XEQT and Your Human Capital: Why Your Career Is Your Biggest Asset (And What That Means for Your Portfolio)

I had a conversation a few years ago that completely changed the way I think about my portfolio.

I was at a friend’s birthday dinner, seated next to a woman named Laura who worked as an actuary at one of the big insurance companies in Toronto. We got to talking about investing – as you do when you are the kind of person who runs a blog called Just Buy XEQT – and I mentioned that I was 100% in equities.

She didn’t flinch. She just nodded and said: “That makes sense. You’re young, you have stable income, and your human capital is enormous. Your real portfolio is way more conservative than you think.”

I must have looked confused, because she pulled out a napkin and drew two circles. One was small – she labelled it “your XEQT portfolio.” The other was massive – she labelled it “your future paycheques.”

“This big circle,” she said, tapping the napkin, “is basically a bond. It pays you reliably every two weeks for the next 25 years. When you combine these two circles, your overall allocation is maybe 15% equities, 85% bond-like income. You’re not aggressive at all. You just think you are because you’re only looking at the small circle.”

That napkin changed everything for me. And if you hold XEQT and have ever felt nervous about being 100% in stocks, this post might change everything for you too.

1. What Is Human Capital (And Why Should Investors Care)?

Human capital is a fancy term for something simple: the total value of all the money you will earn over the rest of your working life.

If you are 30 years old, earn $65,000 per year, and plan to work until 60, your human capital is roughly $65,000 multiplied by 30 years, or about $1.95 million in future earnings. That is before any raises, promotions, or career changes.

Even adjusted for inflation and the time value of money, your human capital at 30 is likely worth somewhere between $1 million and $1.5 million in today’s dollars. That is almost certainly more than your current investment portfolio.

Here is the thing most investors miss: your human capital is an asset, just like your XEQT holdings. It sits on your personal balance sheet, right alongside your TFSA, your RRSP, your savings account, and anything else you own. And it behaves much more like a bond than like a stock.

Why? Because for most Canadians, employment income is relatively stable and predictable. You know roughly what you are going to earn this year, next year, and the year after. It does not swing 30% based on what happened in Asian markets overnight. It arrives on schedule, rain or shine, bull market or bear market. That is bond-like behaviour.

When financial advisors ask you what percentage of your portfolio should be in stocks versus bonds, they are looking at the wrong thing. They are only looking at your investment portfolio. They should be looking at your total wealth – which includes your human capital.

2. The “Total Wealth” Framework That Changes Everything

Here is where the math gets interesting. Let me walk through a concrete example.

Meet Sarah, age 28:

Sarah’s investment portfolio is 100% XEQT. If you only look at her financial assets, she appears aggressively positioned – all equities, zero bonds, zero fixed income.

But when you include her human capital, the picture flips entirely:

Sarah’s real allocation is roughly 2% equities and 97% bonds. She is one of the most conservatively positioned investors in Canada and she does not even know it.

This is the insight that Laura the actuary drew on that napkin. When your human capital dwarfs your portfolio – which it does for almost every working Canadian under 45 – being 100% in equities with your financial assets is not aggressive. It is barely moving the needle on your true risk exposure.

This is exactly why XEQT makes so much sense for younger investors. The 100% equity allocation is not reckless. It is the rational response to the fact that most of your wealth is locked up in future paycheques that behave like bonds.

3. How Human Capital Changes as You Age

Here is the critical part: human capital is a depleting asset. Every year you work, you convert a bit of your human capital into financial capital. Your future earnings shrink while your portfolio (hopefully) grows.

Look at what happens over time. At 25, being 100% in XEQT means your total wealth is 99% bonds (human capital) and 1% equities. At 55, that same 100% equity portfolio now represents 71% of your total wealth. At 65, when your human capital hits zero, your portfolio IS your total wealth – and suddenly 100% equities really is 100% equities.

This is the actual, mathematically grounded reason why most financial guidance says to reduce equity exposure as you age. It is not arbitrary. It is not because stocks become more dangerous on your 50th birthday. It is because the bond-like buffer of your human capital has been spent, and your portfolio needs to compensate by holding some actual bonds.

For XEQT investors, this has a practical implication. If you are in your 20s, 30s, or even early 40s with decades of earning ahead, XEQT’s 100% equity approach is almost certainly appropriate for your total wealth picture. The volatility might feel scary, but in the context of your total balance sheet, it is a small ripple on a very large, very stable pond.

As you approach retirement and your human capital winds down, that is when it might make sense to consider adding bonds – perhaps moving to XGRO (80/20) or XBAL (60/40) to shift your total wealth allocation.

4. Not All Human Capital Is Created Equal

Here is where this framework gets more nuanced, and why the cookie-cutter advice of “just be 100% stocks when you’re young” needs some qualification.

Your human capital is only bond-like if your income is relatively stable and uncorrelated with the stock market. For many Canadians, this is true. If you are a teacher, a nurse, a government employee, an accountant, or anyone with a stable salaried position, your income stream is about as bond-like as it gets. It shows up predictably, it does not fluctuate with market conditions, and it is backed by institutional employment.

But some careers are different:

High human capital stability (bond-like):

• Government employees and public servants
• Healthcare workers
• Tenured educators
• Unionized trades workers
• Salaried professionals in stable industries

Lower human capital stability (more stock-like):

• Commissioned salespeople
• Startup employees with equity-heavy compensation
• Oil and gas workers in commodity-sensitive roles
• Real estate agents
• Business owners whose revenue tracks economic cycles

If your income rises and falls with the economy – or worse, with the stock market itself – then your human capital is less bond-like and more equity-like. In that case, having your financial portfolio also in 100% equities means your total wealth is more aggressive than it appears.

The practical takeaway: If your career income is closely tied to economic cycles, you might want to hold a slightly more conservative financial portfolio to offset that risk. For instance, instead of 100% XEQT, you might consider a 80/20 split like XGRO to add some stability.

But for the majority of salaried Canadians with reasonably predictable income? XEQT’s all-equity approach remains the right call for most of your working life.

5. Why This Matters When Markets Drop 30%

The human capital framework is not just an academic exercise. It is a powerful psychological tool for surviving market downturns.

Let me paint the scenario. You are 32 years old with a $80,000 salary and $50,000 in XEQT. Markets crash 30%. Your XEQT portfolio drops to $35,000. You have lost $15,000 on paper, and every financial headline is screaming that the end is near.

Here is how most people think about it: “I just lost 30% of my investments. This is a disaster.”

Here is how you should think about it with the human capital framework:

Your total wealth declined by 1.3%. Not 30%. One point three percent.

Your human capital did not crash. Your employer did not cut your salary by 30% because the TSX dropped. Your future paycheques are still coming. The vast majority of your real wealth is completely untouched.

This reframing is not a mind trick. It is mathematically accurate. And it is the reason experienced investors can watch their portfolios drop without panicking – they intuitively understand that their investment portfolio is a small piece of a much larger picture.

The next time markets drop and you feel the urge to sell your XEQT, pull up this framework. Calculate your human capital. Look at the total picture. The crash that feels like a catastrophe on your Wealthsimple screen is almost certainly a rounding error on your total balance sheet.

6. Human Capital and Account Priority

The human capital framework also helps answer one of the most common Canadian investing questions: which account should I invest in first?

When your human capital is high (you are young, with decades of earning ahead), your priority should be maximizing tax-free growth over the longest possible horizon. That means:

1. TFSA first – Tax-free growth for decades is incredibly valuable when compounding has the most time to work.
2. FHSA if eligible – Tax deduction on the way in, tax-free on the way out. Unbeatable if you are a first-time home buyer.
3. RRSP next – The tax deduction is most valuable when your income is high. Early in your career, your income (and therefore your tax rate) may be lower, making RRSP contributions less impactful.
4. Non-registered last – Only after registered accounts are full.

As you age and your human capital declines, your account strategy shifts. In your peak earning years (40s-50s), the RRSP becomes more valuable because you are in a higher tax bracket and can take advantage of larger deductions. When you retire and your human capital hits zero, the focus shifts entirely to tax-efficient withdrawals.

The thread connecting all of these decisions? Your human capital. It is the silent variable that determines which accounts, which contribution levels, and which asset allocations make sense at each stage of your life.

7. The “Career Risk” Nobody Talks About

There is a dark side to human capital that deserves honest discussion: it can be destroyed.

Job loss. Disability. Industry disruption. Health crises. All of these can wipe out a significant portion of your human capital overnight. A 40-year-old who loses their career to an industry shift does not just lose their current salary – they lose decades of future earnings.

This is why some aspects of financial planning that seem unrelated to investing are actually deeply connected:

• Emergency fund. Three to six months of expenses in cash protects your human capital from short-term disruptions. If you lose your job, you do not have to sell XEQT at the bottom to pay rent.
• Disability insurance. This is literally human capital insurance. It replaces your income if you cannot work. For most working Canadians, disability insurance is more important than life insurance.
• Skills development. Investing in your career – certifications, education, networking – increases your human capital directly. Spending $5,000 on a course that increases your salary by $10,000 per year is a better “investment” than anything on the stock market.
• Career diversification. Having skills that transfer across industries makes your human capital more resilient. A software developer who can also manage projects has more stable human capital than one who only knows a single niche technology.

The point is this: your XEQT portfolio is one part of a much larger system. Protecting and growing your human capital – through career development, insurance, and emergency savings – is at least as important as your investment strategy, especially in your 20s and 30s when human capital is the dominant asset on your balance sheet.

8. What This Means for Your XEQT Investment Plan

Let me tie all of this together with practical recommendations based on where you are in the human capital life cycle.

If you are 20-35 (human capital dominant):

Your future earnings dwarf your portfolio. This is the time to be maximally aggressive with your financial assets.

• XEQT at 100% equity is absolutely appropriate. Your total wealth is overwhelmingly bond-like because of your human capital. You need the equity exposure to balance it out.
• Focus on increasing your savings rate more than optimizing your portfolio. Moving from saving 10% to 15% of your income will impact your net worth far more than any asset allocation tweak.
• Invest in your career. A promotion or job change that increases your salary by $15,000 per year is worth more than decades of portfolio optimization at your current contribution level.
• Do not panic during market downturns. A 30% portfolio drop when your portfolio is 3% of total wealth is a 1% total wealth decline. Keep buying.

If you are 35-50 (transition phase):

Your human capital and financial capital are approaching equilibrium. This is where the framework starts to shift.

• XEQT is still likely appropriate for most of this period, especially if you have stable employment. Your human capital is declining, but it is still substantial.
• Maximize registered account contributions. Your income is likely at or near its peak. RRSP deductions are most valuable now.
• Consider your career stability. If your industry is facing disruption or your income has become more variable, this might be the time to consider shifting a portion to XGRO for some bond exposure.
• Ensure your insurance is adequate. Disability insurance becomes critical in this phase because losing your human capital now has an enormous financial impact.

If you are 50-65 (human capital declining):

Your financial portfolio is becoming the dominant asset. The bond-like cushion of your human capital is thinning.

• Consider introducing some fixed income. This is the period where moving from XEQT to XGRO or XBAL begins to make mathematical sense.
• The transition should be gradual, not a sudden switch. Moving from 100% equity to 80/20 at 55, then 60/40 at 60, mirrors the natural decline in your human capital.
• Start planning for retirement withdrawals. Your income stream from human capital will soon be replaced by portfolio withdrawals and government benefits.

If you are 65+ (retired):

Your human capital is at or near zero. Your financial portfolio IS your wealth.

• Your asset allocation now directly reflects your risk tolerance. There is no human capital cushion. A 30% drop in your portfolio really is a 30% drop in your wealth.
• Most retirees benefit from some fixed income, though the exact split depends on your pension, CPP/OAS, and spending needs.
• Even in retirement, maintaining some equity exposure through XEQT or a balanced fund protects against the silent risk of inflation eroding your purchasing power over a 25-30 year retirement.

9. The Single Best Investment Most Canadians Overlook

If the human capital framework teaches us one thing, it is this: the best investment most working Canadians can make is in themselves.

I know that sounds like a motivational poster. But the math is clear. If you are 30 years old earning $65,000, and you can invest in a skill, certification, or career move that bumps your salary to $80,000, you have just added roughly $450,000 to your human capital (the present value of $15,000 per year for 30 years). No portfolio return can match that on a $50,000 investment account.

This does not mean you should not invest in XEQT. You absolutely should. The point is that career investment and XEQT investment are not competitors – they are complements. Your career generates the income that funds your XEQT purchases, and your XEQT portfolio is the vehicle that converts that earned income into long-term wealth.

The optimal strategy is both: invest in your career to maximize human capital, and invest in XEQT to convert that human capital into financial capital as efficiently as possible.

10. The Bottom Line

Here is what I want you to take away from this post:

Your investment portfolio is not your whole financial picture. It is one piece of a total wealth framework that includes your human capital – the present value of all the money you will earn for the rest of your working life.

When you include human capital, most working Canadians have a total wealth allocation that is overwhelmingly conservative, even if their investment portfolio is 100% XEQT. A 30-year-old with $40,000 in XEQT and $1.2 million in human capital has a real allocation of roughly 3% equities.

This framework explains why XEQT’s all-equity approach is appropriate for most working Canadians. It explains why market crashes feel scarier than they actually are. It explains why your career is the most valuable asset on your balance sheet. And it explains why protecting your human capital through emergency funds, insurance, and career development is just as important as your investment strategy.

The next time someone tells you that 100% equities is too aggressive, draw them two circles on a napkin. The small one is your portfolio. The big one is your career. Then ask them: “Still think I’m being aggressive?”

I know which circle Laura would point to.