S&P 500 vs XEQT in Canada 2026: Which Should You Buy? The 5-Year Math on $100K

The Verdict First: XEQT Is the Default, the S&P 500 Is a Bet

Here is the position upfront. For the core of a long-term Canadian portfolio, XEQT is the better default — not because it will outperform, but because it removes the single decision most investors get wrong: how much to bet on one country. An S&P 500 ETF is the better choice only when you are making that bet deliberately, with a reasoned view that US large-cap stocks earn their premium, and you can hold the position through a decade where the bet goes against you.

The numbers behind that verdict are not close on recent history. Over the five years to May 31, 2026, VFV — the Vanguard S&P 500 Index ETF, the most popular way Canadians own the index — returned 16.86% annualized, against XEQT's 14.18% (both figures from the issuers' own performance pages). On a $100,000 portfolio that compounds to roughly $217,900 versus $194,100. A $23,800 gap is real money, and it is the reason this comparison gets searched thousands of times a month.

The part most people miss: in the 12 months to May 31, 2026, XEQT beat VFV — 30.87% to 30.20%. Canadian banks and international markets carried the diversified fund past the US index. One year proves nothing on its own, but it demonstrates the thing the five-year table hides: the gap is a bet on continued US outperformance, and bets sometimes lose. XEQT is also the #2 pick in our ranked list of the best index funds in Canada for 2026, precisely because it makes the country decision for you at a defensible cost.

The Side-by-Side: S&P 500 vs XEQT on Every Metric That Matters

The comparison below uses VFV and ZSP as the S&P 500 proxies because they are the two largest Canadian-listed routes to the index. All fee and allocation figures are issuer-verified as of June 2026; returns are NAV total returns to May 31, 2026.

One structural point before the math: XEQT already contains the entire S&P 500. Its US sleeve — the iShares Core S&P Total US Stock Market holdings, roughly 45% of the fund as of June 2026 — includes every S&P 500 company plus thousands of US mid- and small-caps. The question is never "S&P 500 or no S&P 500." It is "the S&P 500 at 45% of my portfolio, or at 100%."

The 5-Year Math: $217,900 vs $194,100 on a $100K Start

Compound the issuer-reported five-year returns on a $100,000 portfolio and the gap looks decisive. VFV's 16.86% annualized grows $100,000 to about $217,900. XEQT's 14.18% grows it to about $194,100. That $23,800 difference is what drives most people searching this comparison to conclude the S&P 500 is simply better.

Now name what produced it. Nearly all of that gap came from one phenomenon: US mega-cap technology stocks re-rating upward, a run that also made the S&P 500 progressively more concentrated in its largest names. The five-year table is not measuring two strategies under neutral conditions — it is measuring one specific regime in which the concentrated fund's biggest holdings happened to be the world's best performers. Project that regime forward and the S&P 500 wins again. Assume any reversion toward international or Canadian equities, and the gap narrows or flips — exactly what the most recent 12 months showed, with XEQT at 30.87% against VFV's 30.20%.

I'd put it this way to a client: the five-year scoreboard is the reason to ask the question, but it is the worst possible reason to answer it. Past performance is the one input you can be certain will not repeat on schedule. The honest inputs are your country-concentration tolerance, your account structure, and whether you would genuinely hold a 100%-US portfolio through five years of US underperformance without capitulating at the bottom.

Fees: The 0.11% Gap Is Real — and It Is Not the Decision

VFV and ZSP each carry a 0.09% MER; XEQT charges 0.20% (issuer pages, June 2026). On $100,000 that is $90 a year against $200 — a $110 annual difference. Over 25 years, with compounding, the fee gap costs an XEQT holder a few thousand dollars relative to the S&P 500 fund. Meaningful, but an order of magnitude smaller than the swing the allocation decision itself produces, and XEQT's extra 0.11% buys automatic rebalancing across four regions you would otherwise manage yourself.

Keep the fee stakes in perspective: both of these funds sit at the cheap end of Canadian investing. The expensive mistake in this country is not XEQT's 0.20% — it is the 2%-MER bank mutual fund, a gap we work through in detail in our ETF vs mutual fund comparison. If you are choosing between VFV and XEQT, you have already won the fee war. Do not let a $110-a-year difference push you into a concentration you do not want.

The Country Bet Nobody Prices In

Buying the S&P 500 instead of XEQT is a decision to put 100% of your equity portfolio in one country's large-cap market — and to concentrate further in whatever that index's biggest sectors happen to be. That has been a winning trade. It is also precisely the structure that has, at other points in market history, gone wrong for a decade at a time: investors who held only their home country's star market through its peak have repeatedly waited 10+ years to recover in real terms.

XEQT's counter-offer is structural humility. At roughly 45% US, 25% Canada, 24% international developed, and 5% emerging markets, it concedes some upside in any single market's boom in exchange for never being fully exposed to any single market's lost decade. It also rebalances automatically — trimming whichever region has run and topping up whichever has lagged — which is the discipline most self-directed investors claim they will apply manually and rarely do.

Two clarifications that decide edge cases. First, if your real shortlist is one-fund all-equity portfolios, the closer comparison is XEQT vs VEQT — same philosophy, different Canadian weight. Second, none of this applies to money you need within five years: an all-equity fund of either kind is the wrong vehicle for a house down payment or an emergency fund, where GICs, bonds, or a HISA — or a cash ETF — do the job without sequence risk.

Tax and Withholding: Where the Two Funds Tie

The tax mechanics are a near-wash, which surprises people who expect the US fund to behave differently. Both VFV/ZSP and XEQT are Canadian-listed funds that hold their US stocks through underlying US-listed ETFs. The US therefore applies its Canada-US treaty withholding rate of 15% to dividends before they reach the Canadian fund — a mechanic documented in both BlackRock's and Vanguard's own withholding-tax guides.

• TFSA: the 15% withholding on US dividends is unrecoverable for both funds. The treaty exemption protects RRSPs holding US-listed funds directly; it does not extend to TFSAs or to Canadian-listed wrappers. The cost is modest — 15% of a low single-digit dividend yield — and identical in kind for both funds.
• RRSP: same story. Because both funds are Canadian-listed wrappers around US-listed ETFs, the RRSP's treaty exemption does not apply. Holding a US-listed S&P 500 ETF directly in an RRSP avoids the withholding, but adds USD conversion costs and US estate-tax paperwork considerations that are not worth it for most portfolios under seven figures.
• Taxable account: the 15% withholding generates a foreign tax credit, so it is largely recovered. Capital gains on sale are taxed at the 50% inclusion rate in 2026 (the proposed two-thirds increase was cancelled March 21, 2025 and never took effect) — a $10,000 gain means $5,000 of taxable income, roughly $2,677 of tax at Ontario's 53.53% top rate. XEQT's Canadian dividend slice gets the dividend tax credit, a small edge in taxable accounts.

Net of all of it: the account wrapper decides far more than the fund choice. Fill the TFSA ($7,000 of new room in 2026, $109,000 cumulative since 2009) and RRSP (up to $33,810 for 2026) before optimizing withholding pennies.

Which S&P 500 ETF: VFV vs ZSP vs XUS

If the verdict for you is the S&P 500, the ticker choice barely matters — and that is the point of this table. All three figures below are issuer-verified, June 2026.

All three are unhedged: your return includes the US dollar's movement against the loonie, which over multi-decade horizons tends to wash out and occasionally cushions US equity drawdowns (the USD often strengthens when markets fall). The hedged versions remove that currency exposure at the cost of tracking drag — a reasonable tool for a specific currency view, the wrong default for 25-year money.

Which Wins for Each Use Case — the Decision Grid

The Halal Verdict: Both Funds Fail the AAOIFI Screen

For Muslim investors, this comparison has a short answer: neither. Under AAOIFI Shari'ah Standard 21, a compliant fund cannot hold companies earning more than 5% of revenue from interest-based finance, and must keep interest-bearing debt and cash-plus-interest-securities each at or below 30% of market capitalization. The S&P 500 carries roughly 11-13% in financials — conventional banks and insurers whose core business is interest. XEQT is materially worse on this axis at roughly 23% financial services, because its Canadian sleeve is anchored by the Big Six banks.

The compliant alternative is a purpose-built Shariah-screened fund — Wahed's HLAL, SP Funds' SPUS, or Wealthsimple's WSHR — re-screened against current holdings before buying and confirmed with a qualified scholar. Our ranked guide to the best halal ETFs in Canada for 2026 runs the full screen on each option, including fees and what each fund excludes.

The Bottom Line: Decide the Allocation, Not the Trailing Return

The S&P 500 vs XEQT question is really one question wearing two tickers: how much of your portfolio belongs in one country? If your honest answer is "all of it, by conviction, through whatever the next decade brings," VFV or ZSP at 0.09% is the cheapest clean expression of that view, and the five-year record — $217,900 vs $194,100 on $100,000 — shows what the bet pays when it works. If your honest answer is "I do not know, and I do not want my retirement depending on getting it right," that answer is XEQT, and the 0.20% MER is the price of never having to know.

My default for most long-term investors is XEQT, with a deliberate, sized XEQT-plus-VFV tilt for those who want more than 45% US exposure. What I'd steer every client away from is the third path most people actually take: buying whichever fund won the last five years, then switching after the other one wins the next three. The 12 months to May 2026 — XEQT 30.87%, VFV 30.20% — is the cheapest lesson the market will ever offer on why that strategy fails.