Inflation

Inflation

Simplifying Investing for Financial Independence

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By Billy and Akaisha Kaderli

RetireEarlyLifestyle.com

Special to Financial Independence Hub

Now that 2024 is in the books, I thought I would look back financially to where we started this adventure, from January of 1991. The chart below shows the ascent of the S&P 500 Index over our 34 years of retirement.

On our retirement date of January 14, 1991, the S&P 500 index closed at 312.49. It has recently closed over 6000, making over 8% annual gains plus a couple per cent counting dividends. Hard to imagine, right? With all of the market ups and downs, global turmoil, governments coming and going, businesses expanding and failing, and still producing a better than 10% annual return.

But is this really a one-off period and not the norm?

Using a calculator, we can see that the S&P 500 returns for the last 100 years, including dividends, is 10.660%.

 And recalculating for the last fifty years, total return is 11.411%. Clearly there is a trend here.

Does this mean that every year you invest you are going to have a 10% return? No!

But what it does tell us is that over longer time periods the return on your investment is handsomely rewarded.

However, if we look at the returns since the year 2000 they have been sub par at an annualized rate of just 7.817%.

And finally, since the financial crisis in 2009, the S&P 500 Index produced a total return of 14.934% including dividends.

Investing is not rocket science and does not need to be complicated.

Getting your house in order for retirement or financial independence is not that difficult. Many investment professionals, journalists, and commentators seem to complicate the issue to the point that even we can’t understand it. Safe withdrawal rates, stocks, bonds, balanced funds, commodities, options, laddered portfolios, annuities, offshore accounts, hedge funds, life insurance … are you kidding? No wonder some people are confused and scared!

What’s a person to do?

First, you need to recognize your needs. Let’s be realistic here. How much are you spending now? Not how much do you make a year, but how much are you paying out? With today’s computer online tools and spreadsheets, this is a very easy task to compute.

The longer you keep track of current consumption, the more confident you’ll become of your future spending habits.

Once you know your expenditures per year, take a look at where that money is going. If it’s to pay credit card bills or other consumer debt, you need to pay that off first. It’s fine to use credit cards as long as you completely pay off your balance monthly. And stay out of debt. I know this is not easy, but it’s your future, and the money you were paying in interest can now be invested.

With your debts paid off, you can commit to financial independence. Analysts say a guideline of 25 times your annual capital outlay should be enough to sustain your current lifestyle. With the data you’ve collected in your chart, you can easily calculate a target amount.

It’s really that simple. Continue Reading…

Harvest Low Volatility ETFs: A smoother Investment Experience

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Image courtesy Harvest ETFs

By Ambrose O’Callaghan, Harvest ETFs

(Sponsor Blog)

Canadians in retirement, or those nearing retirement, are faced with unique challenges in the present-day market. Interest rates have moved up from their historic lows since 2022. The benchmark rate for the Bank of Canada (BoC) reached its zenith of 5.00% in July 2023.

Economic headwinds forced the hand of the BoC in 2024 and 2025. The benchmark rate now sits at 2.75% as of July 7, 2025. More rate cuts are expected before the end of the year. This downward trend for interest rates means that investors who want a secure investment while outpacing inflation may have to look beyond GICs and other fixed-income products in this changing climate. Market volatility is another headwind investors are now contending with, spurred on by a new and aggressive U.S. administration.

There was enthusiasm surrounding the broader economy and the stock market coming into 2025. The previous GOP administration cultivated a reputation as a market-friendly one in the late 2010s. That momentum ground to a halt due to the COVID-19 pandemic, but the perception of a market-friendly GOP largely remained.

Investor sentiment soured in the spring, in large part due to the uncertainty surrounding U.S. government policy, particularly when it comes to trade. Trade tensions have remained elevated, but sentiment has improved into the summer as markets have normalized.

Uncertainty in the spring contributed to elevated levels of market volatility. Some names suffered steep retracements in the first half of April. However, the 90-day pause announced on tariffs led to a dramatic reversal. That led to a rapid recovery for the broader U.S. market. Despite the improved conditions, this market is unique in that lingering trade policy uncertainty is fueling negative sentiment. Headline risk will continue to be elevated through the second half of 2025.

A research note from Vanguard earlier this year speculated that volatility was likely to remain. This is due to factors like policy uncertainty, disruptive currents in the economy like Artificial Intelligence development, and the shifting policy of the Federal Reserve.

Demand for Low Volatility products has increased in this environment. These ETFs offer Canadian retirees a pure low-volatility play with exposure to 100% Canadian equities.

Harvest Low Volatility ETFs:  A Smoother Investment Experience

Harvest’s new Low Volatility ETF suite may be appealing to defensive and long-term investors. This approach to equity investing is factor-based, disciplined, outcome-oriented, is designed to mitigate risk, as well as provide long-term growth. Moreover, the suite includes a high-income solution that generates monthly cash distributions through an active covered call writing strategy.

Low Volatility strategies can outperform in bull or bear markets. They follow a portfolio construction and investment strategy that is built to limit downside while capturing the upside. Investors can capture gains more efficiently by minimizing risk during periods of market turbulence.

The Harvest Low Volatility Equity ETF (HVOL:TSX) holds 40 top Canadian equities. These equities will be ranked and weighted by their risk score and market cap weight, with a 4% maximum weight per name. HVOL’s Canadian equities are scored according to risk and fundamental metrics.

Low Volatility – Portfolio Construction

Source: Harvest Portfolios Group, Inc. April 2025.

Low-volatility strategies have existed in the market since the 2007-2008 financial crisis. However, these strategies have typically followed a generic approach.

The Harvest approach utilizes multiple risk metrics to achieve its stated goals. These include Beta, Volatility, and fundamental analysis. Harvest emphasizes a robust portfolio construction to achieve a defensive low volatility portfolio and superior upside capture. Continue Reading…

Approaching FIRE [Financial Independence, Retire Early] with a balanced mindset

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Image courtesy Tawcan/Unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

I came across this article from The Globe and Mail the other day. The article profiled Jeremy Finney, who retired five years ago at age 41. Soon 46, he is dealing with regrets about early retirement.

According to the article, Jeremy worked at IT and used to push himself to the edge:  70-hour work weeks, back-to-back meetings, working 50 hours straight without sleep. His typical work week meant he was leaving home at 4 AM on Monday to fly to Chicago and returning home late Friday.

The work was so demanding that Jeremy couldn’t take time off around Christmas and from time to time, he had to work through statutory holidays. His job was so stressful that he believes it may have contributed to the breakdown of his first marriage.

That certainly doesn’t sound like a good work-life balance. From the article, my impression was that Jeremy was focusing on earning a high income, saving as much money as he could, and crossing the FIRE finish line as early as possible.  [FIRE is an acronym for Financial Independence, Retire Early.] Spending quality time with his family and having an identity outside of work simply weren’t a priority.

Since I work in high tech, I can relate to this high-pressure, high-demand situation. It’s not unusual for me to have multiple meetings back to back. Since I deal with people globally, it’s also not unusual to have meetings as early as 6 AM and meetings as late as 8 PM.

Sometimes, it can feel like I’m working constantly and the so-called work-life balance is simply not possible.

Three things I learned about work-life balance

Having said that, I have learned a few key things over the years to help me improve my work-life balance:

  1. Setting limits and boundaries. Block off early morning, lunchtime, and dinner time in my calendar.
  2. It’s OK to turn down meetings
  3. If possible, delegate the meeting to someone else

I’m not perfect, but I’m working on getting better at finding the right balance between work and life.

When it comes to FIRE, I think it’s important to approach it with a balanced mindset. The FIRE journey isn’t a sprint, it is a marathon. It takes years and years of planning, saving, investing, and dedication to achieve FIRE. If you approach it like a sprint, I believe you will burn out very quickly. Even if you end up achieving FIRE, you will regret it like Jeremy.

Some additional thoughts on the FIRE journey and approaching it with a balanced mindset: Continue Reading…

Rethinking Retirement Income

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How real Spending Patterns challenge Traditional Retirement Income Planning  

Canva Custom Creation: Lowrie Financial

By Steve Lowrie, CFA

Special to Financial Independence Hub

Here’s a contrarian thought.

When most people imagine retirement, they picture steady cash flow from their investments to support their lifestyle.

The common assumption is that they’ll preserve their financial nest egg and live off the growth” drawing a consistent amount each year while keeping the principal largely intact.

But there are actually three broad approaches. At one end, some plan to spend their entire portfolio over their expected lifetime (as one client joked, “I want my last cheque to bounce.”  At the other end is the idea of preserving capital entirely. Most people, in practice, end up somewhere in between.

But what if that assumption is only part of the story?

The reality is that real-life retirement spending isn’t flat. It fluctuates unevenly and unexpectedly over time. And those patterns can have a big impact on your retirement income strategy.

Retirement Planning has changed. Have you?

For decades, retirement planning has focused on Saving: building a nest egg, maximizing RRSPs, and making the most of tax-advantaged accounts.

But the real challenge begins after you stop working. Then, the question becomes:

How do I turn my savings into reliable, lasting income?

This is where traditional models often fall short. Most assume spending stays constant throughout retirement. But as recent research from J.P. Morgan Asset Management shows, that’s not how real retirees actually spend.

For more on how conventional rules can mislead, see Debunking Retirement Financial “Rules.”

What the Data shows

J.P. Morgan studied anonymized spending data from more than 5 million U.S. households, offering a detailed picture of how retirees actually spend in retirement. These findings closely align with what I’ve observed over 30 years of working with Canadian clients.

Three key Retirement Spending patterns:

  • Spending Surge: Many retirees experience a spike in spending right around the time they retire. This is often due to lifestyle changes and delayed goals coming to fruition in the early retirement years, like travel, home upgrades, or helping adult children.
  • Spending Curve: Over time, overall spending tends to decline. For example, households with investable assets between $250,000 and $750,000 saw an average inflation-adjusted spending decrease of about 1.65% annually through retirement.
  • Spending Volatility: Perhaps most important, spending is anything but steady. According to J.P. Morgan’s 2025 Guide to Retirement, 60% of retirees saw their expenses fluctuate by 20% or more in the first three years of retirement. And this volatility often continues well into later years.

These findings show that retirement income strategies need to be flexible enough to accommodate spikes, declines, and everything in between.

Why it matters

Most financial plans assume a flat, inflation-adjusted income for 25 to 30 years. That’s a very good place to start. However, based on both this research and my practical experience observing hundreds of client habits over three decades, here’s what can happen:

  • You over-save early, delaying retirement unnecessarily
  • You under-spend during healthy years, missing out on the freedom you’ve earned
  • You get caught off guard by spending spikes, leading to early withdrawals or tax surprises

J.P. Morgan’s data shows retirees typically need about 92% of pre-retirement income at age 65, but just 70% by age 85. That is a significant shift and a reminder of why you want healthy exposure to equities, which is the only asset class that has historically given the best chance of outpacing inflation over the long run.

A better way to Plan for Retirement Income

Here are a few ways to build a more adaptable, evidence-based retirement plan: Continue Reading…

Canadian Stock portfolios

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By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

The good news for Canadians who build their own stock portfolios is that if you simply buy enough of those blue-chip companies, then get out of your own way, you’ll likely be a very successful investor. At least on the Canadian equity front.

Research shows that big ‘boring’ blue-chip stocks outperform the TSX Composite. Low volatility and high yield are top of the heap for Canadian equity over the last 25 years. On the Sunday Reads we’ll look at Canadian stock portfolios.

Here’s the post that offered Norm Rothery’s graphic on the performance of Canadian stock portfolios.

Dividends don’t contribute to wealth creation.

Yes we have to remember that the big dividends help us find those blue-chip stocks (and value at times), but the dividend payments don’t contribute to the wealth creation: as the dividend is merely a removal of value from your stock holding. The share price drops by equal on ex dividend day. That said, the dividends can help us find those great companies, and well, they make investors feel good.

Beat the TSX Portfolio

Here’s an example for the high-dividend approach – The Beat The TSX Portfolio.

From that post, the BTSX is having a good 2025 after a couple of years of underperformance. Of course, the big dividend payers suffered during the inflationary rising rate environment.

While the Beat the TSX invests in the top 10 yielding stocks from the TSX 60, I’d suggest investors consider more stocks from the sectors where the BTSX hunts: more financials, more utilities including pipelines. Remove some of the concentration risk. The approach has a very considerable long-term record of outperformance, but it can be very volatile. You might even consider the top 20 yields as I have suggested in the past.

Canadian wide moat portfolios

Personally, I like the Canadian wide moat portfolio approach. Greater returns, less volatility, that floats my boat in semi-retirement. I’ve updated the post for the Canadian Wide Moat Portfolios.

Be sure to give that post a full read, but here’s the wider moat portfolio:

And the returns comparison. There’s a nice beat with lower risk:

In that Canadian Wide Moat post I also offer an update on my wife’s Canadian Wide Moat portfolio. We added more financials and ditched the cyclical railways. There’s more than one way to ‘wide moat.’

And the returns comparison: Continue Reading…