The Barbell Strategy: Combining XEQT and GICs for the Best of Both Worlds

My dad is one of the smartest people I know. He built a successful career, paid off his house early, and saved diligently for decades. But whenever we talked about investing, his face would go pale. “I just can’t watch my money go down,” he’d tell me. “Even 10%. I’ll lose sleep.”

For years, I tried convincing him to go all-in on something like XEQT — a single globally diversified equity ETF that gives you the entire world’s stock market in one ticker. The long-term returns are hard to argue with. But he couldn’t get past the volatility. A 30% drawdown in a bad year? Forget it. He’d sell at the bottom and never invest again.

So he kept everything in GICs. Safe? Absolutely. But after inflation and taxes, his “guaranteed” returns were basically guaranteeing he’d fall behind.

Then I stumbled on something that clicked for both of us: the barbell strategy. Instead of picking one or the other — all stocks or all GICs — you combine the two extremes and skip everything in between. Maximum growth on one end. Maximum safety on the other. Nothing in the mushy middle.

It sounded counterintuitive at first. But the more I dug into it, the more it made sense. And it finally got my dad invested in the stock market — something I’d been trying to do for a decade.

Let me walk you through exactly how the barbell strategy works with XEQT and GICs, why it might be smarter than a traditional balanced portfolio, and how to set it up for yourself.

1. What Is the Barbell Strategy?

The barbell strategy is an investing approach popularized by Nassim Nicholas Taleb, the Lebanese-American essayist, risk analyst, and author of The Black Swan and Antifragile. Taleb’s core idea is that you should avoid the “middle” — moderate-risk, moderate-return investments — and instead split your portfolio between two extremes:

• One end of the barbell: Ultra-safe, capital-preserved assets (like GICs, T-bills, or high-interest savings accounts)
• The other end: High-growth, higher-risk assets (like a globally diversified equity ETF)

The name comes from the shape of an actual barbell — heavy weights on each end, nothing in the middle.

Why skip the middle? Because Taleb argues that moderate-risk investments give you a false sense of security. They’re not safe enough to truly protect you in a crisis, but not aggressive enough to generate the returns you need. The worst of both worlds disguised as the best.

In a Canadian investing context, the “middle” would be things like:

• Bond ETFs (ZAG, XBB, VAB) — they can and do lose value when interest rates rise, as we all learned the hard way in 2022
• Balanced mutual funds — high fees, mediocre returns, false sense of diversification
• “Moderate” all-in-one ETFs (XBAL, VBAL) — fine products, but you’re paying for a bond allocation that GICs can replicate with zero downside risk

The barbell strategy says: replace all of that with pure XEQT (maximum equity upside) and pure GICs (maximum capital protection). You get the growth potential of the stock market AND the sleep-at-night safety of guaranteed returns — with nothing wishy-washy in between.

2. Why XEQT and GICs Are the Perfect Barbell Pairing

Let’s look at why these two specific instruments work so well together for Canadian investors.

XEQT — The growth engine:

• Holds 9,000+ stocks across the entire globe (US, Canada, international developed, emerging markets)
• Historical average returns of roughly 8-10% annually over long periods
• Ultra-low MER of 0.20%
• One ticker, instant global diversification
• Zero stock-picking, zero rebalancing — iShares does it all for you

GICs — The safety anchor:

• Principal is 100% guaranteed (and insured by CDIC up to $100,000 per institution per category)
• Current rates in Canada sitting around 3.5-4.5% for 1-5 year terms (as of early 2026)
• Zero volatility — your balance never goes down, ever
• Predictable, locked-in returns you can count on
• Simple to buy through any Canadian bank or brokerage

Here’s the magic: these two assets have essentially zero correlation. When your XEQT drops 20% in a bear market, your GICs are sitting there calmly, earning their guaranteed interest, completely unaffected. That GIC portion isn’t just providing returns — it’s providing psychological stability. It’s the reason my dad can now hold XEQT through a drawdown without panic-selling, because he knows a significant chunk of his money is locked in and safe.

And unlike bond ETFs, GICs can’t go negative. In 2022, the iShares Core Canadian Universe Bond Index ETF (XBB) dropped roughly 11.5%. Meanwhile, GIC holders earned their guaranteed rate. That’s a massive difference when you’re supposed to be holding “safe” assets.

3. The Barbell vs. the “Balanced” Approach: Why Skip Bonds?

This is the most counterintuitive part of the barbell strategy, so let me address it head-on. If you’ve read anything about Canadian investing, you’ve probably been told to hold a mix of stocks and bonds. The classic 60/40 portfolio. Maybe you’ve even looked at all-in-one ETFs like XBAL (60% stocks, 40% bonds) or XGRO (80% stocks, 20% bonds).

Those are fine products. But the barbell strategy argues there’s a better way.

Here’s the case against using bond ETFs as your “safe” allocation:

Look at that table. Bond ETFs and GICs offer roughly similar yields right now, but GICs come with a guarantee that bond ETFs simply can’t match. The only real advantage bonds have is liquidity — you can sell them any day. But if the purpose of your safe allocation is to be safe, why accept the possibility of loss?

For a deeper dive into the bond question, I’ve written extensively about whether you even need bonds alongside XEQT. The short version: for most Canadian investors, GICs do the same job better.

The barbell strategy takes this logic to its conclusion. Instead of holding XBAL, you hold 60% XEQT + 40% GICs. Same concept, but with a genuine guarantee on the safe side and maximum equity exposure on the growth side.

4. Sample Barbell Allocations for Every Risk Level

The beauty of the barbell strategy is that you can adjust the weight on each end to match your personal risk tolerance and life stage. Here are four sample allocations:

Note for young investors in their 20s with a 30+ year time horizon: You probably don’t need a barbell at all. Going 100% XEQT is likely the optimal strategy for maximum long-term wealth building. The barbell is most powerful when you have a shorter time horizon, need to draw on the money within 5-15 years, or simply can’t stomach the full volatility of an all-equity portfolio.

Hypothetical Returns by Allocation

Let’s model what each allocation might look like over time. I’ll use a long-term average of 8% for XEQT and 4% for GICs (a reasonable mid-range estimate for current rates).

A few things stand out. Even the most conservative barbell (50/50) significantly outperforms a pure GIC portfolio over 20 years — by over $100,000 on a $100K initial investment. That’s the power of having even half your money in global equities. Meanwhile, the 80/20 barbell captures most of the returns of a pure equity portfolio while giving you a 20% safety cushion that won’t budge in a crash.

These are simplified projections and don’t account for taxes, inflation, contributions, or market volatility in any given year. But they illustrate the core tradeoff clearly.

5. GIC Laddering: Making the Safe Side Work Harder

One of the smartest things you can do with the GIC portion of your barbell is build a GIC ladder. Instead of locking all your GIC money into one term, you spread it across multiple terms so that a portion matures every year.

Here’s how a GIC ladder works with a $30,000 GIC allocation (the GIC side of a 70/30 barbell on a $100K portfolio):

When the 1-year GIC matures in Year 2, you reinvest it into a new 3-year GIC. When the original 2-year matures in Year 3, you reinvest into another 3-year. And so on. After the initial setup period, you’ll have a GIC maturing every single year, which gives you:

• Regular access to cash without breaking any GICs early
• Exposure to changing interest rates — if rates go up, your next reinvestment captures the higher rate
• Higher average yields — longer-term GICs typically pay more than 1-year GICs
• A natural rebalancing opportunity — when a GIC matures, you can decide whether to reinvest in GICs or shift some money to XEQT

Some investors extend the ladder to 5 years (five equal chunks across 1 to 5-year terms) to capture even higher long-term rates. For most barbell investors, a 3-year ladder strikes the right balance between yield and liquidity.

Pro tip: Wealthsimple now offers GICs directly within the platform, making it simple to hold both your XEQT and your GICs in the same account. No need to deal with separate bank accounts or transfer headaches.

6. Where to Hold What: Account Optimization

The barbell strategy becomes even more powerful when you put the right assets in the right accounts. Canada’s registered account system is incredibly generous, and smart asset location can save you thousands in taxes over a lifetime.

Here’s the optimal setup:

GICs → RRSP (or RRIF in retirement)

GIC interest is taxed as regular income — the least favourable tax treatment in Canada. By holding GICs inside your RRSP, that interest grows tax-deferred. You’ll pay tax when you withdraw in retirement, but ideally at a lower marginal rate than during your working years. This is the single biggest tax-efficiency win in the barbell strategy.

XEQT → TFSA (primary) and RRSP (overflow)

XEQT generates returns through capital gains and dividends — both taxed more favourably than interest income. But inside a TFSA, they’re not taxed at all. Every dollar of XEQT growth in your TFSA is 100% yours, forever. Since XEQT has the highest growth potential, you want it in the account with the most tax-free upside — your TFSA. If you’ve maxed it out, additional XEQT can go into your RRSP or a non-registered account.

The ideal barbell account structure:

This structure ensures you’re paying the absolute minimum in taxes on every dollar of return. It’s one of the areas where the barbell strategy actually has an edge over all-in-one balanced ETFs — with XBAL or VBAL, you can’t separate the equity and bond components into different accounts. With XEQT + GICs, you can.

7. How to Rebalance Your Barbell Portfolio

Over time, your barbell will naturally drift from your target allocation. If XEQT has a great year and jumps 20%, your 70/30 portfolio might become 75/25. If the stock market drops, it might shift to 65/35. You need a plan to bring it back in line.

Here’s a simple rebalancing framework:

When to rebalance:

• Once a year — pick a date (your birthday, January 1st, tax season) and check your allocation
• When your allocation drifts more than 5% from target — e.g., your 70/30 has become 76/24 or 64/36

How to rebalance:

1. Check your current allocation — add up the total value of XEQT and GICs across all accounts
2. Calculate the difference — if you’re targeting 70/30 on a $150,000 portfolio, you want $105,000 in XEQT and $45,000 in GICs
3. Direct new contributions to the underweight side — this is the easiest and most tax-efficient method. If XEQT has grown and your allocation is now 75/25, put your next contributions into GICs until you’re back to 70/30
4. Use maturing GICs as a rebalancing tool — when a GIC in your ladder matures, you can reinvest in a new GIC or redirect that money to buy more XEQT, depending on which side needs topping up

Avoid selling XEQT just to rebalance (especially in a non-registered account, where selling triggers capital gains tax). New contributions and maturing GICs provide natural rebalancing opportunities without tax consequences.

A real example:

Say you started the year with a 70/30 barbell on $100,000: $70,000 in XEQT and $30,000 in GICs. XEQT grows 15%, GICs earn 4%.

• XEQT: $80,500

  GICs: $31,200

  Total: $111,700

• Current allocation: 72% / 28% (target: 70/30)
• Target GICs: $33,510 — you’re $2,310 short

When your next GIC matures or you make your next contribution, direct that $2,310 toward GICs. Done. No selling, no tax events, no drama.

8. Who Should Use the Barbell Strategy (and Who Shouldn’t)

The barbell isn’t for everyone. Here’s an honest breakdown.

The barbell strategy is great for:

• Investors within 5-15 years of retirement — you need growth to keep up with inflation but can’t afford a 30% drawdown right before you stop working
• Nervous investors who would otherwise hold 100% GICs — the barbell gets at least some money into equities, which is infinitely better than zero equity exposure
• People who just want simplicity — two holdings (XEQT + GICs), annual rebalancing, done
• Those who lived through 2022 and hated watching bond ETFs lose money — GICs give you the “safe” allocation without the surprises
• Retirees drawing income — maturing GICs provide predictable cash flow, while XEQT provides long-term growth to sustain the portfolio
• Parents saving for a child’s education in an RESP — as the child gets closer to university, you can shift the barbell more toward GICs
• Anyone who can’t sleep at night with 100% equities — seriously, the best portfolio is the one you can actually stick with

The barbell strategy is NOT ideal for:

• Young investors (20s) with a 30+ year time horizon — just buy XEQT and don’t look at it. The math overwhelmingly favours 100% equities over very long periods. You’re giving up significant growth by holding GICs when you don’t need the money for decades
• Investors who need liquidity — GICs lock up your money. If you might need the cash in 6 months, use a high-interest savings account instead
• Those who enjoy tinkering and optimizing — the barbell is deliberately simple. If you want factor tilts and tactical asset allocation, this isn’t your thing
• People with very small portfolios — if you have $5,000, just put it all in XEQT. Splitting it adds complexity without meaningful benefit

9. How This Differs from “XEQT vs. GICs”

This page is not arguing that GICs are better than XEQT or vice versa. I’ve already written that comparison — XEQT vs. GICs: Why “Safe” Might Be Costing You a Fortune makes the case that for long-term investors, XEQT wins over GICs alone.

This page is about combining them strategically for situations where 100% equities isn’t appropriate — whether because of your time horizon, risk tolerance, or life stage. The barbell isn’t a compromise. It’s a deliberate design that uses each instrument for what it does best:

• XEQT does what GICs can’t: grow your wealth at 8-10% annually over the long term
• GICs do what XEQT can’t: guarantee your capital with zero possibility of loss

Together, they cover each other’s weaknesses. That’s the whole point.

10. Step-by-Step: How to Set Up Your Barbell Portfolio Today

Ready to implement? Here’s exactly how to do it, start to finish.

Step 1: Decide your allocation. Pick the XEQT/GIC split that matches your risk tolerance and time horizon. If you’re unsure, 70/30 is a solid default for most investors who want growth with a meaningful safety cushion.

Step 2: Open your accounts (if you haven’t already). You’ll want a TFSA for XEQT and an RRSP for GICs. Wealthsimple lets you buy both XEQT and GICs in one platform, commission-free, which makes this about as painless as possible.

Step 3: Buy XEQT in your TFSA. Log in, search for XEQT, place a market or limit order. If you’re new to buying ETFs, I’ve written a complete guide on how to automate your XEQT purchases on Wealthsimple.

Step 4: Set up your GIC ladder in your RRSP. Split your GIC allocation across 1-year, 2-year, and 3-year terms. Look for the highest rates — online brokerages like Wealthsimple often offer better GIC rates than the big banks.

Step 5: Automate your contributions. Set up a recurring deposit (weekly, biweekly, or monthly) into your TFSA for XEQT purchases. For GICs, add lump sums when you have cash available or when a GIC matures.

Step 6: Rebalance once a year. Check your overall allocation every 12 months. Direct new contributions to whichever side has drifted below target. Use maturing GICs as a natural rebalancing opportunity.

Step 7: Adjust over time. As you get closer to retirement, you might shift from 80/20 to 70/30 to 60/40. As your time horizon shortens, the GIC side grows. This is a natural glide path that you control — no expensive target-date fund required.

That’s it. Two instruments. Two account types. One annual check-in. The barbell strategy is proof that simple doesn’t mean unsophisticated.

Final Thoughts

Investing doesn’t have to be all-or-nothing. You don’t have to choose between the stomach-churning volatility of 100% equities and the wealth-eroding “safety” of 100% GICs. The barbell strategy gives you a third option — one that Nassim Taleb would approve of and that your nervous parent or cautious friend might actually stick with.

My dad’s portfolio is now a 60/40 barbell. Sixty percent XEQT in his TFSA, forty percent GIC ladder in his RRSP. He checks it maybe twice a year. When the market dropped last spring, he shrugged and said, “My GICs are fine.” That was it. No panic. No selling at the bottom. No frantic phone calls.

For the first time in his life, he’s invested in the global stock market AND sleeping soundly. That’s the barbell working exactly as designed.

If you’re someone who’s been sitting on the sidelines because the stock market feels too risky, or if you’ve been 100% in GICs and know deep down that you need more growth — the barbell strategy might be the bridge that gets you where you need to be.

Start with whatever split feels right. Even a 50/50 barbell is dramatically better than 100% GICs over the long term. You can always adjust the weights later as your confidence grows.

The best time to start was yesterday. The second best time is right now.