US Market Concentration Risk for Canadians

By Shea Sanche, CFP® · Last reviewed: April 2026

What Is Concentration Risk?

Concentration risk is the danger of having too large a portion of your portfolio in a single market, sector, or asset class. When that concentration performs well, it feels like smart investing. When it reverses, the losses are disproportionate - and the psychological impact can lead to costly behavioural errors.

The US Market's Dominance

The S&P 500 has dramatically outperformed global equities over the past 15 years. This has led many investors - and advisors - to significantly overweight US equities. But much of this outperformance is attributable to valuation expansion, not earnings growth. Current US equity valuations are historically elevated relative to the rest of the world.

The Hidden Concentration in Canadian Portfolios

Many Canadian investors own US equities both directly (through S&P 500 index funds) and indirectly (through global equity funds that are 60-70% US). A portfolio that appears diversified may have 50-70% US equity exposure when all layers are examined.

What the Evidence Says About Global Diversification

Academic research consistently shows that global diversification reduces volatility without meaningfully reducing long-term expected returns. International and emerging market equities trade at significant valuation discounts to US equities - which historically predicts higher future returns.

A Practical Framework

Rather than making a dramatic reallocation, consider: reviewing your total US equity exposure across all funds; comparing current valuations between US and international markets; establishing a target global allocation and rebalancing toward it systematically; and ensuring your asset allocation reflects your goals and risk tolerance - not just recent performance.

Common Questions

Answers to the questions people actually ask.

How do financial advisors in Canada get paid?

Common models include AUM fees, fee-for-service, commissions, or blended arrangements. What matters is understanding incentives and whether you receive coordination beyond investments.

What is a normal advisor fee in Canada?

Fees vary by service and complexity. Instead of comparing a single percentage, evaluate what the fee includes: planning outputs, coordination, accountability, and improved net outcomes.

Are financial advisors worth it in Canada?

They can be when the relationship coordinates investments, tax, estate, and decisions as a system. They are less valuable when the service is limited to reporting and portfolio-only management. ← Back to all articles

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US Market Concentration Risk: What It Means and What Canadian Investors Should Do