have in your emergency fund. It will be different for everyone.

The key reason for keeping some cash reserves is to have liquidity. I can’t emphasize enough that you don’t want to be forced to sell your investments when the market is down simply because you need the money.

Imagine that you needed $7,000 to repair a leak in your house’s roof in March 2020 and you didn’t have any cash reserve. The market was in turmoil at that time and it would be terrible to have had to sell investments to fund this repair.

A couple of important notes on HISA ETFs

Before we dive into the best high-yield Canadian HISA ETFs, there are a couple of important notes I want to point out.

CDIC Protection

The Canadian Deposit Insurance Corporation (CDIC) insures savings of up to $100,000. Most Canadian financial institutions are members of the CDIC. This means when you have money deposited in a bank, you are protected up to $100,000. Provincial credit unions, such as Coast Capital Savings, are protected by the province’s deposit insurer with no limits.

Unlike cash savings, the high-yield HISA ETFs are not eligible for CDIC insurance. But you shouldn’t be too concerned. All the Canadian HISA ETFs use big Canadian banks to hold their money. It is virtually impossible for these big Canadian banks like TD, Royal Bank, and BMO to go under. If that were to happen, the Canadian economy would be in turmoil.

Furthermore, all of these high-yield HISA ETFs I am going over in this article are provided by reputable ETF companies, so there shouldn’t be any concerns for these ETF companies to go bankrupt.

OSFI Rules

In October 2023, the Office of the Superintendent of Financial Institutions (OSFI), which regulates banks, announced new guidelines regarding HISA ETFs.

The OSFI essentially requires HISA ETFs to support 100% liquidity so withdrawals by other financial institutions can be supported on demand. Before this requirement, banks typically maintained a 40% runoff rate on HISA assets.

So what does the OSFI ruling mean?

Basically, the new rule means that the yield from these HISA ETFs isn’t as high as previously.

OSFI can impose further rules, reducing the yields further. This is something investors should keep in mind when investing in a HISA ETF.

Best high-yield Canadian HISA ETFs

Here are the best high-yield Canadian HISA ETFs you can easily buy and sell with your discount broker: Continue Reading…

MoneySense Feature on Rising Fraud: How Seniors and everyone else can minimize odds of being scammed

Deposit Photos has just published a feature article by me that looks at the rising tide of frauds directed at Canada’s seniors, and everyone else.

You can find the full piece by clicking on the highlighted headline here: Canadian Seniors, watch out for these scams.

This Saturday (June 15th) is World Elder Abuse Awareness Day.

Note that while the full 2500-word article at MoneySense is aimed at Seniors, it is not technically my  monthly Retired Money column, which is typically shorter.  And this short summary here at Findependence Hub is only a third as long: hopefully enough to entice readers to hop over to MoneySense for the full article.

So below, I offer only a small fraction of the full column and some of the major links. This is an important topic both for seniors and those who hope to be financially independent seniors one day, so do take the time to click on and read the full article at, linked above.

It was a bit of an eye opener researching and writing  this piece but it appears to be the unfortunate reality of the technological world we all now inhabit.  It’s overwhelming and the situation is unlikely to improve any time soon.

In the past MoneySense has covered such topics as getting scammed through e-transfersphishingcrypto schemes, identity theft and more. There’s financial fraud in general that targets bank accounts, credit cards and potentially every other aspect of your financial life. My feature attempts an overview of most of them from a Canadian perspective, with a few new scams I hadn’t known about before researching this article. (Example: “smishing,” which is sort of phishing in the form of text messages on smartphones.)

A.I. is exacerbating the spread of Frauds on all platforms

As I note at the top of the full column, it’s a sad fact that the rise of Artificial Intelligence (A.I.) has exacerbated this problem. While anyone can be prey for technology-linked schemes to separate you from your money, seniors need to pay particular attention, seeing as they tend to have more money to lose and less time to recoup it.

According to Equifax, Fraud is the top crime perpetrated against older Canadians. Sadly, many seniors fail to report these crimes to the police because they feel shame or embarrassment about being duped by scamsters.

Identity Theft

 Identity theft is particularly worrisome for seniors, if not the rest of us. As Equifax puts it, “a scammer may try to get information such as a bank card or personal identity number, credit card number, health card number, or a driver’s license or Social Insurance number. They can then apply for credit cards, take out loans or withdraw funds in the person’s name.”

5 cyber scams targeting seniors

Elder Abuse Prevention Ontario (EAPO) lists 5 cyber scams that target seniors. These include Romance scams targeting the recently bereaved. Here are 5 red flags to watch for if you’re looking for love online. Continue Reading…