XEQT Holds 9,000 Stocks. So Why Do People Keep Telling You to Pick Your Own?
June 19, 2026
Someone in your life, probably a colleague or a brother-in-law, will tell you their stock picks are beating the market. They bought Shopify before the run-up. They got into a gold miner at the right time. And now they want to talk about it. What they won’t mention is the three positions that went sideways, the trading fees they paid to get in and out, and the fact that they’re comparing their best ideas to the index rather than their full portfolio. XEQT, meanwhile, quietly owns roughly 9,000 companies across North America, Europe, Asia, and emerging markets. It rebalances itself, costs 0.20% per year, and requires exactly zero of your attention. The question worth asking isn’t whether stock-picking can work. A small number of people do it well. The question is whether it makes sense for you, given what the math actually says about the odds.
The 9,000-Stock Number Is Not the Point
When people talk about XEQT’s diversification, they usually lead with the headline: approximately 9,000 individual stocks. It’s a big number and it sounds impressive. But raw stock count is actually a poor way to measure diversification, and understanding why changes how you think about what XEQT really gives you.
VEQT, Vanguard’s competing all-equity ETF, holds over 13,000 stocks. By the simplest reading of that comparison, VEQT would seem more diversified. The Canadian Portfolio Manager Blog ran the numbers more carefully, and the conclusion flips the intuition completely: despite holding roughly 3,300 fewer individual securities, XEQT is more diversified than VEQT in any meaningful sense. The reason comes down to how those holdings are weighted, not how many of them there are.
A portfolio where 90% of the value is tied to one stock has an “effective number of stocks” of just 1.23. It is barely more diversified than owning a single company, regardless of how many other names appear in the holdings list.
VEQT’s emerging markets component contains over 1,100 more stocks than the index it tracks, many of them ultra-tiny positions whose weights are so small they contribute almost nothing to performance. They inflate the headline count without adding meaningful diversification. XEQT’s structure avoids this. Its allocations are more intentional: approximately 45% US, 25% Canadian, 25% international developed, and 5% emerging markets, each held through industrial-scale underlying ETFs with genuine market representation. If you want the full picture of what sits inside the fund, our complete XEQT guide covers every layer of the structure.
Effective Number of Stocks: The Metric That Actually Matters
Statisticians and portfolio theorists use a concept called the “effective number of stocks” to measure how many holdings in a portfolio are genuinely doing independent work. The formula takes each holding’s weight, squares it, sums the results across the whole portfolio, and then takes the reciprocal. An equally weighted 100-stock portfolio has an effective number of stocks of 100. A portfolio where one stock controls 90% of the value and nine others split the remaining 10% has an effective number closer to 1.2.
According to the Canadian Portfolio Manager Blog’s analysis, XEQT’s effective number of stocks sits at approximately 198. VEQT’s is around 180. That means XEQT, with its smaller raw count, has more of its holdings meaningfully contributing to returns and risk than VEQT does with its larger list. The difference traces back to XEQT’s higher allocation to international developed markets, which tend to be more evenly weighted and therefore add more genuine diversification per holding.
Effective diversification comparison: XEQT’s effective number of stocks is approximately 198 vs. VEQT’s approximately 180, meaning XEQT delivers more genuine diversification despite holding 3,300 fewer individual names. Raw holdings count is a marketing number, not a risk metric. (Source: Canadian Portfolio Manager Blog)
This matters for the stock-picking debate because it reframes what you’re actually competing against. You’re not trying to beat a list of 9,000 names. You’re trying to beat a portfolio where roughly 198 companies are all pulling in meaningfully different directions, across every major market in the world. The breadth isn’t decorative. It’s structural protection against the single largest risk in any concentrated position: being wrong about one thing that matters too much.
The Math Problem You Didn’t Know You Were Solving
Imagine two portfolios. Portfolio A holds 10 stocks, each weighted equally at 10%. Portfolio B holds 11 stocks, but one of them makes up 90% of the total while the other 10 split the remaining 10% between them. By stock count alone, Portfolio B looks more diversified. But its effective number of stocks is just 1.23. Almost everything that happens to that portfolio happens because of one company.
This is the trap most DIY stock-pickers walk into without realizing it. You start with five positions you feel good about. One of them becomes your conviction trade. It goes up, you add to it, and before long it represents 40% or 50% of your portfolio. You’re not diversifying at that point. You’re concentrating. And concentration is exactly what XEQT is engineered to protect you against.
Research into individual investor portfolios consistently shows that average Canadians who pick their own stocks hold somewhere between five and fifteen positions. At that level of concentration, a single bad call doesn’t just hurt your returns. It can permanently impair your portfolio. A stock that drops 50% and never recovers requires a 100% gain on everything else just to get back to even. XEQT’s structure makes that scenario nearly impossible. The failure of any single company, even a large one like a major bank or a tech giant, gets absorbed across thousands of other positions. The math of concentration risk works against you the moment you start building a focused portfolio, and it keeps working against you every year you hold it.
Edge vs. Luck: The Unspoken Assumption Behind “Pick Your Own”
The idea that you should pick your own stocks rests on an assumption that almost never gets examined out loud: that you possess some kind of edge. Not just enthusiasm for a particular sector, not a gut feeling about a company, but genuine informational or analytical advantage over the professionals who spend every working hour doing nothing else.
As research on active fund management makes clear, the vast majority of investors don’t have that edge. And the ones who think they do are often confusing a bull market tailwind with personal skill. Professional analysts at major institutions, people with deep access to management teams and decades of experience in a single industry, still fail to consistently beat a broad index after fees. The source of this failure isn’t stupidity. It’s structural: markets are efficient enough that any genuinely useful information gets priced in quickly, leaving most stock pickers competing on noise rather than signal.
The essay “Why I Can’t Pick Winning Stocks, and You Can’t Either” captures this cleanly. Written by an investor who actually worked at an investment research firm, it describes being surrounded by Analyst of the Year winners who knew their coverage companies inside and out, only to conclude that reading a corporate forecast was essentially watching a chain of people guess at the unknowable future and pass those guesses up the management ladder until something presentable emerged. Stock picking requires you to know not just what a company will do, but what it will do better than the market already expects it to do. That is an extraordinarily narrow target to hit consistently.
If you don’t have edge, and the vast majority of investors don’t, then managing your own stock portfolio is a loser’s game. Buying the market via index trackers will be far less hassle and much more cost effective. (Source: “The Cost of Active Fund Management”)
The compounding cost of being average at stock-picking is severe. If your picks match the index before fees and you’re paying transaction costs in spread and commissions, you are behind by that amount every year. If your picks trail the index by even a modest margin, a figure that describes the median active fund manager over most long periods, you are compounding that shortfall across decades. The gap isn’t fixed. It grows.
What XEQT’s 0.20% MER Really Means for Your Returns
XEQT charges 0.20% per year. On a $10,000 portfolio, that’s $20. On $100,000, it’s $200. The cost to own every major market in the world, automatically rebalanced, with no advisor and no commission on Wealthsimple or Questrade, is the price of two dinners per year on a mid-sized portfolio. The full breakdown of how this compares to mutual fund fees is covered in our article on XEQT’s 0.20% MER, but the key point for the stock-picking comparison is what that 0.20% implies about the hurdle you face.
To justify picking your own stocks instead of holding XEQT, you need to beat the index by at least your total transaction costs plus the time cost of research plus any tax drag from realizing gains in non-registered accounts. For most Canadians managing their own portfolios, even where brokerage commissions are zero, the behavioural costs of stock-picking are real. Research consistently shows that individual investors tend to buy high and sell low, particularly in volatile markets. The gap between what a fund actually returns and what the average investor in that fund earns, because of poorly timed entry and exit decisions, can erode a meaningful portion of long-run returns.
VEQT, at 0.24% MER, is only four basis points more expensive than XEQT. That difference matters over 30 years but it’s not the core argument against stock-picking. The real argument is the compounding cost of underperforming the market by even a small amount each year. A persistent annual drag on a large portfolio doesn’t cost you a little money. It costs you a substantial share of your final retirement wealth, invisibly, because you were trying to be clever with a skill most investors demonstrably don’t have.
Fee compounding over 30 years: On a $250,000 portfolio growing at 7% annually, the difference between XEQT’s 0.20% MER and a 2% mutual fund MER works out to roughly $135,000 in final portfolio value. The market return is identical in both scenarios. The only variable is the fee.
Simplicity as a Strategy: Why One Ticker Compounds Better Than Twelve
There’s a version of stock-picking that sounds disciplined and reasonable. Buy six to ten quality businesses, hold them forever, collect dividends, ignore the noise. The problem isn’t the intention. The problem is execution, and the invisible costs of maintaining a concentrated portfolio over a lifetime of changing circumstances.
XEQT rebalances automatically. When US equities run hot and start to dominate the portfolio, the underlying structure adjusts. When Canadian equities lag, the rebalancing adds to them. You don’t have to decide anything. You don’t have to watch the news about tech valuations or whether bank earnings came in above consensus. As our piece on whether XEQT needs rebalancing explains, this feature eliminates one of the most expensive behaviours in DIY investing: the temptation to rebalance based on recent performance rather than target allocation.
The concentrated stock-picker, by contrast, faces this problem constantly. Their portfolio drifts. One position grows from 10% to 30%. They have to decide whether to trim it and pay capital gains tax, or hold it and accept the concentration risk. Either decision has costs. The trim costs real money in a non-registered account and requires a sell decision that may be wrong. Holding it means the portfolio increasingly reflects one company’s fate rather than the global economy. XEQT has no version of this problem.
Transaction costs compound quietly too. Even on a commission-free platform, every buy and sell in a stock portfolio has bid-ask spread costs. Every rebalancing trade is a taxable event in a non-registered account. Every position you add requires research, monitoring, and the cognitive cost of staying current. XEQT converts all of that into a single annual fee of 0.20%. That’s not a compromise. For most long-term investors, it’s the optimal structure.
Canadian Accounts Don’t Forgive a Bad Bet
In the US, contribution limits to retirement accounts are relatively generous and, in some cases, can be replaced after a withdrawal. Canadian registered accounts work differently, and the mechanics make diversification not just smart but close to mandatory.
Your TFSA gives you $7,000 of new contribution room in 2026. If you have been eligible since 2009, your total cumulative room is $109,000. That room is precious. When you contribute cash to your TFSA and invest it, the room is consumed. If the investment loses value, the room it consumed is gone permanently. You cannot re-contribute the original capital just because the position recovered or because you held it long enough. The room is measured in dollars contributed, not in value. A stock that drops 60% in your TFSA doesn’t give you that contribution room back.
This asymmetry is brutal for concentrated stock-picking in registered accounts. Put $10,000 of TFSA room into a single mining stock and watch it fall to $4,000, and you’ve permanently consumed $10,000 of tax-sheltered room to generate $4,000 in current value. The same $10,000 in XEQT, spread across 9,000 companies, could drop sharply in a major crash and has every structural reason to recover, because the global economy has always eventually recovered. A single company that runs out of runway does not.
Your RRSP operates on the same principle. Your annual RRSP contribution room is 18% of the prior year’s earned income, up to $32,490 for 2026. That room accumulates over your career and represents a finite, irreplaceable tax-sheltering opportunity. Using it to concentrate into a handful of stocks rather than owning the entire global market through XEQT is not just a missed opportunity for diversification. It’s a structural risk to the tax efficiency of your retirement plan.
A bad stock pick inside a TFSA isn’t just a financial loss. It’s a permanent reduction in the tax-sheltered space you spent years accumulating. That asymmetry is the reason diversification inside registered accounts isn’t optional.
The standard response to this point is that diversified holdings can also lose value, which is true. XEQT fell sharply during the COVID crash of 2020 and recovered fully within roughly twelve months. The structural difference is that XEQT’s recovery was tied to the global economy’s recovery, because it held every major company in the world, including the ones that benefited from the crisis. A concentrated position in a company that misses earnings, runs into regulatory trouble, or simply fails to grow the way the thesis predicted doesn’t have that safety net. The odds are asymmetric in a way that matters when your registered account room is finite.
Frequently Asked Questions
How many stocks does XEQT actually hold?
XEQT holds approximately 9,000 individual stocks across its four underlying ETFs, which cover the US total market, Canadian equities, international developed markets, and emerging markets. The geographic split is roughly 45% US, 25% Canadian, 25% international developed, and 5% emerging markets. The raw stock count is less important than the effective diversification, which sits at around 198 meaningfully contributing positions after adjusting for concentration.
Is XEQT more diversified than VEQT even though VEQT holds more stocks?
Yes, according to analysis from the Canadian Portfolio Manager Blog. VEQT holds over 13,000 stocks, but many of those positions are so small they contribute almost nothing to the portfolio’s behaviour. XEQT’s effective number of stocks is approximately 198, versus VEQT’s approximately 180, meaning more of XEQT’s holdings are genuinely doing independent work. The difference comes from XEQT’s higher weighting toward international developed markets, where holdings tend to be more evenly distributed.
Can’t a focused stock portfolio beat XEQT if you pick the right companies?
In theory, yes. In practice, the evidence is strongly against it for the overwhelming majority of investors. Beating a diversified index requires not just picking good companies, but picking companies that will outperform what the market already expects them to do, consistently, year after year, net of all transaction costs and taxes. Professional fund managers with full-time research teams fail to do this consistently over long periods. Individual investors face even higher hurdles: less information, less time, and the behavioural tendency to let winners run too long and cut losers too quickly.
What happens to XEQT’s diversification if US tech stocks dominate?
XEQT’s weighting is market-cap based, so large US tech companies do represent a meaningful share of the US portion. But XEQT’s 25% Canadian allocation and 25% international developed allocation provide genuine offset. If US tech corrects sharply, the non-US portions of the portfolio cushion the fall. This is the structural reason XEQT’s geographic diversification is more than decorative: it means no single country’s sectoral blow-up can wreck the whole portfolio the way it would in a US-only or tech-heavy concentrated position.