XEQT vs VBAL: 100% Equities or a Balanced Portfolio for Canadian Investors?

My friend Dan is a cautious person. He drives five under the speed limit. He checks the weather forecast before leaving the house even in July. And when he opened his first investment account back in 2020, he did what cautious people do – he picked Vanguard’s VBAL, the 60/40 balanced ETF that splits your money between stocks and bonds so you never have to worry too much about either direction.

I went the other way. I put everything into XEQT – 100% equities, no safety net, no bond cushion. Dan thought I was being reckless. I thought he was leaving money on the table. We have been having the same friendly argument for six years now, and honestly, it is one of the most important debates in Canadian personal finance.

Because the choice between XEQT and VBAL is not really about two ticker symbols. It is about a fundamental question: should you prioritize maximum long-term growth or a smoother, steadier ride? The answer depends on who you are, how old you are, and – maybe most importantly – how you behave when markets crash.

Let me walk you through everything you need to know to make this decision for yourself.

1. What Is VBAL? Vanguard’s Balanced ETF Portfolio Explained

Before we compare, let’s make sure we are on the same page about what VBAL actually is – because a lot of people confuse it with other Vanguard funds or with iShares’ own balanced offerings like XBAL.

VBAL (Vanguard Balanced ETF Portfolio) is Vanguard Canada’s all-in-one balanced fund. It holds roughly 60% equities and 40% bonds in a single ticker. When you buy one share of VBAL, you instantly own thousands of stocks and thousands of bonds from around the world. Vanguard handles the rebalancing automatically. You never have to touch it.

What VBAL Actually Holds

VBAL is a fund of funds – it holds other Vanguard ETFs under the hood:

Equity side (~60%):

• Vanguard US Total Market Index ETF (VUN) – broad US stock exposure
• Vanguard FTSE Canada All Cap Index ETF (VCN) – Canadian stocks
• Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) – international developed markets
• Vanguard FTSE Emerging Markets All Cap Index ETF (VEE) – emerging market stocks

Fixed income side (~40%):

• Vanguard Canadian Aggregate Bond Index ETF (VAB) – Canadian government and corporate bonds
• Vanguard Global ex-US Aggregate Bond Index ETF (CAD-hedged) (VBG) – international bonds
• Vanguard US Aggregate Bond Index ETF (CAD-hedged) (VBU) – US bonds

That 40% bond allocation is the defining feature of VBAL. It is designed to cushion your portfolio during stock market downturns, reduce your overall volatility, and give you a smoother investing experience. The trade-off is lower expected long-term returns compared to a 100% equity portfolio.

Quick facts about VBAL:

• Ticker: VBAL.TO
• Provider: Vanguard Canada
• MER: 0.24%
• Launch date: 2018
• Distribution frequency: Quarterly
• Risk level: Low to Medium

2. XEQT vs VBAL: The Head-to-Head Comparison

Now let’s put these two side by side. This is where the differences become very clear.

A few things jump off this table immediately.

First, the return gap is substantial. Over five years, XEQT has delivered roughly 12% annually versus VBAL’s roughly 7%. That sounds like a modest difference until you compound it over decades – then it becomes hundreds of thousands of dollars. More on that in Section 5.

Second, the volatility gap is also substantial. XEQT swings nearly twice as much as VBAL in a typical year. During the COVID crash, XEQT dropped about 32% while VBAL only dropped about 18%. If you are the type of person who checks your portfolio daily, that is a very different lived experience.

Third, the MER difference is tiny. XEQT charges 0.20% and VBAL charges 0.24%. On a $100,000 portfolio, that is a $40 difference per year. Both are extremely cheap. Fees should not be the deciding factor here.

3. The 60/40 Philosophy: Why VBAL Exists

The 60/40 portfolio is one of the oldest ideas in investing. The concept is straightforward: put 60% of your money in stocks for growth and 40% in bonds for stability. When stocks crash, bonds typically hold steady or rise, cushioning your overall portfolio. When stocks boom, you still capture most of the upside.

For decades, this was considered the gold standard of portfolio construction. Financial advisors defaulted to it. Pension funds ran variations of it. It was the “sensible” allocation for anyone who wanted growth without the full roller coaster.

VBAL is the modern, low-cost version of this idea. Instead of paying a financial advisor 1-2% to build and rebalance a 60/40 portfolio for you, VBAL does it automatically for 0.24%.

When the 60/40 Works Beautifully

The 60/40 approach shines in a few specific situations:

• Deflationary recessions – stocks crash, but bonds rally as interest rates drop, cushioning your portfolio
• Short-to-medium time horizons – if you need money in 5-10 years, the bond allocation reduces the chance of being underwater when you need to withdraw
• Emotional stability – smaller drawdowns mean less temptation to panic-sell, which is the single most destructive thing an investor can do

When the 60/40 Disappoints

2022 was a brutal wake-up call for 60/40 investors. When inflation surged and central banks hiked interest rates aggressively, both stocks and bonds fell at the same time. VBAL dropped roughly 13% that year. The bonds did not save anyone. This shattered the assumption that bonds always move opposite to stocks, and it forced a lot of investors to re-evaluate whether 40% bonds was really worth the return drag.

It is worth noting that 2022 was historically unusual. Over most periods, the 60/40 diversification benefit holds. But it was an important reminder that bonds are not a guarantee of protection – they are a probabilistic reduction in volatility.

4. Risk Tolerance: The Question That Decides Everything

I can throw numbers at you all day, but the honest truth is this: the right choice between XEQT and VBAL comes down to what you will actually do when markets crash.

The Real Test

Imagine you have $150,000 invested. One morning you wake up and check your portfolio. The market has been falling for three weeks. Your balance now reads $100,000. You have lost $50,000 on paper.

What do you do?

If your answer is “keep buying” – you have the temperament for XEQT. A 33% drawdown is within the normal range for a 100% equity portfolio, and you need to be genuinely okay with that. Not theoretically okay. Actually okay.

If your answer is “I would probably sell, or at least stop contributing” – VBAL is likely the better choice. In the same scenario, a VBAL portfolio would have dropped to roughly $120,000 instead of $100,000. That smaller drop might be the difference between staying the course and panic-selling.

The best investment is the one you will actually hold through the bad times. Research from Dalbar and Morningstar consistently shows that the average investor earns significantly less than the funds they invest in, because they buy high and sell low based on emotions. If VBAL keeps you invested during a crash, it is the objectively better choice for you – even though XEQT has higher theoretical returns.

5. The Opportunity Cost of Bonds: What 40% Fixed Income Costs Young Investors

Now here is the other side of the coin. If you are young – say, in your 20s or 30s – and you have 25-35 years before retirement, holding 40% bonds comes with a very real price tag.

Let’s run the numbers. Assume you invest $500 per month with a $10,000 starting balance:

Read that last line again. Over 30 years, the difference between XEQT and VBAL is roughly $279,000 – on just $500 per month in contributions. That is not a small number. That is years of retirement income. That is a paid-off cottage. That is the difference between retiring at 60 and retiring at 65.

This is what I mean when I talk about the opportunity cost of bonds for young investors. Every dollar sitting in bonds at age 28 is a dollar earning 3-4% instead of 8-10%. Over 30+ years of compounding, that gap becomes enormous.

My friend Dan chose VBAL at 27. He sleeps well at night. But if he sticks with VBAL for the next 30 years instead of switching to XEQT, the opportunity cost will be very real. Whether that trade-off is worth the smoother ride is a deeply personal question – but at least he should know the price he is paying for it.

For a deeper look at whether you need bonds in your portfolio, check out our post on XEQT vs bond ETFs – do you actually need bonds?

6. When VBAL Is the Right Choice

I am an XEQT investor and I make no secret of that bias. But I would be doing you a disservice if I pretended VBAL is never the right answer. There are several scenarios where VBAL is genuinely the smarter pick.

You Are Within 10-15 Years of Retirement

This is the most clear-cut case for VBAL. If you are 50 or 55 and planning to retire at 65, a 100% equity portfolio carries serious sequence-of-returns risk. That means a big crash right before or during the early years of retirement can permanently reduce your income, because you are forced to sell during the dip to fund your living expenses.

VBAL’s 40% bond allocation reduces your worst-case drawdowns from roughly -35% to roughly -18%. When you are a decade from needing that money, that cushion matters enormously.

You Genuinely Cannot Handle Volatility

I mean genuinely. Not “I think I might panic” but “I have panic-sold before” or “I lost sleep for weeks during the 2022 downturn.” Some people are wired to feel portfolio losses more acutely than others. This is not a character flaw – it is just how your brain processes financial risk.

If holding XEQT through a 35% drawdown would cause you to sell everything and move to cash, VBAL is the better choice. A smaller drawdown you can endure is always better than a larger gain you will interrupt by panic-selling.

You Have a Medium-Term Goal

If you are investing for something 5-10 years out – a down payment, a career break, a child’s education – VBAL’s lower volatility makes it more appropriate than XEQT. With a shorter time horizon, the risk of XEQT being underwater when you need the money is meaningfully higher. VBAL’s bonds reduce that risk.

For goals under 5 years, neither XEQT nor VBAL is ideal – use a HISA ETF or GICs instead.

You Are Already Retired or Semi-Retired

In retirement, capital preservation and steady income matter more than maximum growth. VBAL’s 60/40 split gives you exposure to equity growth while keeping a significant bond cushion to fund withdrawals during downturns. Many retirees find VBAL’s volatility level comfortable enough to hold long-term without stress.

7. When XEQT Is the Better Pick

If VBAL is right for the cautious and the close-to-retirement, XEQT is right for everyone else – and that is a lot of people.

You Are Under 40 with a Long Time Horizon

If you have 20-35 years before you need this money, the math heavily favours 100% equities. Over any 20-year period in stock market history, a globally diversified portfolio has delivered positive returns. The short-term volatility that makes bonds attractive simply does not matter over multi-decade time horizons. You will experience crashes, and they will feel terrible in the moment, but you will recover every single time.

Your Human Capital Is Your Bond

When you are young, your biggest asset is not your portfolio – it is your future earning power. A 30-year-old with a stable career has potentially $2-3 million in future earnings ahead of them. That stream of paycheques acts as an implicit bond in your overall net worth. You do not need a second bond allocation inside your portfolio because your career already provides that stability.

You Have a Safety Net Outside Your Portfolio

If you have 3-6 months of expenses in a high-interest savings account and stable employment, you already have your cushion. You will not be forced to sell XEQT during a crash to pay rent. That safety net makes a 100% equity portfolio much more practical.

You Have Invested Through a Downturn Before (or You Trust Your Autopilot)

If you have lived through a drawdown and stayed the course, you know you can handle it. And if you have set up automatic contributions that you will not touch regardless of market conditions, the automatic nature of dollar-cost averaging into XEQT makes it surprisingly easy to hold through rough patches.

8. VBAL vs XBAL: Are They Not the Same Thing?

This is a common point of confusion, and it is worth addressing directly. We have a separate post comparing XEQT to XBAL, which is iShares’ own balanced ETF – not Vanguard’s.

VBAL and XBAL are similar but not identical. Both are 60/40 balanced ETFs, but there are some differences worth knowing:

The most notable difference is that VBAL holds global bonds (US and international, hedged to Canadian dollars) while XBAL’s bond allocation is primarily Canadian bonds. VBAL offers slightly more diversification on the fixed income side. XBAL has a slightly lower MER.

For the purposes of this post, the key comparison is between VBAL’s 60/40 balanced approach and XEQT’s 100% equity approach. The XEQT vs XBAL comparison follows essentially the same logic – same 60/40 vs 100/0 decision – just with a different bond provider. If you are interested in that iShares-only comparison, check out our XEQT vs XBAL breakdown.

9. Tax Efficiency: Where XEQT Has a Clear Edge

If you are investing in a TFSA or RRSP, tax efficiency is mostly a non-issue. Both XEQT and VBAL grow tax-free (TFSA) or tax-deferred (RRSP), so the choice should be based purely on your risk tolerance and time horizon.

But if you are investing in a non-registered (taxable) account, XEQT has a meaningful advantage.

Bond interest is taxed as regular income – the highest tax rate. VBAL’s 40% bond allocation generates interest taxed at your full marginal rate, which could be 40-50% depending on your province and income bracket. XEQT, on the other hand, generates primarily eligible dividends (preferential tax rate) and capital gains (only 50% taxable). No bond interest at all.

In a non-registered account:

• XEQT – more tax-efficient (no bond interest income)
• VBAL – less tax-efficient (40% bonds generate fully taxable interest)

If you are investing outside of registered accounts, this tax drag is an additional cost on top of VBAL’s lower expected returns. It is another reason to lean toward XEQT in taxable accounts, or at minimum to hold VBAL in your RRSP and XEQT in your non-registered account if you are using both fund types.

10. A Decision Framework: Which ETF Is Right for You?

Still not sure? Walk through these questions honestly.

Question 1: When will you need this money?

• Under 5 years – Neither. Use a HISA or GICs.
• 5-10 years – VBAL is the safer choice. XEQT could still be underwater after a multi-year bear market.
• 10-20 years – Either could work, but XEQT’s higher expected return has more time to play out.
• 20+ years – XEQT. The math is overwhelmingly in your favour.

Question 2: Have you invested through a crash before?

• Yes, and I stayed the course – You have proven you can handle it. XEQT.
• Yes, and I sold or stopped contributing – Learn from that experience. VBAL might suit your temperament better.
• No, I have never experienced a real drawdown – Be honest about how you think you would react. If uncertain, there is no shame in starting with VBAL and moving to XEQT once you have lived through a downturn.

Question 3: What is your overall financial picture?

• Strong emergency fund, stable job, no high-interest debt – You can handle XEQT’s volatility because you have a financial cushion outside your portfolio.
• Still building your emergency fund, variable income, some debt – VBAL’s lower volatility means less chance you will need to sell at a bad time to cover expenses.

Question 4: How old are you?

• 20-40 – XEQT for most people. You have decades to recover from any crash.
• 40-50 – Personal preference zone. Both are reasonable.
• 50-60 – VBAL starts to make a lot of sense. Protecting capital matters more now.
• 60+ – VBAL or even more conservative options like VCNS (40/60).

If most of your answers pointed toward XEQT, go with XEQT. If most pointed toward VBAL, go with VBAL. If you are split, err on the side of whatever keeps you invested – consistency trumps optimization.

11. What About Dan? An Update

Remember my friend Dan from the beginning of this post? He put everything into VBAL in 2020. I put everything into XEQT. Six years later, here is roughly how things look:

Dan invested consistently – $600 per month into VBAL in his TFSA. He never once logged in during a crash and panic-sold. He never changed his strategy. He checks his portfolio maybe once a quarter. His VBAL holdings have grown steadily, and he is happy with the trajectory.

I invested the same $600 per month into XEQT. My portfolio has grown more in absolute dollar terms – the return gap is real. But I also went through stretches where I watched five figures evaporate on paper. During the worst of 2022, I was down about $18,000 at one point. I held through it, but I will not pretend it was comfortable.

Here is the thing: we both made the right choice. Dan made the right choice for Dan – a person who values peace of mind, who does not want to think about investing, and who would rather sacrifice some upside for a calmer experience. I made the right choice for me – someone who has a long time horizon, can handle the gut-punch of drawdowns, and wants to maximize the compounding.

The wrong choice would have been for Dan to pick XEQT and panic-sell during a crash. Or for me to pick VBAL and spend 30 years wondering what I left on the table. Know yourself. Pick accordingly.

12. The Lifecycle Approach: Start With One, Transition to the Other

You do not have to pick one ETF and hold it forever. Many smart investors use a lifecycle strategy – starting aggressive and becoming more conservative over time.

Here is a simple framework:

The beauty of all-in-one ETFs is that transitioning is dead simple. In a TFSA or RRSP, you sell one ETF and buy another – no tax consequences. You do not need to rebalance multiple holdings or figure out bond allocations manually. Just swap the ticker and you are done.

This is actually my long-term plan. I am 100% XEQT today. Sometime in my late 40s or early 50s, I will start transitioning toward something with bonds. Maybe VGRO first, then eventually VBAL. The point is that being aggressive now does not lock me in forever.

The Bottom Line: XEQT vs VBAL

Let me be direct.

If you are young, have a long time horizon, and can stomach volatility – XEQT is the better choice. The return advantage over 20-30 years is too large to ignore, and the volatility that makes bonds attractive is precisely the thing that does not matter when you have decades to recover.

If you are closer to retirement, have a shorter time horizon, or know you will panic-sell during a crash – VBAL is the better choice. The 40% bond allocation meaningfully reduces drawdowns, and an investor who holds VBAL for 30 years will always outperform an investor who buys XEQT, panics, and sells at the bottom.

Both are excellent, low-cost, globally diversified ETFs from world-class providers. Both are dramatically better than the high-fee mutual funds that most Canadian banks push on their customers. Whichever you choose, you are making a smart decision.

The most important thing is not which one you pick. It is that you pick one, start contributing, and do not stop. Consistent investing over decades will build wealth regardless of whether your allocation is 60/40 or 100/0. The real risk is not picking the “wrong” ETF – it is not investing at all.

Now stop comparing and start buying.

Related Reading

• What Is XEQT? A Comprehensive Guide
• XEQT vs XBAL: Which iShares All-in-One ETF is Right for You?
• XEQT vs Bond ETFs: Do You Actually Need Bonds?
• XEQT vs VGRO: Which ETF is Right for You?
• XGRO vs XEQT: Which ETF is Right for You?
• Get started with Wealthsimple and earn a $25 bonus

Disclosure: This post contains referral links. I may receive compensation if you sign up through these links. This does not affect my analysis. Choose the ETF that matches your personal risk tolerance, time horizon, and financial situation – not just the one with the highest expected returns.