Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

The Optimal Path to Long-term Outperformance

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By Noah Solomon

Special to Financial Independence Hub

Image courtesy Khürt Williams/Outcome

Well, I won’t back down
No, I won’t back down
You could stand me up at the gates of Hell
But I won’t back down

No, I’ll stand my ground
Won’t be turned around
And I’ll keep this world from draggin’ me down
Gonna stand my ground
And I won’t back down

  • I won’t Back Down, by Tom Petty

It is well understood that people with a lower tolerance for risk must accept lower returns than those who have a greater tolerance. By the same token, investors who are willing to bear more risk can expect to reap higher returns than their more conservative peers.

However, this does not change the fact that any rational person, regardless of their tolerance for risk, would prefer higher rather than lower returns given the amount of risk they are willing to take. Similarly, they would prefer to experience lower rather than higher volatility given their target rate of return.

These self-evident truths beg the following question: For any given level of risk tolerance, what is the optimal path to achieving higher returns? In this month’s missive, I will explore various paths to accomplishing this objective, including their respective strengths and weaknesses.

Live by the Sword, Die by the Sword

If managers try to outperform their benchmarks then by definition they must hold portfolios which are different than their benchmarks, either in terms of its individual assets, their respective weightings within the portfolio, or both.

However, holding a portfolio which differs from its benchmark constitutes the proverbial double-edged sword. The pursuit of great performance can just as easily be wrong or right. If you strive for performance which is far better than the norm, you must hold a portfolio that exposes you to the risk of being far worse. Moreover, over the long term, it is highly likely that you will assume both roles in equal proportion or worse.

The long-term effects of oscillating between strong outperformance and strong underperformance are illustrated in the table below, which incorporates the following data:

  • Monthly returns for the TSX Dividend Aristocrats Index ETF (the benchmark that S&P Global uses to evaluate dividend-focused Canadian equity funds) going back to 2008, which is the first full calendar year of the fund’s existence.
  • Monthly returns over the same period for an “Alternator Fund” which switches every twelve months between underperforming the index by 5% and outperforming it by 5%.

Benchmark Portfolio vs. Alternator Fund: 2008-2025

A symmetrical combination of well above and below average returns produces a long-term record that is characterized by slightly lower returns, higher volatility, and larger losses in challenging markets. The punchline is that managers who strive to consistently outperform by a substantial margin every year are highly likely to deliver subpar results over the long-term.

Slow and Steady Wins the Race

Legendary investor Howard Marks once recalled a discussion he had in 1990 with the director of a major mid-West pension plan. During the conversation, he learned that the plan’s stock portfolio had far outperformed the S&P 500 Index over the past 14 years. Even more striking than its headline performance was the path that it had followed to achieve it.

Notwithstanding that the plan’s returns in any given year had never placed below the 47th percentile or above the 27th percentile, its portfolio’s performance over the entire fourteen-year period placed it in the 4th percentile.

The proverbial moral of the story is that if you swing for the fences and attempt to be in the top 5% or 10% every year, you will fall victim to the double-edged sword, delivering long-term returns that are (at best) mediocre and that are accompanied by high volatility. By contrast, if you deliver performance that is slightly above average on a realistically consistent basis with particular emphasis on outperforming in bear markets, (1) your long-term outperformance will be substantially better than average, and (2) you will be subject to lower volatility and shallower losses in challenging markets.

Munger’s Inversion and the “When” of Outperformance

The late great Charlie Munger, investment guru and longtime Buffett partner, stated, “Invert, always invert.” This statement describes his inclination for taking a given scenario and reversing it to evaluate the ramifications of the opposite scenario. Munger used this approach, which spotlights what to avoid rather than what to seek, to solve complex problems.

Outperformance not only stems from how often and by how much you outperform or underperform, but when you do so. With respect to long-term compounding and wealth creation, it is far more important to outperform in bad times than in good times. Continue Reading…

Preparing your Portfolio for Retirement? Income is SO Yesterday

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By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to Financial Independence Hub

Billy and Akaisha at Caleta Beach, Mexico

We’ve written about this for years in our books.

When preparing for retirement, designing your portfolio for income is over-rated. Oh, it feels good bragging about how much money you make each year, but then you also quiver about the taxes you owe each April.

What’s the point?

To make it – then give it back – makes no sense.

With today’s interest rates, people are being forced to look elsewhere.

Our approach 3 decades ago

When we retired 36 years ago, having annual income was not on our minds. Knowing we had decades of life-sans-job ahead of us, we wanted to grow our nest egg to outpace inflation and our spending habits as they changed too. Therefore, we invested fully in the S&P 500 Index.

On the day we left the working world the S&P 500 closed at 312.49.

We will get back to this in a minute.

500 solid, well-managed companies

The S&P Index are 500 of the best-managed companies in the United States.

Our financial plan was based on the idea that these solid companies would survive calamities of all sorts and their values would be expressed in higher future stock prices outpacing inflation. After all, these companies are not going to sell their products at losses. Instead they would raise their prices as needed to cover the expenses of both rising resources and wages, thereby producing profits for their shareholders.

How long has Coca-Cola been around? Well over 100 years and the company went public in 1919 when a bottle of Coke cost five cents.

Inflation cannot take credit for all of their stock price growth as they created markets globally and expanded their product line.

This is just one example of the creativity involved in building the American Dream. The people running Coke had a vision and have executed it through the years. Yes, “New Coke” was a flop as well as others, but the point is that they didn’t stop trying to grow because of a setback.

Coca-Cola is just one illustration of thousands of companies adapting to current trends and expanding with a forward vision. Continue Reading…

Why your Grandparents’ Investment Strategy may no longer be enough

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Image by Unsplash

By Devin Partida

Special to Financial Independence Hub

The investment playbook has changed. It may have performed well for the last several generations, but finding financial stability is a different game in the 2020s. The best practices established by your grandparents have become obsolete. Therefore, you should look to new financial horizons to establish financial freedom in a way that is more accommodating to modern dynamism and volatility.

How traditional Investment Strategies fail to adapt

The contemporary investing landscape is different from that of the last several decades. The techniques of previous generations are less viable. While you may ask your parents or grandparents for investing advice, their strategies could minimize your wealth generation and financial opportunities.

Most of your grandparents likely maintained a portfolio that followed a simple framework:  the 60/40 rule. Place 60% of your money in reliable stocks or index funds and the rest in high-interest-rate bonds. Today, this is far from the portfolio diversity modern experts want to see. These kinds of portfolios are only growing 2.2% a year now, so professionals are recommending even more varied investments, including precious metals, collectibles, venture capital and private equity, to name a few.

Past portfolios worked alongside robust pensions that were once common in the workforce. It is less common now for this type of security to supplement a 60/40 portfolio. These factors, combined with lengthening lifespans, mean nest eggs are ill-equipped to make it through potential market downturns and the entire length of your retirement. If you are living in retirement longer than previous generations, then the money has to work for you longer.

Why Economic Shifts demand a different Investment Approach

Interest rates have collapsed, and bond prices are mostly trending less than in previous decades, making them unsuitable for outpacing inflation. This reality is why people are seeking even more places to put their money.

The democratization of investments, such as the rise of cryptocurrencies, has also made market understanding more complex. Pair this with exchange-traded funds (ETFs), real estate investment trusts, non-fungible tokens and more, and you have the most enigmatic market history has ever seen: long gone are the days of just relying on blue-chip stocks.

Additionally, retirement savings have become more of a personal responsibility as the number of pension plans has decreased by millions since 1975. An IRA or a 401(k) is the more common route nowadays, as they are cheaper and less risky for employers. Now, many could view their investments as a replacement for what could have been a pension.

Ultimately, the set-it-and-forget-it model of your grandparents’ investment strategies is missing the wealth-generating opportunities you need to prepare for retirement in this climate. The rising cost of living, the financial influence of technological advancements and geopolitical tensions are only a few other factors that could shape how you divert your money.

Ways to Adapt to increase Risk Tolerance and Wealth

You can diversify while still embracing security. It will allow you to prepare for the unexpected. For example, your grandparents’ generation likely faced fewer natural disasters, as climate stressors have increased in recent years. In 2024, natural disasters caused at least $368 billion in economic damage worldwide, affecting people and their financial well-being.

These are the best ways to consider external factors outside of your control while taking advantage of how the investor market looks today.

Craft your Investment Goals

Many choose to work with a financial adviser, but you should start planning by identifying short-, medium- and long-term goals. These could involve buying a house, starting a business or building for retirement. Each goal has a time frame, allowing you to make informed decisions about your risk. At this stage, evaluating the stability of your job, debt and household expenses is critical. Continue Reading…

5 Leaders Share how they’re Adjusting Retirement Asset Allocation for the Rest of 2026

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Market volatility and shifting economic signals are forcing retirement savers to rethink their portfolios in real time. This article gathers practical strategies from five seasoned financial leaders who manage billions in retirement assets and are actively adjusting allocations right now. Their approaches range from bucketing time horizons to integrating global hedges, offering concrete tactics that advisors and individuals can apply immediately.

These experts were gathered by Featured.com, which has been supplying Findependence Hub with quality content for several years. It has changed its procedure so editors like myself can request input on particular topics we think will interest our readership. The sources are all on LinkedIn, as you can see by clicking on their profiles below.

  • Secure Core Needs via Indexed Annuities
  • Segment Time Buckets to Tame Sequence Risk
  • Shift Toward Global Breadth and Tangible Hedges
  • Favor Quality Income Plus Balanced Discipline
  • Blend Abroad Exposure for Safety Anchors

Secure Core Needs via Indexed Annuities

Given the trade and tariff noise, I start by securing essential lifestyle costs with Fixed Indexed Annuities that provide floors with index-linked upside to blunt sequence-of-returns risk.

I also require clients to keep separate emergency reserves and a growth sleeve because FIAs have surrender periods. We coordinate annuity design, laddering, and rider choices with Roth conversions and RMD planning to create a predictable income base before taking market risk.

Will Lane, Retirement & Estate Planning Advisor, Top Rank Advisors

Shift toward Global Breadth and Tangible Hedges

Looking ahead to the rest of 2026, portfolio concerns for individuals aged 65 and over, and those close to retirement (within 10 years), include risk management, purchasing power protection, and geopolitical and currency diversifications.

We are seeing a move away from traditional 60/40 or 70/30 portfolios and toward a more dynamic framework for asset allocation. U.S. stocks and high-grade Fixed Income are still foundational, but we are trying to avoid over-allocation to a particular market or macro scenario.

Some key themes for the future are greater geographic diversification, selective access into non-U.S. assets, and cautious hedging versus U.S. dollar declines. We are not making stark currency predictions, but geographical diversification outside of USD-focused assets is becoming sensible for increasing numbers of investors.

At the same time, there’s also been a reinforcement of allocations to hard assets like precious commodities and metals. The inclusion of crypto exposures is small and is based on suitability.

As such, it’s emphasized that there’s a focus on “resilience and adaptability, and positioning to withstand trade tensions, volatility in inflation, and policy uncertainties in a way that is independent of specific narratives.”

Peter Reagan, Financial Market Strategist, Birch Gold Group

Favor Quality Income plus Balanced Discipline

For investors in or approaching retirement, the balance of 2026 should be geared towards capital preservation, income stability, and inflation resilience as the primary objectives:  while still maintaining enough growth exposure to support long retirement horizons.

Retirees cannot afford to eliminate equities, especially with longer life expectancies and ongoing inflation risk. But favor high-quality cash-generating companies over speculative, momentum-driven stocks. Bonds should primarily reduce volatility and fund near-term spending. Real assets, alternatives can support diversification while improving returns, and investors could have a small exposure to this segment.

For retirees and near-retirees in 2026, the goal is not to time markets, but to construct a portfolio that:

  • Can withstand equity volatility
  • Generates dependable income
  • Preserves purchasing power over a multi-decade retirement

Asset allocation should be personalized, tied to spending needs, risk tolerance, and other income sources — but the overarching theme is balance, quality, and discipline. Not aggressive risk-taking or excessive conservatism.

Geetu Sharma, Founder and Chief Investment Officer, AlphasFuture LLC

Segment Time Buckets to Tame Sequence Risk  

For my pre-retiree clients, one of the biggest risk factors to a successful retirement is Sequence-of-Return risk, or the risk of experiencing poor market conditions at the start of retirement.

To help address this risk, I believe in holding a diversified portfolio that consists of several accounts that have different asset allocations and amounts. For example, funds needed in the first year of retirement would be allocated more conservatively than funds needed in the 15th year of retirement. This helps to reduce the impact of geopolitical risk or currency risk on their portfolio and thus their retirement. Additionally, having a portfolio that includes commodities like gold or international equities helps to balance the risk of a particular underperforming asset class throughout retirement as well.

Stu Evans, Wealth Advisor, Blackbridge Financial

Blend Global Exposure for Safety Anchors

For retirees and those within ten years of retirement, the ongoing tariff tensions and global trade uncertainties require a careful reassessment of asset allocation while maintaining a focus on capital preservation and income reliability. Traditional allocations, such as the 60/40 or 70/30 equity-to-bond mixes, still provide a strong foundation, but we are increasingly emphasizing diversification across geographies and asset types to manage both market and currency risks.

For U.S.-based investors approaching retirement, a modest increase in non-U.S. equities makes sense to capture growth opportunities abroad while reducing concentration risk in domestic markets that may be more exposed to trade disruptions.

We are also monitoring the U.S. dollar closely, and while we are not making aggressive currency bets, selective exposure to assets that historically hedge dollar weakness — such as precious metals and certain commodities — can provide a measure of protection and portfolio resilience.

We continue to stress bonds and cash equivalents for retirees, particularly high-quality, short- to intermediate-duration bonds that preserve capital while providing reliable income. However, in light of persistent inflation pressures and potential geopolitical shocks, we are selectively introducing alternatives, such as commodities, real assets, and limited exposure to crypto in small, highly managed positions: not as core holdings but as strategic diversifiers. The goal is not chasing yield or speculative gains, but rather enhancing portfolio resilience and smoothing volatility.

Overall, the guiding principle remains risk-adjusted diversification: maintaining sufficient equity exposure for growth, bonds for income and stability, and alternatives to hedge against systemic risks, while keeping allocations flexible and aligned with liquidity needs. Retirees should avoid over-concentration in any single market or asset type and prioritize investments that protect purchasing power, provide consistent income, and withstand trade or currency shocks over the remainder of 2026.

Andrew Izrailo, Senior Corporate and Fiduciary Manager, Astra Trust

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10 lessons I’ve learned from 25 years of investing

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Image courtesy Tawcan/Unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

I started DIY investing while I was in university. Back then, I bought a few stocks based purely on recommendations. Honestly, I didn’t have a clue what I was doing. I didn’t know much about stock valuation, how to read quarterly and annual reports, or understand company fundamentals.
Since our financial epiphany, I have become far more knowledgeable about investing. Writing about investing and posting new articles on this blog is one way for me to demonstrate that I understand different investing concepts.

After 25 years of investing, here are 10 important lessons I have learned:

1.) Increase the savings gap

Investing is all about saving money, investing that money, and waiting for it to grow.

To save money, one needs to commit to saving money. Living below your means or spending less than you earn is a common concept in the Financial Independence Retire Early (FIRE) movement. But I believe it’s more than just spending less than you earn. It’s about committing to continue increasing your earning power (i.e. income) while decreasing or maintaining your spending.

The difference between your income and spending is what I call the savings gap, or some people call it the savings rate. The bigger the savings gap, the more money you can save and invest toward your investment portfolio.

When you are starting on your investment journey, you really need to rely on injecting fresh capital into your investment portfolio for it to grow. The compounding effect won’t really pick up until your investment portfolio becomes sizable (say $100k or more). This is like rolling a snowball down the hill. If you start with a tiny snowball, it will take longer to increase the size and the speed of the snowball. If you start with a bigger snowball and can add more snow to the snowball as it rolls down the hill, you can increase the size and speed faster.

So increasing your savings gap will drastically propel the growth of your investment portfolio. Work hard on increasing the savings gap without depriving yourself.

2.) Learn to automate

Over the years, I have learned that the less I get myself in the way of our saving & investing journey, the better. Therefore, I focus on automating as many things as possible.

Whenever we receive a paycheque, a certain percentage is automatically moved to our financial freedom account and it is used for investing. We also automate how much money is moved to the different investment accounts each month.

On the other hand, we also automatically move different percentages of money to the different accounts like Play, Give, and Long Terms Savings for Spending. 

To take advantage of the power of compounding, we enroll in both synthetic and fractional drips with our online brokers so dividends are reinvested and additional shares are purchased automatically.

Some investors I know automate the buying and rebalancing process as well. For example, they would auto-purchase ETFs or stocks every second week or every month. Some use Passiv to auto-rebalance their portfolio until the desired allocation is met (note: we don’t auto purchase or auto rebalance but it’s a worthwhile automation).

3.) Ignore the noise

Nowadays, it’s easy to find news and stock analysis on the internet. Doomsday predictions are everywhere, so it’s easy to react and sell your investment on emotion. Similarly, you can get sucked into hype and fads easily and invest a significant amount of money when you get excited about an idea.

More than ever, it’s important to ignore the noise.

Remember, the stock market is like a roller coaster. It has its ups and its downs. Please do not freak out about the recent pops or drops. We can’t control the market, so why pay attention to all the noise and react to emotion or feeling stressed out about the news? The market is cyclical, bull markets come and go, so do bear markets. There are always ups and there are always downs, too. There’s no other way around it.

The key thing to remember is that the stock market has a tendency to go up over the long term. In fact, a historical long term return is 10% without accounting for inflation.

So ignore the noise and focus on your long-term investing strategy.

4.) Keep it simple

I used to trade on technical and chart analysis. The moving averages, channel breakouts, support & resistance, seasonality, stochastic, and head and shoulders are some of the technical analysis tools I have learned and used over the years. When using these analytical tools to trade stocks, things can often get complicated and it could take time to decide whether to buy or sell. These technical analyses typically require regular monitoring of the stock market, which can be very time consuming.

Over time, I learned that it is best to keep it simple. The idea of hedging your consumption became one of the fundamental pillars of our investing strategy: invest in companies that produce products that we use daily. The harder it is to switch and replace that product, the better. Or the more we and others complain about the product, but find it nearly impossible to find an alternative, the better.

I also learned not to focus overly on the quarter-over-quarter performance. Rather than looking at the micro trends and quarterly performances, we keep it simple by focusing on the macro environment. Are people still buying new iPhones and finding it hard to switch to Android? Are more and more people using credit cards for purchasing rather than cash? Are people relying more and more on their phones and data plans for their everyday tasks?

While technical and chart analysis are still helpful, I learned it is far more important to focus on the simple things like company fundamentals, profitability and product pipelines to understand whether it makes sense to continue investing in the said stocks or not.

Another way to keep things even simpler would be investing in one of the all-in-one ETFs like XEQT or VEQT. This way, you don’t even need to do any research on the companies you own. You simply buy shares of these all-in-one ETFs regularly and dollar-cost-average over time.

5.) Having the right expectations

Unfortunately, many investors believe they can make big profits and multi-baggers in a very short term. They like excitement and if they don’t trade regularly, their hands get “itchy” from lack of action.

This is where having the right expectations is extremely important.

The reality is, investing should be as boring as it can be. There shouldn’t be any excitement at all. It takes years for a stock or an ETF to compound and provide a solid return. Therefore, it’s vital to have the right expectations. You probably aren’t going to get a +100% return every single year. Tracking the historical average, between 8-10%, is totally OK. But don’t forget that the market goes up and down, so you will have a bad year occasionally.

6.) Best investment to buy

What is the best investment to buy? Yes, I have written about the best investment in the world and the best way to invest. In reality, there’s no such thing.

Dividend investing is not the best investment strategy in the world. Dividend investing is also not the best way to invest.

Index investing is also not the best investment strategy in the world. Index investing is also not the best way to invest. Continue Reading…