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Hitting the weights can be great for fitness. A barbell approach is also a potentially profitable regimen to pump up investment portfolios, especially with the chance of volatility ahead.
This approach to equity market allocation blends higher-risk growth stock exposure (such as big tech) on one end, with more defensive equities (such as utilities) on the other. In the middle is a diversified core allocation offering long-term stability, says James Learmonth, co-chief investment officer with Harvest ETFs in Oakville, Ont.
“If you can envision a barbell, you’ve got weights on both sides to keep you balanced,” he says.
The barbell strategy bears closer examination by investors in light of continued equity growth, especially among big tech companies, whose profits are driven in large part by artificial intelligence. Overvaluation risks are rising with AI companies, along with persistent higher-than-desired inflation and increasingly unstable geopolitical conditions.
“While we’re still in a very bullish environment for stocks for 2026, you cannot be naive to the many risks,” says Mr. Learmonth.
By addressing these divergent outcomes, a barbell strategy may be more attractive than holding 60 per cent equities and 40 per cent bonds. That traditional balanced model is less likely to protect portfolios, as stocks and bonds are increasingly correlated.
“You could get into a situation where equity markets sell off aggressively along with bond markets,” Mr. Learmonth says. “So, having that barbell of defence and growth makes sense.”
This strategy demands care and innovation amid the new normal of higher volatility, concentrated equity market risk, inflation and lower yields. A covered-call overlay offers a middle-ground approach. Investors still participate in some equity market growth, but they also receive steady income from the options premiums.
“Even in down markets, writing covered-call options still provide strong monthly cash flows,” says Mr. Learmonth, who speaks from experience as a portfolio manager for Harvest ETFs’ extensive line-up of covered-call exchange-traded funds (ETFs).
“We have one of the most experienced covered-call management teams on the Street, with multiple funds’ track records exceeding 10 years.”
Mr. Learmonth notes that the ETFs’ yields are often double that of dividends from the underlying assets, if not higher, and are paid as monthly distributions. Distribution reinvestment plans are also available.
Harvest ETFs has a wide range of products to build the strategy. Among them is Harvest Tech Achievers Growth and Income ETF HTA-T, which includes 20 large-cap technology stocks such as Alphabet Inc. GOOG-Q, Microsoft Corp. MSFT-Q and Nvidia Corp. NVDA-Q. This fund would be a good fit for the growth side of the barbell approach, he says.
On the defensive barbell end, Harvest Equal Weight Global Utilities Income ETF HUTL-T provides exposure to 30 leading utilities companies, including BCE Inc. BCE-T and TC Energy Corp. TRP-T.
Both funds involve covered calls on up to 33 per cent of holdings, generating tax-efficient premiums.
For the “bar” between the growth and defensive “bells,” investors can look to funds such as Harvest Brand Leaders Plus Income ETF HBF-T. It holds 20 leading stocks in their respective sectors such as Walmart Inc. WMT-Q, Morgan Stanley MS-N and professional services provider Accenture PLC ACN-N.
“HBF offers that core exposure, diversified across many sectors that includes recognizable names with steady performance in multiple economic cycles,” Mr. Learmonth adds.
Investors can even find an all-in-one barbell solution with the covered-call strategy with Harvest Diversified Monthly Income ETF HDIF-T.
“In one fund, you get exposure to multiple Harvest ETFs,” he says, noting this product also uses 25 per cent leverage to boost upside and income.
From currency-hedged to U.S. dollar-traded versions to higher return/risk ETFs such as Harvest Bitcoin Leaders Enhanced Income ETF HBTE-NE, Mr. Learmonth says investors have many ways to construct a barbell strategy to slip into the middle of their portfolios.
Pairing defensive income‑generating ETFs with growth‑oriented income-producing ETFs – all while maintaining balance and predictability – can be a winning combination.
“Given the potential volatility ahead, this nuanced approach offers an attractive blend of income, growth and defence that will intrigue many investors,” he says.
Advertising feature produced by Globe Content Studio with Harvest ETFs. The Globe’s editorial department was not involved.