Frequently Asked Questions

Should I avoid withholding tax completely? I keep hearing about VFV and VOO.

Most beginners hear about 15% withholding tax and greatly overestimate its impact especially when they are starting out.

The 15% only applies to dividends, so if you have a Canadian-listed ETF that gives out 2% in dividends, you are paying 15% * 2 = 0.30% in tax.

To try to eliminate this cost, you would have to hold a US-listed ETF in your RRSP instead. The common example is holding VOO instead of VFV in your RRSP.

However, there are currency costs and delay costs that do not make it clear if it is even worth the retail investor to do. You might also end up with a poorly allocated portfolio because you are basing your stock/ETF selection on one metric.

That’s why in his video on Asset Location, Ben Felix thinks just having the same asset mix across all accounts is going to be more than fine.

This explains why I have 100% XEQT in my TFSA, RRSP, RESP and FHSA.

I already started investing but I’m worried about my allocation. Is my portfolio diversified enough?

This is one of the most common questions from new investors. The good news? You don’t need the “perfect” portfolio to succeed.

Licensed financial advisor Ben Felix suggests a sensible baseline: roughly 1/3 domestic, 1/3 US, and 1/3 international stocks. But perfect is the enemy of good – we don’t know what the perfect portfolio is.

If your portfolio is reasonably close to this structure, or if you own an All-in-One ETF like XEQT, you’re most likely going to be fine. The difference between a “good” and “perfect” allocation is usually much smaller than the difference between investing and not investing at all.

Remember: as we discussed in Why It’s Hard to Beat the Market – even professionals struggle to optimize perfectly.

I own multiple ETFs that seem to overlap. Is this bad?

Not necessarily! Some overlap is normal and expected. The issue is when you own multiple funds that are essentially the same thing.

For example: VTI (US Total Market) and VOO (S&P 500) overlap significantly, but VTI is broader. That’s fine.

The problem: Owning both VFV and TDB902 (both track S&P 500) just creates extra complexity for no benefit.

Bottom line: A little overlap while building diversification is normal. Holding near-identical funds is just extra work.

I have XEQT. Should I add something else for income, growth, or diversification?

Almost always no. But this question keeps coming up, so let me explain why and how to think about it when it does.

It helps to be clear on what kind of question this is. Whether adding something to XEQT is “good” is not a fact anyone can hand you. Any ETF you add changes your allocation, and whether the new mix is better than what you had depends on what you are trying to do.

If you have decided to be a passive investor, you have already accepted the broad market as the neutral default. Under that approach, staying broad is not settling for less. It is the plan working as designed, and the burden is on any addition to justify why it belongs. Someone running an active strategy would weigh this differently, and that is a legitimate choice too. The point is that the answer depends on your own philosophy, not on whatever ticker is being suggested this week.

XEQT (or any of the all-in-ones) is already designed as a complete portfolio. It holds thousands of stocks across global markets, rebalances itself, and is built to be the only equity exposure most investors need. So why do beginners constantly want to add to it? Three patterns:

The income chase. “I want consistent income, so I’ll add some REITs or dividend stocks.” Selling 4% of your XEQT each year is economically identical to receiving a 4% dividend. Both reduce your remaining holdings by the same amount. Shifting toward dividend stocks usually means concentrating into fewer sectors (REITs, financials, utilities), which makes you less diversified than XEQT, not more. If you actually need to plan income from your portfolio, the retirement withdrawal calculator is the right tool, and it works on any diversified portfolio.

The growth chase. “XEQT is fine, but I want more upside, so I’ll add Nvidia or VFV.” This usually means concentrating into the US (which XEQT already holds at ~42%) or into specific tech names. To justify this, you’d need to believe these will outperform what the market already expects, and as we covered in why it’s hard to beat the market, that’s a hard game even for professionals.

False diversification. “I want more diversification, so I’ll add another ETF.” Most additions actually reduce diversification because they overlap with XEQT. Adding VFV means you’re now overweight US stocks. Adding XIC means you’re now overweight Canada. Diversification is about coverage, not about owning more tickers.

The common thread: any addition just changes your allocation. To know whether the new mix is better, you’d need a clear view of the added position’s expected return, its volatility, and how it correlates with XEQT. Most beginners can’t articulate any of those, which is why the answer is usually to leave it alone.

For a more thorough walkthrough, this video is the long-form version:

If a stock doesn’t pay dividends, why would the share price ever go up?

This is one of the most common sticking points for beginners, and it makes total sense as a question. With a savings account or a GIC, you can see compounding happening: interest gets paid, the balance ticks up, more interest gets paid on the bigger balance. With a dividend stock, the same intuition works: dividends arrive as cash, you reinvest, you own more shares. But with a non-dividend stock, nothing visible is happening. The price just goes up. Where does that come from?

The answer: a stock is a claim on a company. When the company makes profits and chooses not to pay them out as dividends, those profits stay inside the business. The company reinvests them into new products, new markets, more equipment, more staff. Over time, that reinvestment grows the company’s future earnings. The market sees the company as more valuable than it was last year, and the share price rises to reflect that.

Two contrasting examples help. Berkshire Hathaway has paid no dividend in roughly 60 years, yet it has compounded shareholder wealth at an extraordinary rate. All of that growth shows up in the share price, because all of the profits have been reinvested inside the business. Coca-Cola pays a substantial dividend, because at its size and maturity it doesn’t have many high-return places to put new money to work. Returning the cash to shareholders lets them deploy it elsewhere. Different mechanisms, same underlying engine: the company creates value, and you participate in it as a shareholder.

This is also why “dividend stocks” and “non-dividend stocks” aren’t really different strategies. They’re different ways the same value gets returned to you. As we covered in Total return and compounding, what compounds for you as an investor is your total return, regardless of which form it arrives in. The “where does the growth come from?” question has a clean answer; you just don’t see it the way you see a dividend hitting your account.

Everyone is saying how the market is going to go down. Should I wait or keep investing regularly?

For most long-term investors, keep investing regularly. This is a common concern, especially when facing economic uncertainties like potential tariffs or inflation. But it’s important to remember the principles we discussed earlier about market efficiency and positive expected returns.

These concepts explain why consistently investing in a globally diversified portfolio is generally more effective than trying to time the market. As we explored in the Navigating Market Volatility section, short-term market movements are unpredictable, but the overall trajectory of the global economy tends to be upward over time.

Important qualifier: This advice assumes you’re investing money you won’t need in the short term (at least 5+ years away). If you’re investing for a short-term goal, facing financial instability, or can’t emotionally tolerate potential losses, you might need to adjust your strategy or consider more conservative investments.

History has repeatedly shown that investors who stay the course and continue regular investments through market uncertainty typically outperform those who try to time their entries and exits. Each time you invest, you’re buying at prices that reflect all current concerns about tariffs, inflation, or other economic factors.

Remember, this applies to broad market investments, not individual stocks. The principles discussed in the section above still hold true regardless of current headlines or market fears.

Should I worry about the AI bubble, Trump’s policies, or other scary headlines?

The short answer: the news you’re reacting to is also the news the market is reacting to.

Whether the worry is AI valuations getting stretched, tariffs and policy uncertainty under a Trump administration, or geopolitical instability in the Middle East, the answer comes back to the same place: how market prices actually work. The price of XEQT today already reflects what millions of investors collectively think those risks are worth. If “AI is in a bubble” is something you’ve concluded from reading headlines, professional investors managing trillions of dollars have read the same headlines and adjusted their positions long before you or I had a chance to.

This does not mean the market is always right. It means that to act on your worry, you would need to believe you know something the rest of the market does not. As we covered in why it’s hard to beat the market, that is incredibly difficult to do consistently, even for full-time professionals.

What this looks like applied to specific worries:

• AI bubble or stretched valuations: Maybe. But if it is obvious enough for you to see, it is already in the price. There is also another side of the trade, professional investors who looked at the same data and decided current valuations are reasonable. You are not the only one who has noticed.
• Trump tariffs and policy uncertainty: Same logic. Every major bank and analyst has been modelling tariff scenarios for months. Whatever you read in the news this week, they read it weeks or months ago and prices reflect their collective best guess.
• Conflict in the Middle East or geopolitical instability: Conflict and uncertainty are not new. The market has priced through the Cold War, multiple oil shocks, 9/11, the wars in Iraq and Afghanistan, and Russia’s invasion of Ukraine. Markets tend to absorb difficult news faster than headlines suggest.
• Too much US in XEQT: See how to check if your portfolio is diversified. The short version is that cap-weighting reflects the actual size of those companies in the global economy, not a bias toward them.

An honest qualifier: this assumes you are investing money you do not need in the short term and that your overall allocation still matches your risk tolerance. If today’s news is making you genuinely anxious about your portfolio, the issue is more often that your allocation is too aggressive for you, not that the news is uniquely bad. The fix in that case is moving toward something like XBAL or VBAL, not jumping to a different theme or sitting on cash.

Should I check if the price is higher or lower than average before buying?

No. When you’re investing in a diversified ETF on a regular schedule, checking price charts or comparing to historical averages is just another form of market timing – and it’s not a useful one.

Here’s why: As we discussed in How Market Prices Actually Work, the current price already reflects what millions of investors collectively think the asset is worth right now. That price incorporates all publicly available information, including whether it’s “high” or “low” compared to historical levels.

The problem with waiting for “lower” prices:

If you’re planning to invest monthly in XEQT or VFV, checking whether today’s price is above or below some average assumes you know something the market doesn’t. But as we covered in Why It’s Hard to Beat the Market, that’s incredibly difficult even for professionals.

More importantly, this approach costs you time in the market. Remember the rigged coin analogy? Every day you delay investing because you’re waiting for a “better” price is like refusing to flip the coin that’s weighted in your favor.

What about when prices hit all-time highs?

This particularly confuses beginners – shouldn’t you wait if prices are at record levels? But think about it: in a growing economy, hitting new highs is literally what we expect to happen over time. The market hits all-time highs regularly, and investors who waited for a pullback often missed out on further gains.

The right approach:

For regular monthly investing in diversified ETFs:

1. Set your investment amount
2. Invest on a consistent schedule (same day each month works well)
3. Don’t look at whether it’s “high” or “low”
4. Just keep going

This aligns with what we discussed in Lump Sum vs DCA – the research shows that consistent investing without trying to time entry points typically produces better results than attempting to optimize purchase timing.

Exception: If you’re making a large one-time investment (like an inheritance), the lump sum vs DCA decision is worth considering. But even then, the question isn’t “is the market high?” – it’s about your risk tolerance and time horizon.

Should I switch to CAGE or get into factor investing?

Probably not as your starting point. But it’s worth understanding what the conversation is about, because you’ll see CAGE come up a lot in Canadian investing communities.

What factors are, briefly: Academic research (most famously the Fama-French models) has identified company characteristics that have historically been associated with higher long-term returns. Things like value (cheap stocks vs expensive), size (small companies vs large), and profitability. A “factor ETF” tilts its weights toward stocks that score well on these characteristics, instead of just holding companies in proportion to their market size like XEQT does.

What CAGE is: Avantis Canadian Equity ETF (CAGE) is a globally diversified all-in-one similar to XEQT in scope, but with tilts toward value and profitability factors. It still holds thousands of stocks across global markets, so it’s not a concentrated bet, but it weighs companies a bit differently than a pure cap-weighted approach. Performance over a typical year is usually within a few percent of XEQT in either direction.

Whether to use it: Factor investing has academic support, but it comes with conditions. The premiums show up over long periods (decades), not predictably year to year, so you need to be willing to underperform a plain index like XEQT for stretches without changing your mind. You also need to trust the implementation, since factor ETFs are more “active” than pure cap-weighting in how they choose weights.

For most beginners, the cap-weighted all-in-ones (XEQT, VEQT, ZEQT) remain the cleaner starting point. They’re the neutral default that requires no view about factors continuing to work. If you become genuinely interested in factor investing later, that’s the right time to evaluate something like CAGE. Going there first because of online hype is the same trap as picking individual stocks based on what’s trending.