XEQT vs the S&P 500: Why Betting Everything on America Is Riskier Than You Think

The question comes up constantly in​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ Canadian investing communities: why bother with XEQT’s international exposure when you could just buy VFV and ride the S&P 500? It’s a fair objection, and the last decade of returns made it feel airtight. From roughly 2013 through 2024, the S&P 500 lapped the rest of the world so consistently that “just buy the S&P 500” started to sound like the obvious answer. But that argument is built almost entirely on recency bias, and understanding why it breaks down is one of the most important things a Canadian investor can do before committing to a single-country strategy for the next thirty years.

What You’re Actually Buying With Each ETF

VFV is Vanguard’s S&P 500​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ Index ETF, listed in Canada and priced in Canadian dollars. It tracks the 500 largest publicly traded companies in the United States. That sounds like a lot of diversification until you look at the actual numbers. As of late 2025, the top 10 stocks in the S&P 500 accounted for close to 40% of the entire index. The Magnificent Seven, Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla, represented roughly 36% of the index’s total market capitalization, more than double their weight from 2022 and triple their weight from eight years prior. That concentration level surpassed anything seen during the dot-com era. Nvidia alone carried approximately an 8% weight in the index.

XEQT is something structurally different.​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ It is a complete global equity portfolio in a single ticker. Through four underlying iShares ETFs, it holds roughly 9,000 companies across approximately 50 countries. The current allocation sits at approximately 45% US equities, 25% Canadian equities, 25% international developed markets covering Europe, Japan, Australia, and South Korea, and 5% emerging markets. That US exposure is still substantial, nearly half the portfolio, but it sits inside a globally diversified frame rather than being the entire bet.

The Decade That Made Everyone Forget History

From roughly 2010 through 2024, US equities​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ dominated global markets in a way that was genuinely unusual by historical standards. The MSCI USA delivered a 10-year annualized gross return of 14.16% as of March 31, 2026, compared to 11.88% for the MSCI ACWI, the all-world index. That gap felt enormous. Investors who held international exposure watched a meaningful portion of their portfolio trail the S&P 500 year after year, and the natural human response was to question why they were doing it.

But this is exactly where the research​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ says investors go wrong. Analysis from the Canadian Portfolio Manager blog, citing Morningstar Direct data, showed that in the decade before the US mega-cap run, an evenly diversified global strategy outperformed the US-heavy approach, and with slightly lower risk. Over the full 20-year period examined, both approaches produced nearly identical returns. The takeaway from that analysis was pointed: don’t fall prey to recency bias, because the last five or ten years tell us little about what to expect going forward.

Diversifying yourself among risky assets​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ provides scant shelter from bad days or bad years, but it does help protect against bad decades and generations, which can be far more destructive to wealth.

The clearest historical example of this​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ is the S&P 500’s “lost decade” from 2000 to 2010. According to Dimensional Fund Advisors, the S&P 500 delivered negative annual returns over that stretch. US small-cap value stocks, international developed markets, and emerging markets all significantly outperformed during that period. Investors who had concentrated everything in American large caps didn’t just underperform, they ended the decade with less money than they started with, in real terms. The Nasdaq sat below its year-2000 peak until 2015. Fifteen years to get back to even is not a rounding error.

Why S&P 500 Concentration Risk Matters Right Now

The argument for global diversification​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ over the S&P 500 is not just a historical one. The current structure of the index creates a specific risk worth naming plainly: you are not actually buying 500 companies when you buy VFV. You are buying a portfolio where seven companies drive nearly half the movement, and where a very large share of performance depends on those companies continuing to justify extraordinary valuations.

To be clear, that might happen. The​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ technology companies dominating the S&P 500 today are genuinely large, profitable businesses. This isn’t 1999, where dot-com companies with no revenue traded at absurd multiples. But the question isn’t whether these are good businesses. The question is whether their current prices already reflect everything good about them. Multiple independent research sources have flagged that US equity valuations by late 2025 were sitting at levels historically associated with more modest forward returns over the following decade. BNN Bloomberg’s market outlook noted that 2026 could mark a shift away from US megacap dominance, a view gaining traction well before the calendar turned.

When you own XEQT, you still get exposure​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ to all of those companies. US equities make up approximately 45% of the portfolio. But you also own Toyota, ASML, Samsung, Nestlé, AstraZeneca, Shopify, Royal Bank, and thousands of other companies that don’t appear in a standard S&P 500 tracker. That breadth is a genuine source of protection. If the Magnificent Seven stumble, XEQT absorbs the hit but doesn’t absorb it alone. An investor who holds only VFV absorbs all of it, with no offset from the rest of the world.

The Home Country Bias Trap Canadian Investors Already Fall Into

There’s an irony worth pointing​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ out here. One of the most well-documented mistakes in investing research is home country bias, the tendency to overweight the country you live in. In Canada, this shows up in a striking way: research cited across multiple sources indicates that Canadians hold approximately 50% of their equity in Canadian stocks, despite Canada representing only about 3% of global equity market capitalization. Familiarity feels safe. Investing in the banks you use, the pipelines you read about, and the telecoms sending you large monthly bills is psychologically comfortable in a way that is financially costly over long periods.

The TSX is heavily concentrated in financials​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ (roughly 31%), materials (roughly 19%), and energy (roughly 18%). It has minimal exposure to technology, pharmaceuticals, and global consumer brands. If you rely on the TSX for your Canadian equity exposure, you are missing enormous swaths of the global economy.

Now here is where the S&P 500 objection gets complicated for Canadian investors specifically. If you load up on VFV to escape Canadian home country bias, you don’t actually escape the underlying problem. You replace one form of concentration, Canadian energy and banks, with a different form of concentration, American tech mega-caps. You’ve traded overexposure to one narrow slice of the global economy for overexposure to another. XEQT, by contrast, gives you diversified Canadian exposure plus diversified global exposure in proportions that track actual world market capitalization. For a deeper look at how XEQT is constructed and what you actually own inside it, the complete XEQT guide covers all the mechanics.

Vanguard research has consistently shown​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ that home country bias reduces risk-adjusted returns over long periods. Canada represents roughly 3% of global market capitalization. Treating it as a quarter of your portfolio is a deliberate overweight, not a neutral default.

What Does XEQT Actually Do When the S&P 500 Struggles?

BlackRock’s published annual returns​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ for XEQT show the following: down 10.93% in 2022, up 17.05% in 2023, up 24.67% in 2024, and up 20.45% in 2025. What happened in 2025 specifically is instructive. Early that year, the US market faced significant turbulence driven by tariff announcements and technology sector uncertainty. Analysis of 2025 ETF returns from Canadian Portfolio Manager noted that the year did not unfold the way most investors expected, and that performance of globally diversified portfolios was partly supported by non-US holdings that didn’t experience the same volatility. The broader takeaway in that analysis: “Leadership rotates. Yesterday’s losers become today’s winners. Shiny new narratives fade. Boring diversification works.”

The emerging markets component of XEQT​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ is worth specific mention. It represents roughly 5% of the portfolio and has historically been the most misunderstood piece. Research on ETF returns published in 2026 noted that XEC, the iShares Core MSCI Emerging Markets IMI Index ETF that sits inside XEQT, returned 25.34% in Canadian dollar terms over 2024 and 2025 combined. Emerging markets had underperformed for more than a decade before that stretch, which is precisely why most investors had stopped paying attention to them, and precisely why holding them through the lean years matters if you want the benefit when the cycle turns.

The Currency Angle That VFV Buyers Often Miss

When a Canadian buys VFV, they are taking​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ on 100% US dollar currency exposure. If the Canadian dollar strengthens against the US dollar, the value of those holdings drops in CAD terms entirely separately from what the underlying stocks do. XEQT carries approximately 75% non-CAD exposure across US dollars, euros, yen, and other currencies, but it also carries about 25% Canadian dollar exposure through its domestic holdings, which provides a partial natural offset against CAD weakness scenarios.

As of this writing, 1 Canadian dollar​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ buys approximately 0.73 US dollars, meaning Canadians holding US-denominated assets have benefited from USD strength in recent years. That tailwind is not guaranteed to continue, and if the loonie strengthens materially, VFV investors absorb that headwind in full. XEQT investors absorb it proportionally, softened by the Canadian and other non-USD allocations. Currency-hedging the entire position costs money in the form of forward contracts and swaps, and those costs compound meaningfully over a multi-decade investment horizon in ways that tend to outweigh the volatility reduction they provide.

The One Case Where VFV Makes Sense

Being honest about this matters. There​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ is a scenario where holding VFV is a defensible choice: if you already own XEQT as your core holding and you want to deliberately tilt toward the US market as a conscious, size-limited decision. Some investors choose to hold a core XEQT position and add a smaller VFV allocation to increase their US weighting beyond what XEQT’s default roughly 45% provides. That is a coherent strategy, provided you understand what you’re doing and are prepared to monitor whether the overweight continues to make sense over time.

What doesn’t hold up is the argument​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ that VFV should replace XEQT entirely as a long-term portfolio for a Canadian investor. That argument depends on the assumption that the US will continue to dominate global markets for the next three decades the way it did for the last one. That’s possible. It’s also a concentrated bet, and it’s a bet you’d be making with your retirement savings based on very recent market history rather than the longer arc of how capital markets behave across full economic cycles.

For most Canadian investors building wealth inside a TFSA (with $7,000 per year in contribution room for 2026), an RRSP, or an FHSA ($8,000 per year, $40,000 lifetime), simplicity and structural soundness matter as much as optimization. XEQT delivers global diversification, automatic rebalancing, and low costs at a 0.20% MER in a single ticker. If you’re comparing all the all-in-one options available to Canadians side by side, the best all-in-one ETF guide covers the full field with current data.

The question isn’t whether the​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌​​‌‌​‌​‌‌​‍‌‌​‌​‌​​​​​‌​‌‌​​​​‌​‌‌​​‌‌‌​‌‌ S&P 500 has been a great investment. It clearly has been. The question is whether that justifies betting your entire long-term portfolio on it continuing to be the world’s best-performing major market for the next three decades. That’s a very different question, and history suggests the answer should give you pause.

Frequently Asked Questions

Is XEQT better than VFV for long-term investing in Canada? For most Canadian investors building long-term wealth, XEQT is the stronger fit. It provides global diversification across roughly 9,000 companies in approximately 50 countries, includes automatic rebalancing, and still gives you roughly 45% US equity exposure. VFV concentrates your entire investment in 500 US companies, with close to 40% of the index driven by the top 10 stocks as of late 2025.

Didn’t the S&P 500 massively outperform global diversification over the past decade? Yes, and that outperformance is real. The MSCI USA posted a 10-year annualized gross return of 14.16% versus 11.88% for the global ACWI index as of March 2026. But in the decade before that, the pattern reversed entirely, and the S&P 500 delivered negative real returns from 2000 to 2010 while international and emerging markets outperformed. Building a strategy around the last decade’s winner is one of the most common and costly errors in long-term investing.

Does XEQT still give me exposure to Apple, Nvidia, and Microsoft? Yes. XEQT holds roughly 45% of its portfolio in US equities, giving you proportional exposure to all S&P 500 companies including every Magnificent Seven stock. The difference is that those holdings sit inside a globally diversified portfolio rather than being the entire portfolio, so a stumble in US mega-caps doesn’t sink the whole position.

Can I hold both XEQT and VFV? You can, but for most passive investors it adds complexity without a clear benefit. XEQT already gives you substantial US equity exposure. Adding VFV on top simply overweights the US market relative to XEQT’s default global weighting. If that’s a deliberate and considered decision, it can be a coherent tilt. If you’re doing it because the S&P 500 has recently outperformed, that’s performance chasing in a different package.