Diversification · 6 min read

Home bias: Canada is about 3% of the world's stock market

Investors in almost every country hold more of their own market than its share of the world. For Canadians that means leaning on a small, lopsided market. There are real arguments on both sides.

Canadian figures after inflation, in CAD, unless noted. Updated October 2026.

How small is 3%?

Add up the value of every listed company in the world, large and small, in developed and emerging markets, and Canada's share is about 3%. In MSCI's broadest world index (ACWI IMI, September 30, 2026), the United States is about 63%, Japan about 6%, and Canada sits fifth at about 3%, just behind the United Kingdom.

Holding much more of your own country than that is called home bias. It isn't unique to Canada: investors everywhere do it. The question is whether a home tilt is a deliberate choice with reasons behind it, or an accident of familiarity.

World weights: MSCI ACWI IMI factsheet, Sep 30, 2026. TSX figures: iShares XIC holdings, Oct 26, 2026.

A market built on banks, oil and mines

Size is only half the story. The Canadian market is also concentrated. Financials, energy and materials together make up about 68% of the TSX Composite. The Big Six banks alone are about 23%. Health care barely exists, and technology is a much smaller slice than in the US.

Source: iShares XIC and State Street SPY holdings files, Oct 26, 2026. Five of eleven sectors shown.

The US has its own concentration, in the other direction: technology is about 40% of the S&P 500, and its largest company is 7.9% of the index on its own. A fund that owns the whole world by market value spreads both bets across many countries and industries.

Countries take turns

If one country reliably led, concentrating there would make sense. History says leadership rotates. Across the 49 calendar years from 1977 to 2025, 18 different countries had the best-performing stock market at least once (in US dollars, so countries are comparable). Canada topped the list once and the US three times.

Whole decades flip too. Japan ranked 2nd of 16 markets in the 1980s, then last of 20 in the 1990s. The US ranked 19th of 21 in the 2000s, then 1st of 21 in the 2010s. Nobody announced either turn in advance. The year-by-year country grid in the interactive guide shows how often the order reshuffles.

Canada vs the world, 1977–2025

Over the full period, after inflation and before fees, Canadian stocks alone grew about 7.1% a year. A portfolio holding every country at its world weight grew about 8.6%. A blend with roughly a quarter in Canada landed between them, at about 8.2%.

The world didn't win every stretch. Looking at 40 overlapping ten-year periods (ending each December from 1986 to 2025), Canada beat the world portfolio in 13 of them. And Canada's worst ten-year stretch, the decade to 1990, was milder than the world portfolio's worst: about +1.9% a year after inflation, against about −3.2% a year for the world in the decade to 2009, which took in both the technology crash and 2008. The blend's worst decade, also the one to 2009, was about −1.7% a year. The guide's Canada vs the world slide plots all three.

Why many Canadians tilt toward home anyway

There are reasons a Canadian might deliberately hold more than 3% at home:

• Taxes. In a taxable account, dividends from Canadian companies qualify for the dividend tax credit. Foreign dividends can lose a slice to foreign withholding tax, and how much depends on the type of account.
• Currency. Spending happens in Canadian dollars, and Canadian stocks add no exchange-rate swings.
• Cost and convenience. Canadian-listed funds are cheap and easy to hold. Familiarity, though, is a feeling, not a reason.

The currency argument cuts both ways. The loonie has tended to fall when stocks fall: from 1977 to 2026, monthly moves in the US dollar against the Canadian dollar had a correlation of about −0.43 with Canadian stock returns. That made foreign stocks a cushion in bad years. In 2008, US stocks lost about 36.7% in US dollars but only about 21.5% for a Canadian, because the US dollar rose about 23.9% against the loonie. Canadian stocks lost about 34.1% that year.

The trade-offs

A portfolio that is mostly Canadian is a bet on a few sectors and a few dozen large companies. For someone whose job is in the same industries, such as banking, energy or mining, it can double up on one risk: a bad stretch for those industries can hit the paycheque and the portfolio at the same time.

Many people land somewhere in the middle. The largest all-in-one ETF families hold about 24% to 30% of their stocks in Canada (issuer fact sheets, September 30, 2026). That is roughly eight to ten times Canada's world weight, yet still leaves most of the portfolio spread across other countries. A common approach is to treat the home share as a decision with reasons attached, rather than a default.

Educational, not investment advice. The same information is shown to every reader and doesn't consider anyone's situation. Past returns don't guarantee future results.