VEQT vs XEQT

Which All-In-One ETF is Better?

As a Canadian investor, you’re likely looking for ways to grow your wealth over the long term. Two popular all-equity ETF options are Vanguard’s VEQT and iShares’ XEQT. Both are designed to offer comprehensive exposure to the stock market, but they have some differences worth considering. In this blog post, we’ll compare VEQT and XEQT to help you determine which might be a better fit for your investment strategy.

What is VEQT?

VEQT is the Vanguard All-Equity ETF Portfolio. It’s designed to provide long-term capital growth by investing primarily in equity securities. VEQT has a broad, diversified exposure to global stock markets, with a focus on Canadian stocks. It aims to provide a more balanced exposure to different sectors and geographies, which can be beneficial during market volatility.

Key Features of VEQT:

• Global Exposure: With a focus on Canadian stocks, it also includes significant exposure to the US, international, and emerging markets.
• Diversification: It spreads investments across various sectors to mitigate risk.
• Low-Cost: Vanguard is known for its low-cost funds, and VEQT is no exception, offering a low management expense ratio.

What is XEQT?

XEQT is the iShares Core Equity ETF Portfolio, managed by BlackRock. It also aims for long-term capital growth by investing in a collection of other ETFs, which in turn hold stocks from around the world. XEQT has a slightly different allocation, with a larger portion of assets typically invested in American and international markets compared to VEQT.

Key Features of XEQT:

• 100% Equity: Aggressively positioned for potential higher returns, with 100% investment in stocks.
• Global Reach: Offers exposure to markets in the US, Canada, and other international arenas in both developed and emerging economies.
• Self-Rebalancing: XEQT is structured to automatically adjust its holdings to maintain its target asset allocation.
• Cost-Effective: It comes with a competitive management expense ratio, although it typically aligns closely with VEQT’s.

VEQT vs XEQT: The Comparison

When deciding between VEQT and XEQT, consider the following factors:

Geographic Allocation:

VEQT tends to have more weight in Canadian equities, which could appeal to investors looking for domestic exposure. XEQT, on the other hand, leans more towards US and international equities, potentially offering better diversification and growth opportunities in global markets.

Sector Allocation:

Both ETFs are diversified across various sectors. However, the specific weightings can differ, which may affect performance depending on which sectors lead or lag in the market.

Performance:

While both ETFs aim for long-term growth, their different allocations can lead to varying performance in different market conditions. It’s essential to review the historical performance of both, keeping in mind that past performance is not indicative of future results.

Fees:

Both VEQT and XEQT have competitive management expense ratios, but even small differences in fees can have a significant impact on long-term returns due to the effect of compounding.

Investment Philosophy:

Consider your comfort with the investment philosophy of Vanguard versus BlackRock. Some investors have a preference for the methodologies used by one provider over the other.

Conclusion

Both VEQT and XEQT are solid choices for Canadians looking to invest in an all-equity ETF. The best choice for you will depend on your investment goals, risk tolerance, and preference for geographic and sector exposure. As with any investment, it’s crucial to conduct thorough research and consider speaking with a financial advisor to ensure the ETF aligns with your overall investment strategy.

Remember, investing in ETFs is a way to diversify your portfolio, but it’s important to be mindful of the risks involved with equity investments. The right ETF can be a powerful tool in your investment arsenal, helping you build wealth over time with a disciplined, long-term approach. Happy investing!