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 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.

How Aging Populations affect the Healthcare Sector

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Populations are aging, creating opportunities for investors in health-care stocks or ETFs. Image licensed to Harvest ETFs from Shutterstock.

By Paul MacDonald, CFA

(Sponsor Content)

In much of the developed world, the population pyramid is inverting. Population pyramids are a demographic tool used to visualize the age of a country’s population. Typically they look like a pyramid, with a broad base —representing a large number of young people—and a gradually narrowing tip representing the natural loss of population as individuals age.

However, as birth rates have declined and life expectancy has increased in developed countries like Japan, France, and Canada those pyramids are looking more upside-down. The United Nations estimates that by 2050 almost 30% of the population of North America will be over 60; that number is projected at over 35% for Europe.

The aging of the developed world is one of the most important demographic trends of our time. An older population means a smaller proportion of the population will be working and paying taxes, while more people aging require the support of social safety nets. But this shift is not all negative. From an investor’s perspective there are a wide array of opportunities in aging populations. At Harvest ETFs, we see this demographic trend as one of the key drivers of the Healthcare sector.

Why the developed world is aging

Aging in North America, Europe, and parts of East Asia reflects a myriad of key factors. One of the most significant contributors to population aging is the remarkable progress in healthcare and medical technology. Reduced mortality rates from diseases and improved treatments for chronic conditions have led to longer life expectancy.

At the same time, birth rates are declining. That is due in part to increased access to education and family planning, as well as changing cultural norms. Families are choosing to have fewer children, or have children when they are themselves older and more established in their careers.

Other factors like urbanization, economic pressures, the cost of living, and the prioritization of personal well-being over raising children have contributed to this demographic shift. With this demographic shift, however, comes a significant economic shift.

As populations age, economies age with them. A shrinking pool of younger workers and a growing group of retirees can create a new set of challenges and opportunities. Most notably it can challenge workforce productivity and the overall tax base of an economy as a smaller percentage of the population will be working.

However, a growing number of older individuals opens up opportunities for many companies, notably in the Healthcare sector.

The investment opportunities of an aging population

At Harvest ETFs we believe the U.S. Healthcare sector is among the areas best poised to benefit from aging populations in the developed world. Taking the United States as a core example of these populations, we can see that healthcare spending increases significantly when the population gets older.

According to the Centers for Medicare & Medicaid Services National Health Statistics Group, the per-capita total personal healthcare expenditures of a U.S. individual aged  19-44 is US$4,856. For an individual aged  45-64 that number is $10,212. For individuals 65 and older, it’s $19,098. Continue Reading…

Managing Debt: How Business Leaders Overcame Financial Challenges

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Image via Pexels, Andrea Piacquadio

In this article, we’ve gathered seven effective strategies from founders and investment bankers on how to pay off significant debt while striving for financial independence. From embracing the “Snowball Method” to prioritizing high-interest debts, these experts share their personal approaches to achieving a debt-free life.

  • Embrace the “Snowball Method”
  • Achieve F.I.R.E. through Diversified Income
  • Reverse Order your Debt Payment Strategy
  • Utilize the “Debt Snowflake Method”
  • Consider Debt Settlement Options
  • Budget and Start a Side Hustle
  • Prioritize High-Interest Debts

Embrace the “Snowball Method”

In my journey to financial independence, I’ve found the “Snowball Method” to be an effective strategy for paying off significant debt. It’s like rolling a snowball down a hill; you start small and gain momentum. 

I began by paying off the smallest debts first, regardless of interest rates. The psychological boost of eliminating a debt was a powerful motivator, propelling me to tackle the next one. It’s akin to cleaning a cluttered room; you start with one corner and before you know it, the entire room is clean. 

This method may not be the fastest or the one that saves the most money in interest, but it’s the one that kept me going, and that’s what matters in the end. It’s not just about the numbers, it’s about the journey and the habits you build along the way. — James Allen, Founder, Billpin.com

Achieve F.I.R.E. through Diversified Income

I am an advocate of the F.I.R.E. movement, having both personal and professional experience with personal finance. I pursued F.I.R.E. because I wanted to follow my interests outside of my 9-to-5 job. I wanted to live a great life while exploring the world and spending more time with family and friends. Most importantly, I didn’t want to worry about finances all my life!

After making wise financial decisions over the years, I could leave my high-stress finance job in July 2019 to pursue my side hustles full-time. What I did was to diligently add to my emergency fund and invest as much as possible. In the first half of 2020, my partner and I could pay off $57,000 in debt, and we are now debt-free. I am now a full-time entrepreneur, with my businesses and side hustles generating a combined multi-six-figure per year income. — Samantha Hawrylack, Founder, How To FIRE

Reverse Order your Debt Payment Strategy

One strategy that has worked for me is to pay off my debt in the reverse order in which it was accrued. This means that I paid off the smallest debt first, and then worked my way through the rest of my debt: the highest interest rate last. 

The reason I did this was because it made me feel empowered and focused. I would think about how much money I was saving by paying off one bill early, and then use that motivation as fuel to keep going. — Jaanus Põder, Founder and CEO, Envoice

Utilize the “Debt Snowflake Method”

One effective strategy that helped me pay off significant debt while striving for financial independence is the “Debt Snowflake Method.” 

While the “Debt Snowball Method” is more well-known, the Debt Snowflake Method involves finding small, everyday ways to save or earn extra money and immediately using those funds to make additional debt payments. It might seem insignificant, but consistently directing small amounts toward debt can add up surprisingly quickly. 

For example, I would take advantage of cash-back apps, sell items I no longer needed, or even offer small freelance services during my free time. Every little contribution would go directly towards my debt, creating a snowflake effect that accelerated my debt payoff journey.  Continue Reading…

From Personal Savings to Business Success: Mitigating Financial Risk in Self-Funded Startups

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Image by Pixels

By Beau Peters

Special to Financial Independence Hub

Unfortunately, it’s rare for a startup to be successful long-term, let alone make it out of its first year alive. You’ve probably come across a lot of research that supports these claims. However, the information isn’t to scare you.

Instead, it’s to give you a realistic picture of how much it actually takes to be successful. If you don’t want your startup to be a part of the above research, you must first understand what contributes to a startup’s failure.

For many, it’s the financial challenges. Many startups don’t get enough money to cover what they need to start their businesses, they don’t manage the money well once they get it, or both. And when a startup is self-funded, it adds another layer of financial complexity that can lead to a failing operation.

Let’s discuss how you can reduce financial risk in your self-funded startup and make it past your first year in business and beyond.

Understand what it will Take to Fund your Business

Unless you’re someone with unlimited financial resources, how much money you can put into your startup is limited. You only have a certain amount to get your startup off the ground and maintain it until you turn a profit.

So, understanding what it will take to fund and run your business is critical. First, figure out what it will cost to launch and maintain your startup. Cover the following:

  • What are your product development costs?
  • Will you be renting an office space? If so, what are the associated expenses?
  • What are the cost of tech tools and software?
  • Will you have labor costs?
  • What will a marketing campaign for your launch and business cost?
  • What will your monthly expenses be?
  • What are your tax obligations?

Write down any other expenses unique to your startup that you’ll need to account for. Once you determine what the financial impact will be, you can create a realistic budget.

Create a Realistic Budget

To mitigate financial risk in your self-funded start up, you need to cling to your budget. Sticking with your budget ensures that you’re running your business within your means, can save some, and also afford your personal expenses.

Take the monthly business expenses you listed above and insert them into your budget. After that, input how much you’re bringing in each month. The hope is that your business pays for itself in the future. But factor in the personal money you put in to ensure your business stays afloat for now.

You’ll also want to detail how much money you’re allocating to business savings, an emergency fund, your tax account, and what you’re paying yourself.

Subtract your costs from your income and see what you have left over. If you’re in the negative, your next move is to find ways to cut costs. If you’re in the positive, consider investing the remaining amount or reinvesting it into your startup to keep growing. Continue Reading…

Timeless Financial Tip #7: 6 Steps to Retiring as Planned

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Canva Custom Creation: Lowrie Financial

By Steve Lowrie, CFA 

Special to Financial Independence Hub

Retirement isn’t the only reason to set aside current income for future spending. But since it’s usually the elephant in the financial planning room, it’s worth a Timeless Tip of its own.

The following are 6 ways to leverage lifelong financial planning, so you can retire on your own terms and on your own timeline.

  1. 1. Don’t Delay Retirement Planning, Start Today

I know, it’s easy to assume retirement planning is for when you get older. How old? Well, older than you are today (you tell yourself).

It’s also true that a detailed retirement plan is unlikely to come into focus until you’re at least mid- if not late-career. It’s hard to take clear steps toward hazy targets.

But none of this means it’s wise to be too Rip-Van-Winkle-like about your retirement planning. Even if it’s decades away — and especially if it’s not — a few sensible financial planning steps should help you avoid having to take any huge leaps 20 years down the road.

  1. Do Some Financial Forensics

To get started, try doing some Family Spending Forensics. Don’t worry, no forceps will be required to get a grip on what you’ve got and where it’s going. No judgment! Just take a few hours every year or so to ask yourself:

  • How much am I currently spending, in what categories?
  • How much am I saving for upcoming expenses?
  • How much am I investing for the future?
  1. Have a Personalized Financial Plan

Once you have a sense of where you’re at, create a financial plan that outlines where you’d like to go, including in retirement. Your plan should describe what your goals are, when you would like to achieve them, their approximate cost, and where the money will come from. Revisit your plan annually to freshen it, as needed. Having a plan in place will help you:

  • Spot any spending or saving leaks early on. It’s easier to heal a hole when it’s still small.
  • Make the most of new income. If you receive a raise, pay off your mortgage, receive an inheritance, or otherwise come across “new” money, your financial plan will inform you how to use the assets for maximum benefit, instead of randomly spending them on “whatever.”
  • Make good lifetime choices. Few families have more money than they know what to do with. Instead, most of us must bridge gaps between our assets and our aspirations. So, think about:
    • How will you bridge your gaps?
    • Will you work longer or pursue a higher-paying job?
    • Should you spend less, now or in the future?
    • Will you choose to invest more aggressively?

A financial plan helps you make good choices among spending/saving tradeoffs: during your working years and into retirement.

  1. Invest Toward and In Retirement

For most of us, our financial success comes from income earned during our career years. But it’s usually essential to also have invested a significant portion of that income into an inflation-beating, globally diversified investment portfolio we can tap in retirement. A financial needs analysis quantifies what your investment portfolio might look like to sustain a satisfying lifestyle in retirement: Continue Reading…

Valuation: Good for Long but not for Short

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Graphic courtesy Outcome/QuoteInspector.com.

By Noah Solomon

Special to Financial Independence Hub

As I have written in the past, valuations are of no use for determining broad market returns over the short term.

To be clear, I am NOT implying that valuation doesn’t matter. Historical experience demonstrates that it has been an extremely powerful predictor of average returns over the long term. Without fail, whenever valuations have stood well below average levels, strong returns ensued over the next 7-10 years. Conversely, highly elevated valuations have preceded anemic or negative returns.

For investors interested in shorter-term market movements, sentiment indicators may harbor greater potential than their macroeconomic or valuation-based counterparts. In this month’s missive, I explore some of the more commonly cited indicators that purportedly possess short-term predictive capabilities to ascertain:

(1) Whether the historical record confirms the presence of any predictive power, and
(2) What these variables are signaling for markets in the near term.

The VIX Index: Embrace the Fear

The VIX Index represents the market’s expectations of the S&P 500 Index’s volatility over the next 30 days. Its level is derived from the prices of S&P 500 options with near-term expiration dates. Dubbed the “fear index,” the VIX is often used to gauge market sentiment, and in particular the degree of fear among market participants.

Historically, the VIX has served as a good, if imperfect indicator of market turning points:

  • Although it failed to provide a clear “get out of dodge” signal before the peak of the tech bubble in early 2000, the VIX’s historically stratospheric level in late 2002 indicated a level of extreme fear that signaled that better times were at hand.
  • In early 2007, the VIX stood at very depressed levels, indicating the high degree of complacency that contributed to the global financial crisis of 2008. Unfortunately, it was far too early in signaling the recovery. In October 2008, extremely elevated VIX levels were signaling the type of abundance of fear that often precedes rebounds, yet stocks still had plenty of downside before ultimately bottoming in March of 2009.
  • More recently, the VIX failed to provide a warning signal of the market turmoil of 2022. However, its extremely elevated stance in late October of 2022 signaled that a rebound was imminent.

VIX Index Levels and S&P 500 Index Returns: 1997 – Present

Putting specific bear markets and recoveries aside, the above table demonstrates that elevated VIX/fear levels have on average preceded higher returns, and depressed VIX/lower fear levels have foreshadowed lower returns. The historical record lends credence to Buffett’s sage advice that it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”

Put Call Ratio: Beware Cheap Insurance

Like the VIX Index, the put-call ratio (PCR) is widely used to gauge the overall mood of the market. Put options provide the right to sell stocks at a predetermined price and are often purchased as insurance to protect portfolios from market declines. Call options offer the right to buy stocks at a predetermined price and are frequently bought to capture upside participation when stock prices rise.

The PCR increases when the market participants’ desire for downside protection rises relative to their desire for upside participation. Alternately stated, a rise in the PCR is indicative of a rise in bearish sentiment. Conversely, the PCR falls when people become more focused on reaping gains than on avoiding losses, which is indicative of a rise in bullish sentiment.

Since 1997, the PCR has been a contrarian indicator, whereby elevated levels (high fear/low greed) have on average signaled higher returns and lower PCRs (low fear/high greed) have heralded subdued or negative results. Continue Reading…