Is XEQT Too Concentrated in US Stocks? Understanding the 45% American Allocation

I had this exact concern when I first started buying XEQT – my dad kept telling me I was too exposed to “those American companies.” He’d grown up watching Canadian businesses, worked his whole career at a Canadian firm, and the idea of almost half his retirement savings being tied to the US felt uncomfortable. “What happens when the Americans do something crazy?” he’d say, waving vaguely at the TV during some political news cycle.

And honestly? I understood where he was coming from. When you open your Wealthsimple app and see that roughly 45 cents of every dollar you’ve invested in XEQT is sitting in American stocks, it can feel like you’re making a massive bet on one country. You’re supposed to be diversified. You’re supposed to own “the whole world.” So why is nearly half your money parked south of the border?

This question comes up constantly on Reddit, in investing Discord servers, and in the emails I get from readers. It might be the single most common concern I hear about XEQT. And after spending a ridiculous amount of time digging into the numbers, reading Vanguard and BlackRock whitepapers, and running historical simulations, I’ve come to a conclusion that might surprise you: 45% US isn’t too much. If anything, XEQT is actually underweight the United States relative to a pure market-cap approach.

Let me show you why.

1. XEQT’s Current Geographic Breakdown: Where Your Money Actually Goes

Before we can talk about whether the US allocation is “too much,” let’s get the actual numbers on the table. When you buy a share of XEQT, your money gets split across four underlying iShares ETFs, each covering a different region:

So yes, the US is the single largest geographic allocation at roughly 45%. That’s almost twice the allocation to Canada, more than double the international developed markets, and over four times the emerging markets allocation.

When you look at it that way, I get why people feel uneasy. But the thing is, you can’t evaluate a geographic allocation in isolation. You need to compare it to something – and the most logical comparison is global market capitalization.

2. Why 45% US Isn’t Actually Overweight – It’s Underweight

Here’s the fact that changed my entire perspective on this: the United States represents approximately 60-63% of global stock market capitalization.

Let me say that again. If you took every publicly traded company on earth and added up their market values, American companies would account for roughly six out of every ten dollars. That’s not opinion – it’s just math. Companies like Apple, Microsoft, NVIDIA, Amazon, Alphabet, and Meta are so enormously valuable that the US dominates global equity markets in a way no other country comes close to matching.

Now look at what XEQT gives you: 45% US exposure.

That means XEQT is actually underweight the United States by about 15-18 percentage points compared to a pure market-cap weighted global portfolio. If BlackRock had simply allocated based on market cap, you’d have closer to 60% US, not 45%.

Here’s what a pure market-cap allocation would look like versus what XEQT actually does:

The surprise isn’t that XEQT has too much US. The surprise is that it has too little US – at least by a strict market-cap standard. The real outlier in XEQT’s allocation isn’t the 45% American exposure. It’s the 25% Canadian exposure, which overweights Canada by roughly 8x its actual share of global markets. (I’ve written extensively about why this home country bias is actually a deliberate and beneficial design choice, but that’s a separate conversation.)

If someone on Reddit tells you XEQT is “too American,” ask them what they think the US share of global market cap actually is. Most people guess somewhere around 30-40%. When you tell them it’s over 60%, the 45% allocation suddenly looks a lot more reasonable.

3. What the US 45% Actually Gives You: Sector Diversity Within a Country

One of the misconceptions about US exposure is that it’s all the same type of company. People hear “US stocks” and think of Silicon Valley tech giants. But the reality is that the American stock market is one of the most sector-diverse markets on the planet.

When you hold the US through ITOT (which is what XEQT uses for its American allocation), you own companies across every major industry:

• Technology: Apple, Microsoft, NVIDIA, Broadcom, Adobe, Salesforce
• Healthcare: UnitedHealth, Johnson & Johnson, Eli Lilly, Pfizer, Abbott Labs
• Financials: JPMorgan Chase, Berkshire Hathaway, Bank of America, Goldman Sachs
• Consumer Discretionary: Amazon, Tesla, Home Depot, McDonald’s, Nike
• Industrials: Caterpillar, Honeywell, Union Pacific, Deere & Company
• Energy: ExxonMobil, Chevron, ConocoPhillips
• Consumer Staples: Procter & Gamble, Coca-Cola, Costco, Walmart
• Communication Services: Alphabet (Google), Meta, Netflix, Disney
• Utilities: NextEra Energy, Duke Energy, Southern Company
• Real Estate: Prologis, American Tower, Equinix
• Materials: Linde, Sherwin-Williams, Freeport-McMoRan

That’s not a concentrated bet. That’s the most diversified single-country stock market in the world. For a deeper look at how these sectors blend together in your overall portfolio, check out the full sector breakdown I’ve put together.

Compare that to Canada’s stock market, where financials (the Big Five banks plus insurers) and energy (oil sands companies) together make up over half the index. If you’re worried about concentration risk, the US allocation is actually the antidote, not the problem.

4. The Canada Overweight Debate: 25% for a 3% Market

If we’re going to talk about concentration, we should talk about the real elephant in the room: Canada.

XEQT gives 25% of your portfolio to Canadian stocks. Canada represents roughly 3% of global stock market capitalization. That’s an 8x overweight – far more dramatic than anything happening with the US allocation.

The Canadian stock market is dominated by:

• Financials: Royal Bank, TD, Scotiabank, BMO, CIBC, Manulife, Sun Life
• Energy: Canadian Natural Resources, Suncor, Cenovus, Imperial Oil
• Materials: Barrick Gold, Nutrien, Teck Resources

Those three sectors alone account for roughly 55-60% of the S&P/TSX Composite. When you buy 25% of your portfolio in Canadian stocks, you’re effectively making a concentrated bet on Canadian banks and oil companies.

Now, there are excellent reasons for this overweight – currency alignment, the eligible dividend tax credit, reduced foreign withholding tax, and regulatory familiarity. I’ve laid all of this out on my home country bias page. But the point here is this: if you’re worried about geographic concentration, the Canada allocation deserves far more scrutiny than the US allocation.

The 45% US allocation across thousands of companies in eleven sectors is actually the most diversified piece of your XEQT portfolio. The 25% Canada allocation across a couple hundred stocks heavily weighted toward two sectors is where the real concentration lives.

5. Historical Performance: US-Heavy vs. Globally Balanced Portfolios

One of the strongest arguments people make against heavy US exposure goes something like this: “US stocks have outperformed recently, but that won’t last forever. You’re performance-chasing.”

And to be fair, there’s some truth in the concern. US stocks have been on an absolute tear for the last 15 years, driven largely by the growth of Big Tech. From 2010 to 2024, the S&P 500 crushed virtually every other major market. It’s natural to wonder whether that dominance will continue.

But here’s what the historical data actually shows across different decades:

Leadership rotates. The US dominated the 1990s and 2010s. International markets led in the 1970s and 1980s. Emerging markets were the star of the 2000s. No region wins forever.

This is exactly why XEQT’s geographic diversification across all four regions makes sense. You’re not betting that any single region will keep winning. You’re making sure you own the winner, whoever it turns out to be.

6. The “Lost Decade” Lesson: What Happens When the US Stumbles

The 2000-2009 period is the most instructive case study for anyone worried about US concentration. During this decade, the S&P 500 delivered a total return of roughly -9.1% – that’s negative, over ten full years. If you had put $10,000 into US stocks at the start of 2000, you’d have had about $9,090 at the end of 2009. A decade of your investing life, gone.

But here’s what happened elsewhere during those same ten years:

• International developed markets returned roughly +16% total (modestly positive)
• Emerging markets returned roughly +154% total (a massive gain)
• Canadian stocks returned roughly +85% total (a strong gain, driven by a commodity boom)

If you had a portfolio like XEQT during this period – with 45% US, 25% Canada, 20% international developed, and 10% emerging markets – you would have still been in positive territory, even while the US was underwater. Your Canadian and emerging market holdings would have more than compensated for the US weakness.

This is the beauty of the allocation. The 45% US isn’t a bet that the US will always win. It’s a recognition that the US is the largest and most diverse market in the world, and it should get the largest allocation – but it’s cushioned by meaningful allocations to three other regions that can pick up the slack when America stumbles.

Could the 2000s happen again? Absolutely. And if they do, you’ll be glad you didn’t pile even more into US stocks than XEQT already holds. But you’ll also be glad you didn’t cut your US allocation to 20%, because when the inevitable recovery comes (and it always has, historically), you want enough US exposure to participate in the rebound.

7. The Problem with Reducing US Exposure

Let’s say you’re still uncomfortable with 45% US and you want to reduce it. What happens when you actually try to do this?

You only have three options:

Option A: Add more Canada. You buy additional XIC alongside XEQT. But you’re now increasing your allocation to a market that’s only 3% of global cap, dominated by banks and oil. You’ve traded perceived US concentration for actual Canadian concentration. Your sector breakdown tilts even more heavily toward financials and energy.

Option B: Add more international developed. You buy additional XEF alongside XEQT. This gets you more Europe and Japan – economies that have grown significantly slower than the US over the past two decades. European markets come with their own risks: slower GDP growth, complex regulatory environments, demographic challenges, and political fragmentation. You might be reducing US risk, but you’re adding European risk.

Option C: Add more emerging markets. You buy additional IEMG or XEC alongside XEQT. Emerging markets offer higher growth potential, but also higher volatility, political risk, currency risk, and governance risk. China alone makes up a large portion of emerging market indices, and investing heavily in Chinese equities carries its own concentration concerns.

The uncomfortable truth is that every geographic allocation has risks. When you reduce US exposure, you’re not reducing risk in general – you’re trading one set of risks for another. And in most cases, you’re trading the risks of the world’s most regulated, most liquid, most sector-diverse stock market for the risks of less regulated, less liquid, more concentrated markets.

That doesn’t mean the US is risk-free. But it does mean that “just reduce the US” isn’t the obvious improvement people think it is.

8. The Magnificent 7 Problem: Concentration Within the US Allocation

Alright, here’s the counterargument that actually has some teeth: a significant chunk of the US allocation is concentrated in a small number of mega-cap technology companies.

As of early 2026, the so-called “Magnificent 7” – Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, and Tesla – represent roughly 25-30% of the total US stock market’s capitalization. Since XEQT has 45% in US stocks, that means roughly 11-14% of your entire XEQT portfolio is in just seven companies.

That is a legitimate concentration concern, and I won’t pretend otherwise.

However, a few things are worth keeping in mind:

This isn’t a flaw in XEQT’s design – it’s a reflection of market reality. These companies are massive because investors around the world have collectively decided they’re enormously valuable. A market-cap-weighted index should reflect that.

It’s self-correcting. If these companies become overvalued and their stock prices decline, their weight in the index automatically decreases. You don’t have to do anything. The index rebalances for you. If Apple drops 50%, your exposure to Apple drops roughly 50% too. Market-cap weighting naturally reduces your position in declining companies.

It has always been this way. In the 1970s, the “Nifty Fifty” (Xerox, Polaroid, Kodak) dominated. In the 1990s, it was GE, Cisco, and Intel. In the 2000s, it was ExxonMobil and the energy giants. Mega-cap concentration is a feature of market-cap weighting, and it changes over time as leadership rotates.

The rest of ITOT provides ballast. Even though the Magnificent 7 are large, ITOT still holds approximately 3,500 other US companies. Mid-caps, small-caps, and thousands of companies you’ve never heard of are all in there, providing diversification beyond the mega-cap names.

If the Magnificent 7 concentration truly bothers you, the answer isn’t to reduce your US allocation. It’s to consider whether you want a different weighting methodology altogether (like equal-weight or factor-based). But that’s a fundamentally different question from “is 45% US too much.”

9. Should You Add XEF or XEC to “Dilute” Your US Exposure?

I see this suggestion constantly: “If you’re worried about US concentration in XEQT, just buy extra XEF or XEC on the side to bring your US percentage down.”

In theory, this works. If you put 80% in XEQT and 20% in XEF, your effective US allocation drops from 45% to roughly 36%, and your international developed allocation rises from 20% to about 36%. You’ve “diluted” the US.

But here’s why I’d think twice before doing this:

You’re overriding BlackRock’s allocation. The asset allocation team at BlackRock – a firm managing over $10 trillion – designed XEQT’s geographic split after extensive research into expected returns, correlations, currency effects, and tax implications for Canadian investors. When you bolt on extra XEF, you’re essentially saying “I know better than BlackRock’s quant team.” Maybe you do. But probably you don’t.

You lose the simplicity benefit. The entire point of an all-in-one ETF like XEQT is that you buy one thing and you’re done. The moment you start adding satellite holdings to adjust the allocation, you’ve created a multi-ETF portfolio that needs periodic rebalancing. You’re back to making timing and allocation decisions – the exact decisions XEQT was designed to eliminate.

You might be solving a problem that doesn’t exist. As we’ve established, 45% US is actually an underweight relative to global market cap. Adding more international to bring it down further means you’re now significantly underweight the world’s largest and most diverse stock market. You need a strong conviction that international markets will outperform the US going forward to justify this bet.

Tax drag on rebalancing. In a non-registered account, selling XEQT or XEF to rebalance can trigger capital gains taxes. With XEQT alone, BlackRock handles rebalancing internally, within the fund, with no taxable events for you.

My honest take: for the vast majority of Canadian investors, XEQT on its own is more than enough. If you genuinely want to reduce US exposure after understanding all of the above, that’s your right. But make sure you’re doing it based on analysis, not anxiety.

10. The Bottom Line: XEQT’s US Allocation Is Well-Researched and Reasonable

Let me bring this all together.

XEQT’s 45% US allocation is:

• Lower than pure market-cap weighting would suggest (the US is ~60-63% of global markets)
• The most sector-diversified piece of your portfolio (eleven sectors vs. Canada’s concentration in financials and energy)
• Historically validated (US markets have delivered strong long-term returns while other regions provide diversification during US downturns)
• Automatically rebalancing (if US markets decline, your US weight naturally decreases)
• Deliberately chosen by BlackRock’s asset allocation team after decades of research into optimal portfolio construction for Canadian investors

Is it perfect? No allocation is perfect. The Magnificent 7 concentration is a legitimate concern, and there will be periods when the US underperforms and you wish you had less exposure. The lost decade of the 2000s could absolutely happen again.

But here’s what I’ve come to believe after years of researching this: the risk of tinkering with XEQT’s allocation is greater than the risk of leaving it alone. Every adjustment you make introduces a new bet – a bet that you’re smarter than BlackRock’s models, that you can time geographic rotations, that you know which region will outperform next. Those are exactly the kinds of bets that passive investing is designed to help you avoid.

My dad eventually came around, by the way. It took a few conversations and one memorable spreadsheet I made him over Christmas dinner, but he finally understood that 45% US isn’t a blind bet on America – it’s a reflection of economic reality, cushioned by meaningful allocations to Canada, international developed, and emerging markets. He bought his first shares of XEQT the following January.

The best thing you can do with XEQT’s geographic allocation is understand it, accept it, and then stop thinking about it. Set up your automatic contributions, let BlackRock handle the rebalancing, and focus your energy on the things that actually matter for your long-term wealth: your savings rate, your time in the market, and your ability to stay the course when markets get rocky.

That’s the boring answer. It’s also the right one.