Investing in the ETF market has become increasingly popular among Canadians, but not all options are created equal. One such example is the XEQT ETF, which has been criticized for being a suboptimal choice for Canadian investors. While it offers exposure to global equities, its structure and fees may not align with the best interests of long-term investors.

The XEQT ETF is designed to provide broad exposure to global markets, including the U.S., Europe, and emerging markets. However, its heavy weighting towards Canadian equities raises concerns. Canada represents a relatively small portion of the global economy, yet the ETF allocates a significant portion of its holdings to Canadian stocks. This over-concentration can limit diversification and expose investors to unnecessary risks tied to the Canadian market.

Another issue is the ETF's fee structure. While it is marketed as a low-cost option, there are other ETFs available that offer similar global exposure at even lower fees. Over time, these seemingly small differences in fees can compound, significantly impacting overall returns. For investors focused on maximizing their long-term gains, opting for a more cost-effective alternative could be a smarter move.

Additionally, the XEQT ETF's approach to currency hedging has been questioned. Currency fluctuations can have a substantial impact on returns for Canadian investors holding international assets. The ETF's lack of a clear hedging strategy may lead to unpredictable outcomes, especially during periods of volatile currency movements.

For Canadians looking to build a diversified portfolio, it’s essential to carefully evaluate the pros and cons of any ETF. While the XEQT ETF may seem like a convenient one-stop solution, its limitations in diversification, fee structure, and currency management make it a less-than-ideal choice for many investors. Exploring other options with better global exposure and lower costs could lead to more favorable outcomes in the long run.