Your Advisor Calls It ‘Too Risky.’ The Math Calls It Something Else.
June 8, 2026
The conversation goes like this. You sit down with an advisor, mention you want to be 100% in equities, and watch their expression shift. “That’s quite aggressive,” they say. “Markets can drop 30%. You need some protection.” They pull out a pie chart showing a balanced portfolio: 60% stocks, 40% bonds. It feels responsible. Measured. Safe.
What they almost never show you is what that “protection” actually costs over a 25-year investing horizon. And that number is the part of the conversation that changes everything.
Two Definitions of Risk That Don’t Agree With Each Other
The risk your advisor is measuring is short-term volatility: how far a portfolio can fall in a bad quarter. On that metric, a 60/40 portfolio genuinely does cushion the blow. During the 2008 financial crisis, a balanced portfolio lost far less than a pure equity portfolio in the worst 12-month window.
But there is a second kind of risk that gets almost no airtime in those client meetings: the risk of running out of money before you run out of life. The risk of watching your portfolio grow meaningfully slower over decades, and arriving at age 65 with substantially less than you could have had. The risk of outliving your purchasing power because your bond allocation spent 30 years being a handbrake on your compounding.
Short-term volatility is uncomfortable. Long-term underperformance is catastrophic. They are not the same thing, and your advisor’s risk questionnaire only measures one of them.
Historical data compiled by researchers including Elroy Dimson at London Business School, covering over 100 years of global financial returns, consistently confirms that equities deliver the highest long-term real returns of any major asset class. The S&P 500 has returned approximately 10.2% annually on average over the past century in nominal terms. Bonds have returned roughly half that, with significantly less ability to grow purchasing power after inflation. For an investor with a 20 or 30-year horizon, that difference does not add up linearly. It compounds.
What the Return Math Actually Looks Like
Consider a 32-year-old Canadian investing steadily for 33 years until retirement. The gap between an all-equity portfolio compounding at a higher long-run rate and a balanced portfolio compounding at a lower rate does not close over time. It widens. Every year that bonds drag on the return of a balanced portfolio, the equity investor pulls further ahead in total wealth accumulated. The endpoint difference, over a full investing lifetime, tends to be substantial rather than marginal.
Research published in Canadian finance sources projects a classic 60/40 balanced portfolio returning between 5% and 7% annually over the next decade, while international developed-market equities are projected at 7% to 9% over the same period. The pattern is consistent with the long historical record: a balanced portfolio is expected to return less than an all-equity portfolio over meaningful investment horizons. The numbers are not mysterious. They are just rarely shown to you in that format.
The compounding gap: Even a 2% annual return difference between an equity and a balanced portfolio, sustained over 30 years of regular contributions, produces a dramatically larger final balance for the equity investor. The gap is not a rounding error. It is a retirement.
Is XEQT Too Risky? It Depends When You Need the Money
XEQT, the iShares Core Equity ETF Portfolio, holds roughly 9,000 companies across Canada, the US, international developed markets, and emerging markets. Its MER is 0.20%, which means you pay about $200 per year on a $100,000 balance. It is 100% equities, which means it will drop hard in a market downturn. During COVID, it fell more than 30% in a matter of weeks before recovering fully within months. In early 2026, tariff-driven volatility created another meaningful drawdown.
None of that is hidden. In fact, if XEQT holds your money and you need it in two years, it genuinely is too risky for you. The correct answer for a two-year horizon is a high-interest savings account or a GIC, full stop. Nobody sensible argues otherwise.
The question worth asking is: what is “risky” for someone who is 28, contributing $600 a month into their TFSA, and does not plan to touch this money for 35 years? For that person, the short-term drops in an equity portfolio are not the primary risk. They are noise. The primary risk is not having enough money when work is no longer an option. For a full breakdown of what XEQT actually is and how it’s structured, this piece on why so many Canadians are going all-in on XEQT covers the mechanics in detail.
Research on investor behaviour, including decades of DALBAR data, has consistently shown what is called the “behaviour gap”: the difference between what an index fund returns and what the average investor actually earns. That gap has historically been 2 to 4 percentage points per year, entirely from self-inflicted decisions: selling during panics, buying back too late, switching strategies mid-cycle. Volatility does not destroy wealth. Reacting to volatility does.
Why Your Advisor Might Not Be Wrong, But Their Incentive Might Be
This is the part nobody says out loud. Most financial advisors in Canada are not fiduciaries. They operate under a “suitability” standard, which means they need to recommend something appropriate for you, not necessarily the thing that is best for you over the long term. And many of them are compensated through embedded trailer commissions in the mutual funds they sell.
A conservative balanced mutual fund with a 2% MER keeps a client invested and less likely to call the advisor when markets fall. It generates trailer fees. It satisfies a regulator checking that the recommendation was “suitable.” And it genuinely does smooth out the ride. None of that makes the advisor a villain. But it does mean their incentive to explain the 30-year compounding cost of a conservative allocation is essentially zero.
Canada has among the highest mutual fund fees in the world. A 2% MER on a $200,000 portfolio costs $4,000 per year, every year, regardless of performance. XEQT’s 0.20% on the same balance costs $400. Over 25 years, assuming even modest portfolio growth, that fee difference alone accounts for a significant and permanent drag on your accumulated wealth. The question of whether 100% equities is “too aggressive” is often a distraction from the question of whether 2% in annual fees is “too expensive.”
The most expensive investment decision most Canadians make is not holding too many equities. It is holding the wrong product in the wrong wrapper for 20 years while paying someone to tell them it is safe.
The Historical Drawdown Argument: Honest About Both Sides
The advisor’s concern about drawdowns is not invented. Market corrections of roughly 10% happen approximately every one to two years. Bear markets, meaning drops of 20% or more, happen roughly every five years. Crashes of 30% or more happen approximately every decade. If you are close to retirement and drawing down your portfolio, these statistics matter enormously. Selling into a crash during the early years of retirement can permanently damage a portfolio in ways that are mathematically difficult to recover from, a phenomenon called sequence of returns risk.
For investors within five to ten years of retirement, holding some fixed income to cushion drawdowns makes genuine sense. The conversation changes when you are in your 30s or 40s, still accumulating, still contributing every month. At that stage, a market crash does not just represent a paper loss. It represents an opportunity to buy more shares at lower prices. Bear markets during the accumulation phase can actually improve long-run outcomes if the investor keeps contributing rather than selling.
Key distinction: Sequence of returns risk is real and matters near retirement. It is largely irrelevant for accumulators 15 or more years from drawing down. Conflating the two is the most common error in these conversations.
What XEQT’s Global Diversification Actually Buys You
One thing advisors sometimes miss when they call a 100% equity ETF “risky” is that XEQT is not a bet on one market or one sector. Its roughly 9,000 holdings span approximately 45% US equities, 25% Canadian equities, 25% international developed markets, and 5% emerging markets. When US markets sold off sharply in spring 2026, the Canadian and international allocations provided meaningful relative support. When Canadian equity markets drag in other periods, the international and US holdings provide the counterbalance.
This is global diversification doing exactly what it is designed to do: smoothing outcomes across geographies and business cycles without requiring any intervention from the investor. You are not making a concentrated bet when you hold XEQT. You are making the closest available approximation to a bet on global economic progress, accessible to any Canadian at 0.20% per year. That is a very different risk profile than the word “aggressive” implies when your advisor uses it in a meeting.
For a deeper look at how XEQT stacks up against the other all-in-one options, including more conservative choices like XGRO, the complete all-in-one ETF comparison is worth reading before you make any changes.
The Exception Is Real: When Bonds Actually Belong in Your Portfolio
There are situations where a 100% equity allocation is genuinely wrong, and being honest about that matters. If you have a concrete goal within ten years, whether a home purchase, a career change, or a planned early retirement, sequence of returns risk becomes real and deserves respect. If you know from genuine self-knowledge that a 35% portfolio drop would cause you to sell everything and go to cash, then a more conservative allocation is right for you, not because bonds have better returns but because an investment you can stick with always beats an optimal portfolio you will abandon.
RRSP and TFSA contribution limits for 2026 stand at $32,490 and $7,000 per year respectively. If you are using a TFSA for a short-term goal and an RRSP for long-term retirement, you might reasonably hold XEQT in the RRSP and something more conservative in the TFSA. Context matters. The blanket statement “100% equity is too risky” does not.
The right asset allocation is the one you will actually hold through a bear market. But most Canadians are not nearly as fragile as their advisor’s questionnaire suggests.
Frequently Asked Questions
Is 100% equity really appropriate for most Canadian investors? For investors with a time horizon of 15 years or more who are still accumulating, the evidence strongly favours a 100% equity allocation. The long-run return advantage of equities over bonds compounds dramatically over decades, and the volatility that concerns advisors in the short term is largely irrelevant for money you will not touch for 20 years. The picture changes meaningfully within ten years of retirement, where sequence of returns risk becomes a real concern.
Why do advisors recommend balanced portfolios if all-equity performs better long-term? Many advisors in Canada are compensated through product commissions rather than flat fees, which creates an incentive toward products that keep clients comfortable rather than maximizing long-term returns. Conservative allocations also reduce the risk of clients panic-selling and calling angry. This does not make advisors dishonest, but it does mean their advice is shaped by incentives that do not always align with your 30-year outcome.
How much does XEQT drop in a market crash? Because XEQT is 100% equities, it drops in line with global equity markets. During the COVID crash of March 2020, global equity markets fell more than 30% in roughly five weeks before recovering. For investors who were buying throughout that period, those lower prices ultimately improved their long-run returns. For investors who needed the money in 2020, it would have been a serious problem. Time horizon determines which of those scenarios applies to you.
Should I hold XEQT in my TFSA, RRSP, or FHSA? XEQT is appropriate in any registered account from a tax standpoint, with one nuance: US dividends are subject to a 15% withholding tax in a TFSA or FHSA but not in an RRSP, where the Canada-US tax treaty provides relief. For most Canadians in the accumulation phase, this difference is small relative to the compounding advantage of getting money invested at all. The 2026 TFSA limit is $7,000 per year and the RRSP limit is $32,490 or 18% of prior year earned income, whichever is lower.