The TSX Composite Index has an exposure of 28% to energy and 14% to the materials sector. The past few days, in which the TSX Index fell triple digits for three straight days, indicate that such a high weighting to the commodities sector can be dangerous. Globe and Mail columnist, Rob Carrick, has written a timely column on reducing exposure to the volatile commodities sector using the iShares (The old iUnits ETFs are now called iShares) Dividend Index Fund (XDV) and some of the iShares sector ETFs like the XEG (Energy) and XMA (Materials).

My personal opinion is that the Canadian market is narrow and shallow enough that investors can slowly build up positions in different industries using representative equities. For instance, the financial sector can be represented by two banks and one insurance company, energy by a senior and an intermediate producer and utilities by one electricity producer and one pipeline company. Some sectors like health care, consumer staples and information technology have better representation in US equities.