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 VictoryLapRetirement.com). 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.
Not every high-paying job accelerates your journey to Financial Independence (FI). The real difference lies in spotting a company with a modern, FI-friendly career path that combines strong compensation with flexibility, autonomy and genuine growth opportunities. These organizations pay well while creating conditions that allow you to build wealth faster and on your terms.
What a FIRE-Friendly Career Path really means
A Financial Independence, Retire Early (FIRE) career path demands more than raw earning power. In addition to high compensation, you need a strong work-life balance that leaves room for side income and a culture that values autonomy over micromanagement. A balanced lifestyle supports job satisfaction and engagement, keeping work sustainable and fulfilling.
The most FI-friendly companies offer predictable schedules, remote flexibility and trust-based management. These conditions allow you to maintain side projects, develop new skills and preserve the mental energy that strategic financial planning requires. Companies with healthy work hours allow daily recovery time that supports individual well-being and job performance.
Look for Cultures that prioritize Results and Flexibility
The clearest signal of a positive company culture is a focus on results and deliverables. Organisations that measure success by output rather than desk time create environments in which high performers work efficiently and reclaim hours for wealth-building activities.
Look for flexible scheduling policies, outcome-based performance metrics and leadership that respects boundaries. Presenteeism cultures do the opposite, rewarding visible activity over actual productivity and forcing you to trade time for appearance. The cost is measurable in hours you could allocate to wealth-building.
Decode a company’s commitment to Real Growth
How a company approaches development reveals whether it will support or stifle your trajectory. Surveys show that 60 to 70% of HR professionals express dissatisfaction with performance management systems. This signals a majority of rigid, outdated cultures that hinder both growth and flexibility.
Modern employers invest in career development programs that include mentorship, skill-building opportunities and clear advancement paths. These green flags indicate an organization that prioritizes meaningful employee development. During your research, examine whether the employer offers structured learning, cross-functional projects and visible promotion patterns that reward performance.
Seek Radical Transparency in Pay and Promotions
You can’t map a route without coordinates, and compensation transparency provides them. Companies that publish pay bands and promotion criteria let you project your earning potential with precision, which is critical when you’re calculating your FI timeline. Continue Reading…
Evidence over emotion. Process over prediction. Better decisions over better guesses.
Image created with ChatGPT by Lowrie Financial
By Steve Lowrie, CFA
Special to Financial Independence Hub
Welcome to Before You Decide, a series about the decisions that shape our financial lives. Each article explores a common financial question through the lens of evidence, behavioural finance, and more than three decades of working with Canadian families. The goal is not to predict the future, but to make better financial decisions with the information available today.
A financial decision can be sensible and still produce a disappointing result. It can also be poorly considered and make money. That is what makes investing so difficult.
Most of us naturally judge our decisions by their outcomes. If an investment rises, we assume the decision was good. If it falls, we assume somebody made a mistake. Behavioural economists have a name for this tendency. They call it outcome bias.
Outcome bias is our tendency to judge the quality of a decision by the result it produced rather than by the quality of the reasoning that led to it. The problem is that luck sits between a decision and its outcome, which means a good result does not always prove that the original decision was sound.
Every important financial decision should therefore be judged twice. The first judgment should take place when the decision is made, based on the quality of the reasoning and the information reasonably available at the time. The second should take place much later, after the outcome is known.
Most investors only perform the second evaluation, and that is where many costly mistakes begin.
Every investor eventually faces two different questions: Did my investment work, and was it a good decision? Those questions may sound similar, but they are not the same.
Why is outcome bias especially relevant today?
A relatively small group of technology and artificial intelligence related companies has recently produced outsized returns. Investors who concentrated their portfolios in some of these companies have been rewarded handsomely, while investors holding broadly diversified global portfolios may be wondering whether diversification has become an expensive form of caution.
We have seen this movie before.
During the technology and telecommunications boom of the late 1990s, a relatively small group of companies dominated both market returns and investor attention. The technologies were real, and many of the companies were genuinely innovative. That did not mean every investment made sense or every price was justified.
The same distinction matters today. Artificial Intelligence (AI) may profoundly change the economy without making every AI-related investment a good decision at current prices.
For a Canadian investor, a concentrated position in AI-related stocks may also involve several overlapping risks. It can amount to a concentrated commitment to one sector, one country, one currency, and often a relatively small number of companies. Those risks may continue to be rewarded for years, but they remain risks nonetheless.
The important question is not simply whether the investment works. It is whether the decision itself was well reasoned, whether the risks were understood, and whether the position made sense within the investor’s broader financial plan.
What are the four possible outcomes of a financial decision?
Every financial decision eventually falls into one of four categories:
A good process combined with a good outcome is what every investor hopes for. You followed a sensible process, understood the risks, and received a favourable result.
A good process followed by a disappointing outcome is more difficult to accept, but it does not necessarily mean the process failed. Good decisions improve the odds, they do not guarantee a particular result.
A poor process followed by a poor outcome is painful, although at least the mistake is visible. Something in the original reasoning can be examined, understood, and improved.
The most dangerous combination is a poor process followed by a good outcome. In that situation, the result appears to validate the decision, confidence grows, and the same choice may be repeated with more conviction and more money behind it. Nothing in the outcome forces the investor to question the original reasoning.
This is outcome bias at its most expensive. A temporary success becomes a lasting lesson for entirely the wrong reason.
Why do investors judge decisions by their outcomes?
Looking at the result is easy. Examining the decision is much harder.
By the time most people make an important financial choice, they have usually considered taxes, investment products, market forecasts, retirement planning, family needs, and competing advice. Mental fatigue encourages shortcuts, and recent performance becomes one of the easiest shortcuts available.
If the investment made money, it must have been a good decision. That conclusion feels natural, but it is not reliable.
I explored this idea in an earlier article about choice overload and decision fatigue. One of the best-known studies in behavioural economics found that shoppers presented with twenty-four varieties of jam were much less likely to make a purchase than shoppers offered only six. More choice attracted more attention, but it produced fewer decisions.
Investors face far more than twenty-four choices. Individual companies, sectors, countries, currencies, investment styles, economic forecasts, and an endless stream of financial commentary compete for our attention every day. When the menu becomes overwhelming, we naturally look for an easier way to judge our decisions, and recent returns become that shortcut.
There is another problem. We examine our losses far more carefully than our successes. When an investment disappoints, we search for mistakes. When it performs exceptionally well, we rarely ask how much of the result may simply have been good fortune.
Success seldom asks us to defend our thinking, which is one reason poor decisions with good outcomes can survive for so long.
How can you tell the difference between skill and luck?
One useful test is to ask whether a skilled participant can deliberately produce a poor result.
In an activity dominated by skill, that is usually possible. A strong chess player can lose a game on purpose because the relationship between skill and outcome is direct enough to control.
Now think about a concentrated stock portfolio over a single year. Could you reliably make it lose money? Probably not. Unexpected news, changing interest rates, investor enthusiasm, government policy, and countless other factors could move the investment in either direction.
That does not mean skill has no place in investing. Skill appears in building a diversified portfolio, managing risk, controlling costs, minimizing taxes, and staying disciplined when markets become emotional. It also appears in knowing what can be controlled and refusing to pretend that everything else can be predicted.
One year’s return therefore tells us far less about skill than most of us would like to believe.
Why is one investment result not enough to judge a decision?
A single investment outcome contains a great deal of noise, while a pattern across many decisions tells us much more.
Researchers at The Wharton School at the University of Pennsylvania studied what happened when a large employer simplified the investment choices in its workplace retirement plan. Participants generally traded less, paid lower investment costs, and held more appropriate portfolios. The researchers estimated that lower costs alone could leave the average participant approximately US$9,400 better off over twenty years.
The participants did not become better investors because they learned to predict markets. They became better investors because the decision-making environment improved.
That distinction matters because better financial outcomes often come from better decision-making processes rather than better predictions.
What does outcome bias look like in real life?
Several years ago, I had a client who decided, against my advice, to sell a diversified investment portfolio and make a concentrated commitment to residential investment real estate in Toronto.
The decision did not happen in isolation. Another advisor was enthusiastically promoting recent real estate returns and presenting the strategy as an opportunity that should not be missed. Like many investment stories built on recent success, it appealed to a powerful fear of missing out. Continue Reading…
How American and Canadian investors can reduce capital gains taxes after decades of buying and holding.
AlainGuilot.com via Grok
By Alain Guillot
Special to Financial Independence Hub
Buying a broad-market ETF and holding it for decades is one of the simplest ways to build wealth.
You buy an ETF like the Vanguard S&P 500 ETF (VOO) for U.S. investors or the iShares S&P/TSX 60 Index ETF (XIU) for Canadian investors. You reinvest the dividends, ignore the daily market noise and continue adding money whenever you can.
Twenty years later, the strategy has worked beautifully.
But now you have a new problem: how do you reduce capital gains tax when selling an ETF that has increased enormously in value?
This is the strange punishment for being a successful long-term investor.
You followed the advice to buy and hold. You resisted panic selling. You avoided speculation and unnecessary trading.
Now your portfolio may contain hundreds of thousands of dollars in unrealized gains.
Selling a large amount in one year could create a substantial tax bill. It could also push your income into a higher tax bracket and affect income-tested benefits.
This is not merely a theoretical question for me. I have accumulated VOO and XIU for many years, and I know that selling a large portion at once could create a painful tax expense.
Fortunately, selling everything in one year is not the only option.
First, Understand the Capital Gains Problem
Suppose you invested $200,000 in VOO over many years.
Your investment is now worth $700,000.
Your unrealized capital gain is approximately:
$700,000 market value − $200,000 cost = $500,000 gain
You do not owe capital gains tax simply because VOO increased in value.
The tax is generally triggered when you sell or otherwise dispose of the investment.
That means you have some control over when the gain is realized.
The central question is not:
How can I avoid paying any tax?
A better question is:
How can I realize this gain gradually and pay the lowest reasonable amount of tax over my lifetime?
That change in perspective is important.
Reduce Capital Gains Tax by Avoiding One Giant Sale
The worst approach may be to sell the entire position without first calculating the consequences.
A large sale could concentrate decades of gains into a single tax year.
In both Canada and the United States, capital gains interact with the investor’s other income. Realizing more gains can bump you up to a higher tax braket and thus you will pay a higher tax rate.
A more efficient strategy is often to sell your ETF gradually.
For example, an investor could sell enough each year to cover:
Annual living expenses
Planned travel
Major purchases
Charitable donations
Portfolio rebalancing
Instead of realizing a $500,000 gain in one year, the investor might spread the gain over 10, 15 or 20 years.
This does not eliminate the tax.
It gives the investor more control over the rate and timing and hi might be taxed in a lower tax bracket.
Strategy 1: Sell more during Low-income Years
Some years are naturally better than others for realizing capital gains.
Good opportunities may arise:
After retirement but before pensions begin
Before collecting Social Security or government benefits
Before mandatory retirement-account withdrawals
During a sabbatical or period of reduced employment
In a year with large deductions
In a year when business income is unusually low
These lower-income years can create room to realize gains at a more favourable rate.
For American investors
The United States applies special federal tax rates to long-term capital gains.
Depending on taxable income, some long-term capital gains may fall into the 0% federal capital gains bracket. Higher-income investors generally face 15% or 20% federal rates, and some may also owe the 3.8% net investment income tax. State taxes may apply as well.
This creates a powerful planning opportunity.
An American investor with unusually low taxable income may sell some VOO, realize a long-term gain and potentially pay no federal capital gains tax on part of that gain.
The investor can then buy VOO again.
The newly purchased shares receive a higher cost basis, reducing a future taxable gain.
For Canadian investors
Canada does not have a special 0% capital gains bracket comparable to the American system.
Instead, only a portion of a capital gain is included in taxable income. The proposed increase in Canada’s capital gains inclusion rate was cancelled, leaving the one-half inclusion system in place.
If a Canadian investor realizes a $20,000 capital gain, $10,000 is generally included in taxable income under the one-half inclusion rate.
The final tax depends on the investor’s federal and provincial marginal tax rates.
A Canadian investor with little other income may therefore realize gains at a relatively modest tax cost. The investor can repurchase their ETF immediately, increasing the adjusted cost base.
This practice is known as capital gain harvesting.
Strategy 2: Harvest Capital Gains every year
Most investors have heard about tax-loss harvesting.
Capital gain harvesting receives far less attention.
Here is how it works:
Estimate your taxable income for the year.
Calculate how much additional capital gain you can realize without entering an undesirable tax bracket.
Sell enough of your ETF to realize that gain.
Repurchase the same ETF inmediately after selling it.
Record the transaction and update the cost basis.
The investor remains invested while gradually increasing the tax cost of the portfolio.
Over many years, this can reduce the unrealized gain that remains in the account. I use this strategy every year. I sell a portion of my investments, realize some capital gains, and buy the same investment inmediately after selling it.
Can you buy the same ETF back immediately?
Yes, when you sold it for a gain.
The American wash-sale rule and the Canadian superficial-loss rule are designed to restrict the recognition of losses when substantially identical securities are quickly repurchased.
They do not generally prevent an investor from repurchasing an investment immediately after realizing a gain.
Capital gain harvesting can therefore be completed without remaining out of the market for 30 days.
The disadvantage is that you are paying some tax earlier than necessary. As a citizen of this wonderful country, I don’t mind paying some taxes on my gains, as long as those taxes are not exessive and feel as a punishment for my success.
Money paid in tax today can no longer remain invested and compound.
The strategy is most attractive when the current tax rate is lower than the rate you reasonably expect to face later.
Strategy 3: Use Capital Losses to Offset your ETF Gains
A diversified portfolio may contain investments that have declined in value.
Selling one of those investments creates a capital loss that may offset part of the gain realized from selling your ETF. This strategy is called Tax-loss harvesting.
For example:
Gain from selling VOO: $30,000
Loss from selling another investment: $12,000
Net capital gain: $18,000
This allows the investor to reduce the VOO position while limiting the immediate tax bill.
United States
American investors can use capital losses against capital gains.
When losses exceed gains, a limited amount may generally be deducted against other income, with unused losses carried forward to later years.
The wash-sale rule must be considered before repurchasing the losing investment.
Canada
Canadian net capital losses can generally be used against taxable capital gains.
Unused net capital losses may normally be carried back as far as three years or carried forward to future years.
Canada’s superficial-loss rule may deny an immediate loss when the investor—or an affiliated person—buys the same or identical property during the restricted period and still owns it 30 days after the sale.
Again, this rule matters for losses, not gains.
Strategy 4: Donate your ETF instead of Cash
Investors who regularly support charities should consider donating appreciated ETF shares directly.
This can be much more tax-efficient than selling your ETF and donating cash.
For American investors
An American investor who donates qualifying appreciated securities held for more than one year may generally avoid recognizing the embedded capital gain.
The investor may also qualify for a charitable deduction, subject to deduction limits, documentation requirements and whether the investor itemizes deductions.
The charity receives the shares and can sell them without creating a capital gains tax bill for the donor.
Instead of donating $10,000 in cash, the investor could transfer $10,000 of his long held ETF containing a large unrealized gain.
The investor keeps the cash and removes some of the portfolio’s oldest, lowest-cost shares.
For Canadian investors
Canada also offers favourable treatment for direct donations of publicly traded securities to registered charities.
Qualifying donations can receive a zero capital-gains inclusion rate, while the donor may also receive a charitable donation tax credit.
The important word is directly.
Selling your ETF first and donating the cash may trigger the capital gain. Transferring the ETF shares directly to the charity may avoid it.
This is one of the few strategies that can genuinely eliminate the tax on part of an appreciated ETF position.
Of course, it only makes financial sense for money that the investor already intends to give to charity.
Strategy 5: Choose which Shares to Sell
This is one area where the American and Canadian systems differ significantly.
American investors may identify specific shares
An American investor may have purchased his favorite ETF at many different prices.
Some shares may have a cost basis of $150, while newer shares may have a basis of $500.
When selling, the investor may be able to instruct the broker to sell specific shares.
Selling the highest-cost shares first produces a smaller taxable gain.
For example:
Sale price: $600
Old share cost: $150
Gain: $450
Compared with:
Sale price: $600
Newer share cost: $500
Gain: $100
Specific-share identification can help American investors control which gains are realized. Proper instructions and records are essential. IRS guidance requires investors to maintain records supporting the basis of their investments.
Canadian investors use an average adjusted cost base
Canadian investors generally cannot select the highest-cost ETF shares and pretend those were the only units sold.
Identical securities are pooled together.
The investor must calculate the average adjusted cost base of all identical ETF units held in non-registered accounts. The gain on a sale is based on that average cost.
This makes accurate recordkeeping especially important.
Broker records may not always correctly combine ETF held across multiple Canadian taxable accounts.
Honestly I prefer the Canadian systeme of average adjusted cost much better. I have been making many different purchases during more than 10 years. It’s a headache to keep record of that small purchase I did of the XIU ETF 10 years ago.
Strategy 6: Keep Accurate Records
Before worrying about how to reduce capital gains tax, make sure the gain has been calculated correctly.
An incorrect cost basis can produce an unnecessarily large tax bill.
The records should include:
Every purchase
Reinvested distributions
Brokerage commissions
Stock splits
Transfers between brokers
Return-of-capital distributions
Previous sales
Currency conversions, when applicable
Special issue for Canadians holding U.S ETFs in U.S. dollars
U.S. ETF trades in U.S. dollars, but Canadian taxes must generally be calculated in Canadian dollars.
The purchase cost must be translated into Canadian dollars using the appropriate exchange rate at the time of purchase. The sale proceeds must also be translated using the relevant exchange rate at the time of sale.
A gain that appears to be modest in U.S. dollars may be larger in Canadian dollars if the Canadian dollar weakened during the holding period.
The CRA calculates gains by subtracting the adjusted cost base and selling expenses from the proceeds of disposition.
Investors who accumulated a U.S. ETF over 20 years may need to reconstruct many transactions.
That effort can be worthwhile.
Finding forgotten purchases, commissions or reinvested distributions may increase the adjusted cost base and reduce the taxable gain.
Strategy 7: Stop Reinvesting Dividends
An investor who is approaching retirement may not need to continue reinvesting every dividend from their ETF.
Instead, the cash distributions can be used for living expenses.
Within the article, there are a few ETFs I’ve considered to adjust our portfolio for AI success long-term:
Fund: Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)” that ETF provides balanced diversification across the entire AI ecosystem, including hardware, software platforms, and foreign AI leaders. Top holdings frequently include giants like Nvidia, Broadcom, and Apple.
Beyond that article you can also consider Fund: TD Global Technology Leaders Index ETF (TSX: TEC) – with a lower MER and TEC is also heavily-traded in Canadian-dollars so this is a low-cost option for global tech.
Finally, you can stick with what I * used to own QQQ or a Canadian-listed ETF that clones it – those ETFs invest in the top-100 companies on the NASDAQ-100 index so it’s a very passive way to own tech and AI-related tech.
* I used to own QQQ but I sold all of it about a year ago now in favour of 1. portfolio simplicity and 2. Canadian-listed ETF investing. I’m better for it – since my two-fund Canadian-listed ETF solution is up about 12% combined YTD for almost 50% of my portfolio and we don’t need to worry about AI run-ups or bubbles anymore in doing so. We ride diversified returns…
Like Jon from the article, although in my early 50s vs. 70s, from where I sit I’m planted firmly in the retirement risk zone whereby the early retirement years need to be monitored carefully: which also implies to me no major portfolio overhauls either. Just some adjustments from time to time.
In May 2020, during the early days of the pandemic and while bank stocks were depressed, we presented a webcast entitled “Credit Cycle is Coming – What to Expect.”
During that webcast, we (correctly) predicted that during the expected downturn, the new loan loss accounting would deepen the credit cycle for the Canadian banks and importantly shorten its duration to 2-3 quarters (versus the historical duration of a credit cycle of 4-6 quarters).
Two quarters later, in October, we followed up with a presentation/webcast entitled “Canadian Banks: Cycle is (Basically) Over,” explaining why we believed the cycle was ending, and that the upside from earnings normalization was material.
Demonstrating our conviction, we launched HCAL: the Hamilton Enhanced Canadian Bank ETF, Canada’s first modestly levered ETF on October 14, 2020. We argued that its higher yield and growth potential relative to the Canadian banks created an excellent opportunity for long-term investors to take advantage of the looming recovery. We also noted that notwithstanding its modest leverage of 25%, its volatility profile was not meaningfully different than owning an individual Canadian bank stock[1].
In the year that followed, Canada’s Big Six bank stocks recovered much faster than the market anticipated, due to an improving macro environment and rapid normalization of earnings supported by large reserve releases. In 2021, HCAL rose more than 51%, outperforming the Solactive Equal Weight Canada Banks Index by over 20%[2].
HCAL’s success marked an important milestone in our growth and helped pioneer a new category in Canada, demonstrating that modest leverage, when applied thoughtfully to high-quality stocks and trusted sectors, could enhance long-term returns.
Since inception, HCAL has generated an annualized return to investors of 30.3%, with a higher yield and similar volatility profile to the Big Six Canadian banks (more below).
As a result, HCAL now has over $1 billion in assets under management (AUM), making it the seventh member of the Hamilton $1 billion-and-over club.
In Canada, Banking is King
Known for their consistent dividends and wide ownership, Canada’s Big Six banks are considered among the most reliable blue-chip companies in the country and the backbone of the economy and stock market.
Put simply, for every $100 you invest, you get approximately $125 exposure (net of financing costs), and this approach has delivered higher monthly income and higher long-term returns since HCAL’s inception when compared to the Canadian bank index, specifically the Solactive Equal Weight Canada Banks Index (“Canadian Bank Index”.)
Born out of inventive thinking during a time of uncertainty for the banking sector, HCAL has grown to more than $1 billion in assets under management and become an important part of Hamilton ETFs’ growth and story. Its success reflects our focus on developing thoughtful, differentiated investment solutions, which is key to the Hamilton ETFs ethos.
“As an ETF provider, you want to offer products that make your clients money, it can’t just be about inflows to you. We always ask: is this a good product? Does it add value and choice to investors?” said Executive Chairman and Co-Founder Robert Wessel.
Some of the factors that have made HCAL stand out:
Owning blue-chip Canadian banks: HCAL provides exposure to the Canadian banks, one of Canada’s most trusted sectors with an uncommonly long record of dividend sustainability.
Similar volatility to an individual Canadian bank stock: Since inception, the increase in volatility from the enhanced structure roughly offsets the decline in volatility from diversification. As a result, HCAL has had a volatility profile roughly equal to owning any single Canadian bank stock (see chart below).
The outcome?
HCAL has provided investors with strong returns over its 5-year track record. Since inception, it has provided investors with both a higher long-term return than the Big Six banks, at 30.3% annualized return (see table below) and higher yield with similar volatility to the Big Six Canadian banks.
Hamilton ETFs: Pioneers of Enhanced ETFs
Launched in October 2020, HCAL was Canada’s first “enhanced” ETF followed by the second, the Hamilton Enhanced Canadian Covered Call ETF (HDIV), which launched in July 2021. When creating HCAL, we chose 1.25x exposure, which we believe is a “Goldilocks” level of leverage, because our analysis and back-testing of the strategy suggested higher long-term return potential while maintaining a volatility profile similar to that of an individual Canadian bank stock[6]. Continue Reading…
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