The 1 Strategic Canadian ETF I’d Make Sure Every TFSA Includes

Canadian investors naturally tend to have some home country bias, and that is not always a bad thing. There are legitimate advantages to owning Canadian stocks, such as tax efficiency and lower currency risk.

Many investors feel more comfortable owning businesses they recognize, use regularly, and understand. Canada also has several strong sectors, including banks, pipelines, railways, and energy infrastructure.

Still, too much home country bias can become a problem. Canada is only a small part of the global equity market, yet many Canadians hold portfolios heavily concentrated in domestic stocks. That creates sector concentration risk, especially in financials, energy, and commodities, and causes you to miss sectors the Canadian market lacks, such as technology.

It is also worth remembering that many Canadians already have substantial economic exposure to Canada outside their investment portfolios. Your employment income is likely tied to the Canadian economy. If you own a home or investment property, your real estate exposure probably is, too.

Concentrating your investment portfolio heavily in Canadian stocks on top of that can unintentionally stack even more of your financial future onto a single country and economy.

What XAW does

One of the easiest ways to balance that out is by owning one exchange-traded fund (ETF) that holds the entire world outside Canada, essentially. That is what iShares Core MSCI All Country World ex Canada Index ETF (TSX:XAW) does.

XAW tracks a globally diversified portfolio of developed and emerging market stocks outside Canada using underlying index funds. That gives investors exposure to thousands of companies across the United States and in developed and emerging international markets. You get small, mid, and large-cap stocks along with exposure to all 11 market sectors.

The fund charges an expense ratio of 0.22% and currently offers a trailing 12-month yield of 1.2%. Over the trailing 10-year period with dividends reinvested, XAW has delivered a solid 12.94% annualized return.

How much Canada should you hold?

For Canadian investors already holding domestic stocks elsewhere, XAW can be an efficient diversification tool. In a Tax-Free Savings Account (TFSA), XAW can be a simple way to build global diversification around an existing Canadian core.

Personally, I think pairing XAW with a moderate Canadian stock allocation often makes the most sense. Many all-in-one ETFs keep Canadian equities around 20% to 30% of the portfolio.

That gives you some home country exposure without letting Canada dominate the entire account. Of course, you can adjust this however you wish, but it’s best not to tinker too much once your allocation is set beyond annual rebalancing.

The post The 1 Strategic Canadian ETF I’d Make Sure Every TFSA Includes appeared first on The Motley Fool Canada.

Should you invest $1,000 in iShares Core Msci All Country World Ex Canada Index ETF right now?

Before you buy stock in iShares Core Msci All Country World Ex Canada Index ETF, consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and iShares Core Msci All Country World Ex Canada Index ETF wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have over $18,000!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 94%* – a market-crushing outperformance compared to 85%* for the S&P/TSX Composite Index. Don’t miss out on our top 10 stocks, available when you join our mailing list!

Get the 10 stocks instantly #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of April 20th, 2026

More reading

• 1 TSX Consumer Stock That Could Bounce Back Fast
• BCE’s Dividend Has Been Getting a Lot of Attention — Here’s Why
• 1 Incredible TSX Dividend Stock to Buy While it’s Down 50%
• Why Canadian Dividend ETFs Could Be the Simplest Way to Defend Your Portfolio
• Here’s an Ideal TFSA Dividend Stock That Pays Consistent Cash

Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.