XEQT and VFV: Why Holding Both Is a Mistake (2026)
XEQT already holds the S&P 500. Adding VFV doesn't diversify — it concentrates you in US stocks. Here's the math Canadian investors need to see.
⚠️ This is educational content, not investment advice. Please consult a qualified financial advisor for guidance specific to your situation.
What Each ETF Actually Holds
XEQT (iShares Core Equity ETF Portfolio) is a globally diversified, all-in-one fund that holds approximately 8,400 stocks across Canada, the US, international developed markets, and emerging markets. Its current geographic split is roughly:
- United States: ~45%
- Canada: ~25%
- International Developed: ~24%
- Emerging Markets: ~6%
It is designed to be a complete portfolio in one ticker — buy it, forget it, let it rebalance.
VFV (Vanguard S&P 500 Index ETF) holds only the 500 largest US companies. That is it. No Canada, no Europe, no Japan, no emerging markets.
The Overlap Math: What Your Portfolio Actually Looks Like
When you buy VFV, you are buying US equities. When you buy XEQT, you are already buying US equities — about 45% of every dollar you put into XEQT goes to US stocks, including the same S&P 500 companies that VFV holds.
| Split | True US Exposure | Canada | International | Emerging |
|---|---|---|---|---|
| 100% XEQT | ~45% | ~25% | ~24% | ~6% |
| 80% XEQT / 20% VFV | ~56% | ~20% | ~19% | ~5% |
| 70% XEQT / 30% VFV | ~62% | ~17.5% | ~17% | ~4% |
| 50% XEQT / 50% VFV | ~72.5% | ~12.5% | ~12% | ~3% |
| 100% VFV | 100% | 0% | 0% | 0% |
A 50/50 split puts 72.5% of your portfolio into a single country. Canada shrinks to 12.5%. Your international exposure falls to about 12%. That is not a diversified portfolio. That is a US portfolio with a small Canadian side dish.
Want to see exactly how much XEQT and VFV overlap? Run them through the ETF Overlap Checker — it shows the underlying holdings comparison for 50+ Canadian ETFs.
Is Holding Both Ever Justified?
Yes — but only if it is deliberate. A US tilt is a legitimate investment position. The S&P 500 has outperformed global equities in most years since 2010. If you have genuine conviction that US large-cap stocks will continue to dominate, a measured VFV sleeve makes sense.
A 70% XEQT / 30% VFV split produces about 62% US exposure. That is a conscious, deliberate US overweight. That is fine. What is not fine is buying both without doing this math and assuming you are diversified.
It is also worth noting that 2025 flipped the recent performance narrative: XEQT returned 20.45% while VFV delivered 12.23% — an 8-point reversal from the prior year when VFV led by more than 10 points. Geographic concentration can cut both ways.
What to Do If You Are Holding Both Right Now
First, do not panic. The goal is not necessarily to sell — especially in a taxable account where selling triggers capital gains. The goal is to understand your actual portfolio and decide whether you want to stay there intentionally.
If you want pure global diversification: Consolidate into XEQT only and stop adding VFV. You get full global exposure at 0.20% MER with zero overlap issues.
If you want a deliberate US tilt: Calculate your combined US exposure using the table above and decide on a target. A 70% XEQT / 30% VFV split gives roughly 62% US exposure with still-meaningful international and Canadian coverage.
If you want maximum US exposure at minimum cost: VFV alone at 0.09% MER is a cleaner, cheaper choice than any XEQT/VFV blend.
To figure out which account each ETF makes the most sense in — TFSA vs RRSP vs taxable — use the Account Type Optimizer. There are real differences in how foreign withholding taxes apply depending on account type.
FAQ
Does XEQT already include VFV? Not directly — XEQT holds US equities through its underlying iShares US total market ETF, not via VFV specifically. But the exposure is very similar. About 45% of XEQT is invested in US equities, including the same large-cap US stocks that VFV holds through the S&P 500.
Is it bad to hold both XEQT and VFV? It depends on whether it is intentional. A 50/50 split produces roughly 72.5% US exposure. If you know that and want it, holding both is a defensible strategy. If you did not know it, it is worth reviewing.
What percentage of XEQT is US stocks? Approximately 45% of XEQT is allocated to US equities as of 2026 — its largest single geographic allocation.
Should I hold VFV in my TFSA or RRSP? In a TFSA, VFV is subject to the 15% IRS withholding tax on US dividends — a structural limitation of Canadian-listed US ETFs held in a TFSA. Use the Account Type Optimizer to work through the account-type question for your situation.
What is the best alternative to holding both XEQT and VFV? For pure global diversification at low cost, XEQT alone is the cleaner choice. For deliberate US overweighting, a 70% XEQT / 30% VFV split gives a tracked, intentional tilt. For maximum US exposure at minimum fees, VFV alone at 0.09% MER is most efficient.
This is educational content, not investment advice. Always review the fund prospectus and consider your personal financial situation before investing.
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