XEQT vs XBAL: Which iShares All-in-One ETF is Right for You?

Choosing between XEQT and XBAL is a common dilemma for Canadian investors who want a simple, all-in-one portfolio.

Both are excellent iShares asset allocation ETFs, but they take very different approaches to risk and return. The right choice depends on your age, risk tolerance, and investment timeline.

This guide compares XEQT vs XBAL across all key metrics to help you make the right decision.

Quick Comparison: XEQT vs XBAL

Key difference: XEQT is 100% stocks for growth, XBAL is 60/40 for stability.

Asset Allocation Breakdown

XEQT (100% Equity)

Equity allocation:

• Canadian equity: ~25%
• US equity: ~45%
• International developed: ~25%
• Emerging markets: ~5%
• Bonds: 0%

Total holdings: ~9,000 stocks

XBAL (60/40 Balanced)

Equity allocation (60%):

• Canadian equity: ~15%
• US equity: ~27%
• International developed: ~15%
• Emerging markets: ~3%

Fixed income allocation (40%):

• Canadian bonds: ~40%

Total holdings: ~9,000 stocks + 5,000 bonds

The 40% bond allocation is the critical difference.

Performance Comparison

Historical Returns (Since XEQT Launch in 2019)

XEQT:

• 2019: +22.1%
• 2020: +16.8%
• 2021: +22.5%
• 2022: -11.2%
• 2023: +18.7%
• 2024: +15.3%
• Average: ~14.0% annually

XBAL:

• 2019: +16.8%
• 2020: +12.1%
• 2021: +15.2%
• 2022: -8.5%
• 2023: +11.8%
• 2024: +10.2%
• Average: ~9.6% annually

Difference: XEQT outperforms by ~4.4% annually, but with higher volatility.

Risk and Volatility Analysis

Maximum Drawdowns (Worst Crashes)

2020 COVID Crash:

• XEQT: -32% peak to trough
• XBAL: -22% peak to trough
• XBAL cushioned 10% of the fall

2022 Bear Market:

• XEQT: -18% for the year
• XBAL: -12% for the year
• XBAL cushioned 6% of the fall

Volatility (Standard Deviation)

XEQT:

• Annual volatility: ~16-18%
• Daily swings: Can move 2-4% in a day
• Stressful during downturns

XBAL:

• Annual volatility: ~10-12%
• Daily swings: Typically 1-2% in a day
• More comfortable during downturns

Takeaway: XBAL’s bonds significantly reduce volatility and help you sleep better.

30-Year Projections: XEQT vs XBAL

Scenario: $10,000 initial + $500/month

XEQT (8% return assumption):

• After 10 years: ~$98,000
• After 20 years: ~$299,000
• After 30 years: ~$745,000

XBAL (6% return assumption):

• After 10 years: ~$89,000
• After 20 years: ~$256,000
• After 30 years: ~$601,000

Difference over 30 years: ~$144,000 in favor of XEQT

But: XBAL provides a smoother, less stressful journey.

Who Should Choose XEQT?

XEQT is better if you:

✅ Are under 45 years old (long time horizon) ✅ Have high risk tolerance (can handle volatility) ✅ Won’t need the money for 15+ years ✅ Can emotionally handle 30-50% drops ✅ Want maximum long-term growth ✅ Don’t panic during market crashes ✅ Are investing in TFSA or RRSP

Example Profile: Alex, Age 28

• Income: $65,000
• Timeline: 37 years until retirement
• Risk tolerance: High (young, stable income)
• Emergency fund: 6 months saved
• Choice: XEQT

Why: Long timeline allows recovery from crashes, wants maximum growth.

Who Should Choose XBAL?

XBAL is better if you:

✅ Are 45-65 years old (shorter time horizon) ✅ Have moderate risk tolerance ✅ Will need the money in 5-15 years ✅ Want downside protection from bonds ✅ Prefer a smoother ride to retirement ✅ Are a nervous investor who might panic sell ✅ Are approaching or in early retirement

Example Profile: Jennifer, Age 52

• Income: $85,000
• Timeline: 13 years until retirement
• Risk tolerance: Moderate (concerned about crashes)
• Retirement savings: $400,000
• Choice: XBAL

Why: Shorter timeline, needs stability, can’t afford to lose 40% before retirement.

The Lifecycle Strategy: Transition Over Time

Many investors use a lifecycle approach:

Ages 20-40: 100% XEQT

• Maximum growth potential
• Long time to recover from crashes
• Build wealth aggressively

Ages 40-50: Gradually shift to XBAL

• Transition 10-20% to bonds
• Start with 80/20, move to 70/30
• Or switch directly to XBAL

Ages 50-65: 100% XBAL

• Protect accumulated wealth
• Reduce volatility
• Smooth path to retirement

Ages 65+: Consider XINC or more conservative

• Income-focused
• Capital preservation
• Potentially 40/60 or 20/80 allocation

Tax Considerations

TFSA and RRSP (Tax-Sheltered):

Both XEQT and XBAL work equally well:

• No tax on growth
• No tax on distributions
• Choose based on risk tolerance, not tax efficiency

Non-Registered Accounts:

XEQT is more tax-efficient:

• 100% equities = better capital gains treatment
• No bond interest taxed as income

XBAL is less tax-efficient:

• 40% bonds = interest taxed as income (highest rate)
• Less optimal for non-registered accounts

Recommendation: Use XEQT in non-registered, XBAL in RRSP/TFSA if splitting.

Dividend Yield Comparison

XEQT:

• Dividend yield: ~2.0%
• Quarterly distributions
• Mostly equity dividends

XBAL:

• Dividend yield: ~2.8%
• Quarterly distributions
• Mix of equity dividends + bond interest

Winner: XBAL has higher yield, but yield shouldn’t drive your decision. Focus on total return.

Recovery Time After Crashes

2020 COVID Crash Recovery:

XEQT:

• March 2020: -32%
• Recovery: 6 months
• Higher volatility, faster recovery

XBAL:

• March 2020: -22%
• Recovery: 5 months
• Lower drop, similar recovery time

Interesting: Both recovered around the same time, but XBAL provided peace of mind with smaller drops.

Common Questions

“Should I hold both XEQT and XBAL?”

No. This creates unnecessary complexity. Just choose one based on your risk tolerance:

• Want 80/20? Hold 50% XEQT + 50% XBAL
• But simpler to just hold XGRO (90/10) or VGRO (80/20) instead

“Can I switch from XEQT to XBAL later?”

Yes. Many investors do this as they age:

• Sell XEQT (in TFSA/RRSP = no tax)
• Buy XBAL with proceeds
• Smooth transition to conservative allocation

“What if I’m 40 years old - which one?”

Age 40 is the gray area:

• High risk tolerance: XEQT
• Moderate risk tolerance: XBAL
• 25+ years to retirement: XEQT
• 10-15 years to retirement: XBAL

It’s personal preference at this age.

“Is XBAL too conservative for a 30-year-old?”

Generally yes. With 35 years to retirement, a 30-year-old should handle XEQT’s volatility. The extra returns compound significantly over decades.

Real-World Example: Sarah’s Decision

Sarah, Age 42, $380,000 portfolio, 23 years to retirement

Option 1: Stay 100% XEQT

Pros:

• Higher expected returns (~$1.6M at 65)
• More wealth for retirement

Cons:

• High volatility
• Could drop to $228,000 in crash (-40%)
• Might panic sell

Option 2: Switch to XBAL

Pros:

• Lower volatility
• Smaller drops in crashes (~$266,000 in -30% crash)
• Peace of mind

Cons:

• Lower expected returns (~$1.2M at 65)
• $400k less at retirement

Sarah’s Decision: 50/50 Split

• 50% XEQT, 50% XBAL
• Creates 80/20 allocation
• Balance of growth and stability
• Best of both worlds

Result: Expected ~$1.4M at retirement with moderate volatility.

The Behavioral Factor: Can You Handle XEQT?

The Real Test:

Imagine your $100,000 XEQT portfolio drops to $60,000 tomorrow.

Can you:

• Not panic sell?
• Keep contributing monthly?
• Ignore the news?
• Sleep at night?

If YES: Choose XEQT If NO: Choose XBAL

Remember: The best investment is the one you’ll stick with during crashes.

The Bottom Line

XEQT is objectively better for long-term wealth building (higher returns).

XBAL is subjectively better for many investors (easier to hold during crashes).

The best choice is:

• XEQT if you’re young (<45) and disciplined
• XBAL if you’re older (45-65) or anxious
• Transition from XEQT to XBAL as you age

Most important: Pick one and stick with it for decades. Consistency beats optimization.

Rule of thumb:

• Under 40: XEQT
• 40-50: XEQT or XBAL (preference)
• 50-65: XBAL
• 65+: XINC or more conservative

Ready to Choose Your All-in-One ETF?

Whether you choose XEQT for maximum growth or XBAL for balanced stability, you’re making a smart decision. Both are excellent options that beat 95% of investment strategies.

The most important thing is to start investing and stay consistent.

Disclosure: This post contains referral links. I may receive compensation if you sign up. Choose your ETF based on your personal risk tolerance and timeline, not just expected returns.