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).

Resist the Urge to Make a Quick Profit on your Best Stock Picks

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Investors often go for the easy gains, but resist the urge to dump your best stock picks for a quick profit

Image courtesy TSInetwork.ca

Here’s a quote from one of the first highly successful investors I ever had the privilege of meeting. While talking about the stock market, he casually mentioned, “I’m a rich man today because I was smart enough to buy Canadian Tire stock at $0.50, and too stupid to sell when it hit $2.00.”

The quote deserves to be repeated more often, since it simplifies a key rule for successful investing and preserving your best stock picks: Don’t be too quick to sell a winner. Unfortunately, this rule gets broken all the time. Many investors buy a particular stock, often a junior stock, because they like a number of things about it: the business plan, the experience and achievements of the management, the outlook for the industry the company is targeting, the general economic environment, and so on. Before too long, however, other investors are likely to discover the same stock.

They may like it so much that they bid up its share price. When that happens, it can spur the early buyers to take profits.

These early buyers may lose interest because they fear the stock has burned up its near-term potential. Worse still, they may fear the rise is a “last gasp” and that the stock may suddenly go into a deep setback. Or, they may decide they found one good stock before the rest of the market did, so they can sell their latest winner and go on to invest the proceeds in something better.

Their initial good fortune may give them the urge to sell their first winner, in hopes of finding something else just as good, but with more profit potential because it has not yet caught the market’s attention.

Before you yield to this urge, it’s better to consider what else has changed about the stock, other than its rise in price. Did its business plan change? Probably not. Chances are that few if any of its attractive industry aspects have changed. Good management, good industry opportunities, a positive economic outlook and so on can persist through long periods of adversity.

That’s why you need to overcome the intermittent but all-too-human urge to take a quick profit on your best stock picks.

Mind you, before selling the stock and buying something else, you need to contemplate a related rule: Resist the urge to declare a junior investment a winner, just because of its novelty, or its uniqueness, or its frequent appearance in the broker/media limelight.

Lots of good-sounding investment ideas turn out to be poor investment performers.

Think long-term when it comes to maximizing gains on your best stock picks

The goal of an investor, particularly if you follow the Successful Investor approach, is to make an attractive return on your investments over a period of years or decades. Failure means making bad investments that leave you with meagre profits or losses.

Unsuccessful investors can still make some profits. They just don’t make enough to offset the inevitable losses and leave themselves with an attractive return. If you focus on the idea that you never go broke taking a profit, you may be tempted to sell your best investments whenever it seems the investment outlook is clouding over.

On occasion, you may succeed in selling just prior to a major downturn, and buying back at much lower prices. More often, prices will soon hit bottom and move up to new highs. If you buy back, you’ll pay higher prices. If you had followed this investment belief with Canadian bank stocks, for example, you could have missed out on some big gains over the years.

In hindsight, market downturns are easy to spot. Spotting them ahead of time is much harder, and impossible to do consistently. After all, if you could consistently spot market downturns ahead of time, you could acquire a large proportion of all the money in the world, and nobody ever does that.

The problem is that you’ll foresee a lot of market downturns that never occur. All too often, the market-downturn clouds disperse soon after skittish investors have sold. Good reasons to sell do crop up from time to time, of course, even if you follow a long-term conservative investing approach. But “You’ll never go broke taking a profit” is not one of them.

So, when is it the right time to sell your best stock picks?

Investors often ask, “When do I sell?” There is no simple, fits-on-a-t-shirt answer to the question. But there are some helpful guidelines. Continue Reading…

Avoid being trapped by a Mortgage as a FIRE Retiree: 5 Tips

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Can you really achieve Financial Independence when you still have a mortgage looming over you? Our insights will help you avoid feeling trapped by payments.

Image: Iryna for Adobe

By Dan Coconate

Special to Financial Independence Hub

Achieving Financial Independence early brings freedom, flexibility, and opportunities. But entering this new chapter requires thoughtful planning, especially when it comes to housing.

Avoid being trapped by a mortgage in early retirement by adopting a strategic approach that aligns with your financial goals. Whether you plan to downsize, relocate, or stay put, being proactive can preserve your hard-earned independence without a mortgage becoming a financial burden.

Below are five essential tips to guide you through managing your mortgage while protecting your financial independence.

Prioritize Paying off your Mortgage

Carrying a mortgage into Financial Independence can feel like dragging a heavy anchor. If you can, aim to own your home outright before retiring early. This eliminates one of the largest monthly expenses, giving you greater control over your budget. Many Canadians find success by accelerating their payments or making lump-sum contributions when possible. Debt-free living provides immense peace of mind and opens up new possibilities for pursuing the lifestyle you envisioned.

Consider Downsizing

Scaling down your home can offer financial and lifestyle benefits. Downsizing can free up home equity, reduce maintenance costs, and even lower property taxes. However, a well-thought-out plan ensures you don’t trade your current home for another financial burden.

It is possible to buy a new home before selling yours: you just need to be strategic about it. You also don’t have to limit yourself to smaller square footage; consider homes in less expensive areas or those better suited to your needs.

Explore Passive Income from Real Estate

Turning your property into a source of income can significantly offset costs. For instance, renting out a portion of your home or owning a rental property can transform your mortgage payment into a cash-flow opportunity. Many pursuing Financial Independence have increasingly tapped into short-term vacation rentals or long-term tenants to supplement their budgets. Proper research and planning ensure this approach aligns with your goals while providing notable financial advantages. Continue Reading…

3 books I just read that Retirees DIYing their pensions need to read

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Amazon.ca

My latest MoneySense Retired Money column looks at a must-read new book on Retirement as well as two related books on DIY stock-investing. You can read the full column by clicking on the highlighted headline: Who you gonna trust: Barry Ritholtz or Jim Cramer?

The must read and main focus of the MoneySense column is William Bengen’s A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More. If that sounds familiar it should: Bengen’s original book on the 4% Rule is considered the bible of retirement, with his famous “SAFEMAX” guideline of 4% a year being an annual amount of withdrawals that should be “safe” for retirees to continue for a full 30 years, even after inflation. The original book,  titled Conserving Client Portfolios During Retirement, was first published in 2006.

Never mind that even Bengen considers 4.7% be a more universal SAFEMAX. The original book was aimed at financial advisors and professionals while the new one ostensibly is aimed at retail investors and retirees. I say ostensibly because I was a little disappointed with it and found the plethora of complicated charts and tables a bit much for lay investors. Still, there’s a lot of common sense there: Inflation is big long-term threat to retirees as are bear markets. Withdrawing too much from portfolios can be disastrous if you are unfortunate enough to retire just as a bear market hits and/or inflation starts to bite.

On the other hand, sticking with the old 4% rule or even the smaller amounts of 3% or even 2% advocated by some cautious souls, could result in you withdrawing less than you really need to enjoy retirement, although the tax department and any heirs might commend your caution and frugality.

How to make money in any market

Amazon.ca

While it’s rare for me to buy new hardcover books because I receive so many “free” review copies of financial books, I actually did buy A Richer Retirement as soon as it was available on Amazon. Plus, unusually, I also bought two other brand new books on the related topic of investing and stock-picking.

One was Jim Cramer’s How to make money in any market, by the sometimes revered but often maligned host of  CNBC shows Mad Money and Squawk on the Street. It’s fashionable for some financial journalists who believe in efficient markets and indexing to diss Cramer but I am not in that crowd. In fact, Cramer recommends that newcomers to investing put the first US$10,000 into an S&P500 index fund or ETF.

However, for seasoned investors and even retirees, Cramer suggests putting half a portfolio in index funds and the other half in individual stocks. Where we part company is his recommendation that the bucket of stocks be restricted to just five names, which would mean 10% in each. For my money, that’s way too concentrated and risky, even though he often brags about how he is often accosted by Nvidia Millionaires who tell him they bought that stock as soon as he announced on air that he had renamed his dog Nvidia.

How NOT to invest

Amazon.ca

Finally, regulars to this site may already have read Michael Wiener’s review of Barry Ritholtz’s How NOT to invest, which appeared here in this blog a few weeks after appearing on his Michael James on Money blog.

To be sure, those who are fond of disparaging Jim Cramer might quip that should have been the title of his own book, seeing as there are actually ETFs out there that try to profit by shorting Cramer’s picks. As of this writing, my copy has arrived but I have not yet finished reading it, as it’s a bit longer than the other two.

But based on the book blurbs and Michael’s review, I have no doubt it will be worth reading, whether for younger investors or seasoned ones and/or retirees.

Finally, while I only just received my review copy, I note that David Chilton is publishing a new edition of his classic financial novel, The Wealthy Barber, which any young person just starting to invest should acquire.  I look forward to revisiting it.

 

 

 

Adding DayMAX™ ETFs to Enhance Income and Diversification (HDIV/HYLD)

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Image courtesy Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog: originally posted by Hamilton ETFs on Sept. 30, 2025)   

The Hamilton Enhanced Canadian Covered Call ETF (HDIV) and the Hamilton Enhanced U.S. Covered Call ETF (HYLD) portfolios have recently been modified slightly to introduce new positions in the DayMAX™ ETFs.

Over the years, portfolio changes within HDIV and HYLD have been made to meet their objective of providing attractive monthly income, while also considering improved diversification and other expected benefits for unitholders. In January 2024, HDIV and HYLD reached an important milestone with the full internalization of their holdings. This change removed all third-party ETFs, brought the top-level management fee of HDIV and HYLD down to 0% (subject to the fees of the underlying portfolio ETFs), and supported increases to monthly distributions.

Following the recent launch of the DayMAX™ ETFs, Canada’s first ETFs using zero-day-to-expiry (0DTE) options, a decision was made to introduce them to HDIV and HYLD, to help deliver higher yields and broader diversification.

DayMAX™ ETFs at a Glance

DayMAX™ ETFs are Canada’s first suite of ETFs to apply daily option strategies. By combining 0DTE options with modest 25% leverage, they aim to deliver higher and more frequent tax-efficient income. The lineup includes:

For a full overview, see DayMAX™ ETFs: Seize the Day.

Key Changes to HDIV and HYLD

The portfolio changes involved modestly reducing HDIV and HYLD’s exposure to select YIELD MAXIMIZER™ ETFs and adding positions in DayMAX™ ETFs, specifically CDAY, SDAY, and QDAY.

Both fund families are designed to generate high tax-efficient income, but they differ in how it is achieved. YIELD MAXIMIZER™ ETFs use longer-duration covered calls, while DayMAX™ ETFs employ Zero-Day-to-Expiration (0DTE) options, contracts that expire the same day they are written. This structure allows DayMAX™ ETFs to write options approximately 250 times per year, compared to 12 with traditional monthly contracts, creating more frequent opportunities to generate option premium income. By combining the longer-duration covered calls of YIELD MAXIMIZER™ ETFs with the daily options strategies of DayMAX™ ETFs, HDIV and HYLD are now diversified across time horizons and income streams, monetizing both monthly and daily volatility.

For the full list of updated holdings, please visit the fund pages: HDIV holdings and HYLD holdings.

Expected Benefits of Adding DayMAX™ ETFs to HDIV and HYLD

  1. Higher Yields: The introduction of DayMAX™ positions increases the internal portfolio yield of both HDIV and HYLD, supporting their primary objective of providing attractive monthly income.
  2. Increased Diversification: By adding DayMAX™ ETFs, HDIV and HYLD expand their holdings to broader exposure, increasing portfolio breadth.
  3. Improved Alignment to their Respective Markets: The sector weights of HDIV and HYLD are now closer to those of the Canadian and U.S. markets, respectively, as approximated by the sector weights of the S&P/TSX 60 and S&P 500. Continue Reading…

The Politics of Portfolio Management

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Image courtesy Pexels/Karola G.

By John De Goey, CFP, CIM

Special to Financial Independence Hub

The interplay between politics and economics has never been starker. We have an American President who is doing more to stick his nose into the affairs of those that are supposed to be at arms length than any of his predecessors ever dreamed.

Despite this, people who offer commentary on both the economy and capital markets (they are separate things) act as though what’s going on on Capitol Hill is so unremarkable that they conspicuously fail to work any acknowledgement of the dysfunction into their commentary.

Last week, I sat in on a webinar hosted by Jeff Schulze, CFA, who is managing director, head of economic and market strategy for Clearbridge Investments. In his presentation, Schulze noted that the S&P 500 is currently trading at 23 times forward earnings and that only the late 1990s saw a higher number. He added that there has been recent downward pressure on the federal funds rate and opined that the ‘one big beautiful bill’ will offer further fiscal stimulus down the road.

In a dashboard of 12 indicator variables, only one was flashing red (recession). Four were yellow (neutral) and seven were green (expansion).  He went on to opine that corporate profits don’t look recessionary. He concluded that a near-term recession is unlikely. I’m not disputing his economic evidence:  I’m simply noticing that there was not a word about political implications or developments. That silence strikes me as conspicuously odd.

There are many smart people who look closely at all manner of economic indicators who also look the other way regarding politics. As if they are not related. Why is that? They don’t talk about what’s going on Capitol Hill at all. The topic is taboo. It’s “polarizing.” Some even allege it’s beyond the purview of their mandate. I disagree.

EMH vs Active Management

The efficient market hypothesis (EMH) posits that capital markets do an excellent job of digesting all available information (from all fields of endeavour) quickly and accurately. By synthesizing information into a consistent worldview, EMH implies that no one can reliably ‘beat the market’ through security selection or timing strategies.

The economic forecast offered by Clearbridge seemed predicated on the assumption that what’s going on in Washington is normal, but it also seemed predicated on market inefficiency since Schulze made multiple references to the need for active management. If the market is efficient, then it is already reliably taking the dysfunction in Washington into account. If, on the other hand, it is inefficient, then the vagaries of an unpredictable President stand out as being meaningful and should be noted. So if the conduct of the President is a meaningful consideration, why wasn’t it mentioned by a guy who implicitly rejects EMH? Continue Reading…