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).

Franklin Templeton likes prospects for US and global stocks in 2026

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Franklin Templeton’s Investment Outlook for 2026 and beyond was largely positive, judging by the three speakers who presented to advisors and the media at Toronto’s Ritz Carleton Hotel on Tuesday (Nov. 25). In fact, UK-based Global Investment Strategist Michael Browne declared the year now closing, 2025, to be “the Year that the Bear cried Wolf.”

Browne, who is with the Franklin Templeton Institute, released the following preliminary results of Franklin Templeton’s Global Investment Management Survey 2026, shown below:

Browne expects three Fed rate cuts next year and foresees U.S. equities as measured by the S&P500 to end as high as 7400 by the end of 2026.

Like other Templeton executives, Browne expects to see rises in stocks outside the United States. This year, the story has been about growth in the U.S. market and Value in the rest of the world, he said. But even though there are no “Magnificent 7” stocks in Europe or the Emerging Markets — the Mag 7 and their innovation mindset seem unique to the U.S. — he expects a widening and broadening of global markets, with “opportunities in all asset classes.” He expects earnings growth of 5 to 10%, somewhat below the 13.5% Factset consensus.

Corporate margins keep rising, housing markets are weak, and the High-Yield Default Rate is near historically low levels, Browne said, with slides illustrating each point: “Stress indicators do not
point to a severe default cycle in the near term.”

However, Tariff revenue for the U.S. is “unfortunately” high, he said.

Even so, as the chart below demonstrates, real GDP (Gross Domestic Product) is forecast to rise over 2026 and inflation is expected to be flat to down next year.


Meanwhile, there is more than US$7 trillion in cash still sitting on the sidelines and capex growth for the big hyperscalers is expected to remain strong, Browne said. They will spend US$3 trillion by the end of the decade and may generate significant returns for the four hyperscalers investing from Cash: Meta, Microsoft, Amazon and Google.

How to spot a Bubble … and a Crash

Browne provided past examples of historic bubbles, ranging from Dutch Tulipmania of 1637 to the American railway mania of the early 1850s, which crashed in 1873, and severe stock market declines in 1907, 1929, 1987, 2001 and 2008.

Bubbles usually end after 7 developments: Debt, Rate rises, a “First Failure,” Confidence fails Reverse Velocity, Margin Calls, Forced or Panic Selling and finally Fraud.

Comparing the 2020s to the 1990s, one of Browne’s slides said “The dot-com bubble burst in 2000: more than five years after the release of Netscape.”

Historically, Global Equities have delivered double-digit gains following Rate cuts and have supported P/E expansions, Browne said. All markets except China are more correlated to the U.S. than in the past. In Emerging Markets, Browne likes India and China: “When the Fed cuts, Emerging Markets fly.”

The last scheduled speaker was Jeff Schulze, CFA, Managing Director and Head of Economic and Market Strategy for ClearBridge Investments, who reassured attendees they don’t need to fear the All-Time Highs the U.S. has been experiencing throughout much of 2025:

Schulze says that with possible Tariff Refunds, “we think the economy next year will outperform consensus expectations … We’re buyers of Dips.” While valuations are “full” right now, with the Fed cutting we don’t see multiples going down  … for the first time in a long time, diversification will be more additive as we see a broadening out.” The previous laggards will become leaders, including small- and mid- caps and the S&P493 (all but the Mag 7).

One slide on the Tariffs said this: “The Supreme Court may decide that the administration’s IEEPA tariffs need to be refunded, which would be a windfall to corporate America next year. Secretary of the Treasury Scott Bessent has noted that approximately half of the incremental tariff revenue, which is on pace to near $200 billion by year-end, has come from IEEPA tariffs.”

Continue Reading…

Retired Money: Experts opine on various tweaks to Bengen’s famous 4% Rule

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William Bengen, creator of the famed “4% Rule.”

My latest MoneySense Retired Money column is titled The 4% rule, revisited: A more flexible approach to retirement income. Click on the hyperlink for full column.

It goes into more detail on William Bengen’s updated book about the 4% Rule, which was one of three recently published financial books we reviewed in the last Retired Money column.

For that column I had originally planned to focus exclusively on that book, A Richer Retirement, Supercharging the 4% Rule to Spend More and Enjoy More. However, I decided to review two other books at the same time; meanwhile I ended up on a related project on my own site, which involved asking more than a dozen financial advisors on both sides of the border what they think of the 4% Rule and the tweaks Bengen covers in his follow-up book. You can see all responses in this blog that appeared earlier this month on Findependence Hub, but at over 5,000 words  it was a tad long for the space normally assigned to the Retired Money column.

 For the MoneySense version, I focused on the most insightful comments and added a few thoughts of my own. The survey was conducted via Linked In and Featured.com, which has long supplied good content for my site.

Broader diversification spawns a 4.7% Rule

Trusts and estates expert Andrew Izrailo, Senior Corporate and Fiduciary Manager for Astra Trust, says Bengen’s original idea was to provide a sustainable income stream for at least 30 years without depleting your savings. In his new book, Bengen “revisits this concept using updated data and broader asset allocations,” summarizes Izrailo, “He now argues the safe withdrawal rate could rise to around 4.7%, supported by stronger market performance and portfolio diversification beyond the original stock-bond mix.”

For American investors, Izrailo still begins with 4% as a baseline because “it remains simple and conservative. Then I evaluate three major factors before adjusting: market volatility, portfolio performance, and expected longevity.” For Canadian retirees, “I tend to start lower, around 3.5%, due to differences in taxation, mandatory RRIF withdrawal rules, and the impact of currency and inflation differences compared to U.S. portfolios.”

Toronto-based wealth advisor Matthew Ardrey, of TriDelta Financial was not part of the original Featured roundup but agreed with the general view that while a helpful starting point, the 4 Rule is only a guideline. “When I meet with a client, I don’t rely on the 4% rule at all,” said Ardrey, who has worked with clients for more than 25 years “I’ve learned that rules of thumb — like the 4% rule — pale in comparison to the clarity and confidence that come from a well-crafted” and personalized financial plan.  Such a plan should reflect each person’s unique circumstances, priorities, and goals, allowing them to build the right decumulation strategy for their situation.

No one size fits all

Almost all the experts caution against taking a one-size-fits-all approach to the 4% Rule or its variants. Over 20 years with her own clients financial advisor and educator Winnie Sun, Executive Producer of ModernMom, starts with 4% as the baseline, then adjusts it based on actual client spending patterns and market conditions … The biggest mistake I see isn’t about the percentage itself: it’s that people forget about tax efficiency in withdrawal sequencing.”

Oakville, Ont.-based insurance broker James Inwood says the 4% rule is “a decent guideline, but it’s not some magic number you can set and forget. I’ve watched people get into trouble because they didn’t account for medical bills, which are a real wild card here in Canada. I always tell people to build in a cash buffer and check in on that withdrawal rate every couple of years instead of just locking it in permanently.” Continue Reading…

HCAL turns 5: Enhanced Exposure to Canadian Banks

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Image courtesy of Hamilton ETFs

By Hamilton ETFs

(Sponsor Blog)

Since launching in October 2020, the Hamilton Enhanced Canadian Bank ETF (HCAL) has provided investors with a simple way to get more from one of Canada’s most reliable sectors, the Big-6 banks. By adding modest 25% leverage to an equal-weight portfolio of Canadian bank stocks, HCAL has delivered strong results over the past five years, offering investors enhanced income and growth potential from a sector known for its stability and consistent dividends.

Five years of Enhanced Growth & Income

HCAL’s structure is straightforward: for every $100 invested, HCAL borrows ~$25 at institutional borrowing rates and invests it back into the same six banks, providing roughly 1.25x exposure to the sector. This approach has supported higher monthly income and higher long-term returns since HCAL’s inception when compared to a non-levered Canadian bank portfolio, specifically the Solactive Equal Weight Canada Banks Index (“Canadian Bank Index.”)

HCAL vs. Canadian Bank Index — Growth of $100K [1]

Long-Term benefits of Modest Leverage

Over time, the power of compounding is a key driver of returns, and modest leverage can amplify that effect. In HCAL’s case, the 25% leverage applied to Canada’s largest banks has contributed to meaningfully higher long-term returns. The leverage is realized at institutional borrowing rates, typically lower than those available to individual investors, and HCAL can be held in registered accounts, providing access to the benefits of low-cost leverage in accounts where margin isn’t normally available. Continue Reading…

Fritz Gilbert: My biggest Surprise in Retirement

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TheRetirementManifesto

By Fritz Gilbert, TheRetirementManifesto

Special to Financial Independence Hub

I’m fortunate to have saved aggressively in my company’s 401(k) since I started my career at Age 22.

It’s what allowed me to retire at Age 55.

And yet, like many folks my age, those savings were predominantly in “Before-Tax” accounts in my company’s 401(k) plan.  Sure, I got the tax break while working, and I felt like a genius. Besides, we didn’t have the option of investing in a Roth, so the decision was easy.

I knew those taxes would come due when I “got old,” but I’d worry about that later.

Later has arrived. 

As I shared in my Retirement Drawdown Strategy, when I retired, we had 56% of our retirement savings in Before-Tax accounts, as shown below:

The Golden Age of Roth Conversions

Now that I’m retired, I’ve been laser-focused on doing annual Roth conversions to reduce that Before-Tax balance. As I wrote in The Golden Age of Roth Conversions, it makes sense to do Roth conversions in your early retirement years (be careful if you’re getting ACA subsidies, and ugly Aunt IRMAA can be a problem if you’re 63 or older).  I won’t rehash the arguments for why; you can read about it in the linked article.

My goal is to manage the taxes on my terms, rather than being “forced” into whatever the Required Minimum Distributions rule requires in my 70s.  I’d also like to get as much of that money converted into a Roth for the benefit of my wife, in the event I die early (she’d pay higher taxes as a single tax filer vs. our current “Married Filing Jointly” status). For now, I’m playing the tax bracket “stuffing” game (topping off my selected tax bracket with Roth conversions) and trying to be smart about minimizing the taxes I pay throughout my retirement.

The Bad News: The Roth conversions are not making as much of a difference as I had hoped.

My Biggest Surprise in Retirement:  It’s Hard to reduce your Pre-Tax Account Balance!

We’ve all heard about the power of compounding and how valuable it is in personal finance.  If you want a refresher, check out my post, “The Most Powerful Force in the Universe.” 

What I didn’t think about, and only realized after I retired and started doing Roth conversions, is the fact that compounding makes it difficult to reduce your pre-tax account balance.

Despite doing aggressive Roth conversions, our pre-tax balance isn’t coming down like I expected!

In fairness, part of that “problem” is driven by above-average returns since my retirement in 2018.  First world problem, I know.  But it’s still been a big surprise.

Let’s do a hypothetical example to demonstrate the point. 

To make the math easy, let’s say you have $1M in your pre-tax account, and your first full year of retirement is 2019.  If you had that entire $1M in stocks, here’s what would have happened without doing any Roth conversions (S&P 500 returns from ycharts, including dividends):

In this example, a $1M portfolio would have grown to $2.6M in 6 short years.  That’s the power of compounding. Amazing!

Let’s modify the above example, and say you’re doing an annual Roth conversion of $50k.

How much impact would Roth conversions make? Not much…

Despite doing annual Roth conversions of $50k, the pre-tax value has still doubled, to $2.15 M!

A More Realistic Scenario – $500k 

Ok, I hear you.  No one has $1M in their pre-tax account.  I got your attention, though, right?

Fair enough, let’s assume the starting balance is $500k (which compares nicely with the average 401(k) balance of $573k for folks in their 60’s):

The problem remains.

With a $500k starting balance and $50k annual Roth conversions, the account has still grown by $357k (to $857k), or 71%.

Bottom Line:  It’s difficult to reduce your pre-tax account balance due to the power of compound interest.

In fact, the only way to reduce your pre-tax account is to do annual Roth conversions in excess of the annual return generated by the pre-tax portion of your portfolio.  Sticking with the $500k example, an average annual Roth conversion of $89k would have been required to maintain the pre-tax balance at $500k, as shown below:

(Note:  you could argue about my $0 Roth conversion in a down year, but it’s just an example.  Quit whining and do your own math – wink.)

What About A 60/40 Portfolio @ $500k?

No one has a 100% stock portfolio in their pre-tax accounts, right?  Let’s see what things look like if our retiree had a 60/40 stock/bond allocation in their pre-tax accounts.  We’ll use the S&P 500 for stocks, and Vanguard’s Total Bond Market Index Fund (VBMFX) for bonds, we can find their annual returns here.

Without any Roth conversions, the account would have grown from $500k to $990k, as shown below:

Add in our $50k/year of Roth conversions, and the ending balance is $609k, an increase of 22%:

Bottom Line:  Even with a 40% bond allocation, it’s difficult to reduce your pre-tax balance via Roth conversions.

We’ve done aggressive Roth conversions every year, yet I continue to be frustrated by how little we’ve moved the needle.  In full transparency, we’ve reduced it, but only by 15% of its starting value.  That’s far less than I would have expected, given the size of the conversions we’ve done. Continue Reading…

Book Review: The Wealthy Barber (2025 fully revised edition)

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Special to Financial Independence Hub

 

Many aspects of personal finance have changed in the 36 years since The Wealthy Barber classic book first appeared.

To update it, author David Chilton had to not only do an extensive rewrite, but he had to come up with new advice.  He did a great job of making The Wealthy Barber 2025 update fully relevant to Canadians today.

Chilton takes important topics that are usually dry and hard to understand and brings them alive in an entertaining story format. But this book is much more than just a fun take on personal finances; the advice is excellent.  Chilton gives insights you won’t find elsewhere.  The book is like a course on personal finance requiring no previous knowledge, and even discussions of insurance and wills are funny and compelling enough to be page-turners.

The bulk of the book is a set of financial lessons mainly aimed at Canadians between 20 and 45.  The early chapters introduce the characters, make it clear that the lessons require no prior expertise, and that the lessons really will help with seemingly impossible problems like the high cost of housing.  These early chapters do a good job of convincing readers that they really can improve their financial lives.

Between the jokes and identifying with the characters, readers will find themselves enjoying lessons that would normally be boring.  Chilton uses dialogue to emphasize important points, to voice objections to his advice, and to clarify common misunderstandings.

I often find things I disagree with in books, but that really isn’t the case here.  Chilton had to make some tough decisions about which details to include and which to leave out, and most readers could come up with a topic or nuance they wish was covered.  One topic I think could have made the cut is that some investors think they don’t pay investment fees.  I’ve heard people recommend their advisor because he doesn’t charge any fees.  All advisors get paid out of their clients’ money in one way or another, no matter what anyone says to the contrary.

I won’t try to summarize the lessons because the result wouldn’t be useful.  Without Chilton’s explanations of the whys behind his advice, too much would be lost.  Instead, I’ll comment on several areas.

Artificial Intelligence (AI)

Chilton didn’t really discuss AI except to make a good joke that I won’t spoil.  He was asked the question “What happens if AI takes away most of our jobs and the economic system collapses?”  There are some bad things AI could do such as cyber war, monitoring all of our actions, preventing us from doing “unapproved” things, and limiting our movements.  However, I don’t see negatives in AI doing jobs for us.  If AI together with machines will eventually grow our food, make clothes and other goods, and build houses, why will we need money?  Until we get to that point, we’ll still need money and people to do jobs.

Pay yourself first

One of the book’s characters says “Save first, spend the rest, good.  Spend first, save the rest, bad.”  This core piece of advice survived from the original book, but there are some caveats now.  For example, some diligent savers “offset the growing value of their assets on their net-worth statements with matching, or near matching, debts on the liability side.  From excessive car loans to large credit-card balances to massive lines of credit, many [live] beyond their means to a scary level.”

Watching other people, I’m convinced that it’s important to set aside savings from your pay first and then spend later, but my wife and I are weirdos who never needed to do this.  Our natural tendency to spend little usually left plenty of savings at the end of each pay period.  We’re the type who had to learn to spend more as our income and savings grew.

Index investing

I thought the passage explaining why we should just buy all stocks instead of trying to pick the best ones was well done.  It included “No, we can’t just buy the winners.  No, there is no way for us to consistently pick them ahead of time.  No, the people we hire to do it for us aren’t any good at it either.”

Like most experts who are trying to help their audiences, Chilton is a fan of all-in-one asset allocation ETFs.  “Not only does the fund buy the individual stocks for you, it does so across the world,” and “These funds also do all the rebalancing for you.”  These funds handle everything so there is no need to monitor your progress.  In fact, to avoid making emotional decisions, you’re best to “pay almost no attention” to the daily or weekly changes in the value of your savings.

“One of the most important factors, if not the most important, as you choose what type of investments to make, is the associated time frame.  How long are you able to set the money aside?  How long until you need it?”  Stocks in the form of all-in-one ETFs are for the long term.  For something like a house down payment, “unless I thought my purchase was at least five to seven years away,” I wouldn’t invest it aggressively.

Starting early

I’m a fan of advising people to start the saving habit early.  Chilton gives an example to motivate this advice where saving $1000 per month for 8 years is more valuable than saving $1000 per month for the subsequent 24 years.  Continue Reading…