XEQT vs Target-Date Funds in Canada: Which Is Better?

If you’ve spent any time researching retirement investing in Canada, you’ve probably come across two very different philosophies. On one side, there’s the “set it and forget it” promise of target-date funds. On the other, there’s the lean, low-cost simplicity of all-in-one ETFs like XEQT.

I remember the first time I looked into target-date funds. The pitch sounded almost too good: pick the fund that matches your retirement year, and it automatically shifts from stocks to bonds as you get older. No rebalancing, no thinking, no stress. Just pick a date and walk away.

But then I looked at the fees. And the fine print. And the limited options available in Canada. And I realized that for most Canadian investors, XEQT paired with a simple plan is the far better choice.

Let me walk you through exactly why.

1. What Are Target-Date Funds and How Do They Work?

A target-date fund (sometimes called a TDF or lifecycle fund) is a single mutual fund or ETF designed around a specific retirement year. You pick the fund closest to when you plan to retire – say, 2055 – and the fund manager handles everything from there.

The key feature is the glide path. Early on, the fund holds mostly equities (stocks) for growth. As the target date approaches, the fund automatically shifts its allocation toward bonds and fixed income to reduce risk. By the time you hit retirement, the portfolio might be 30% stocks and 70% bonds.

Here’s the basic idea:

• 20+ years to retirement: 80-90% equities, 10-20% bonds
• 10 years to retirement: 60-70% equities, 30-40% bonds
• At retirement: 30-40% equities, 60-70% bonds
• Past retirement: Continues to become more conservative

In the US, target-date funds are massively popular. They’re the default option in most 401(k) plans, and companies like Vanguard and Fidelity manage hundreds of billions in them. The concept makes sense for people who genuinely never want to think about their investments.

But Canada is a very different story.

2. Target-Date Fund Options Available in Canada

Unlike the US, where target-date funds dominate workplace retirement plans, Canada has far fewer options – and many of them come with significant drawbacks.

Here are the main target-date products available to Canadian investors:

BMO Target Date ETFs (ZTD series)

• BMO offers a series of target-date ETFs (e.g., ZTD2030, ZTD2035, ZTD2040, etc.)
• MER: approximately 0.30-0.40%
• Available on discount brokerages
• The closest thing Canada has to the low-cost US target-date experience

Fidelity ClearPath Retirement Portfolios

• Mutual fund series with target years
• MER: approximately 0.80-1.20% (depending on the series)
• Primarily available through advisors and workplace plans
• Higher fees eat into returns significantly

Mackenzie Target Date Funds

• Mutual fund format with various target years
• MER: approximately 0.90-1.50%
• Mostly sold through financial advisors
• Among the most expensive options

TD Retirement Portfolios

• Available through TD branches and TD Direct Investing
• MER: approximately 0.80-1.30%
• Convenient if you already bank with TD
• Fees are still much higher than ETF alternatives

The pattern is clear: most Canadian target-date funds are expensive mutual funds sold through advisors or workplace plans. The low-cost ETF versions (like BMO’s) exist, but they haven’t gained nearly the traction that all-in-one ETFs like XEQT have.

3. Head-to-Head Comparison: XEQT vs Target-Date Funds

Let’s put the numbers side by side. This is where things get interesting.

The comparison tells a pretty compelling story. XEQT wins on fees, flexibility, availability, and transparency. The only thing target-date funds offer that XEQT doesn’t is the automatic glide path – and as I’ll explain, that’s not necessarily an advantage.

4. The Fee Problem: Small Percentages, Massive Impact

This is the part that really bothers me about target-date funds in Canada. Let’s do the math, because the numbers are eye-opening.

XEQT charges an MER of 0.20%. A typical Canadian target-date mutual fund charges somewhere between 0.80% and 1.50%. Let’s use 1.00% as a middle-ground example.

That 0.80% difference might not sound like much. But over a 30-year investing career, it’s devastating.

Assume you invest $500/month for 30 years at a 7% average annual return:

• With XEQT (0.20% MER): Your portfolio grows to approximately $566,000
• With a 1.00% MER target-date fund: Your portfolio grows to approximately $492,000
• Difference: ~$74,000 lost to fees

That’s $74,000 that went to fund managers instead of your retirement. And if you’re looking at funds charging 1.50%? The gap widens to over $100,000.

Even the cheapest target-date option in Canada – BMO’s ETF series at around 0.35% – costs nearly double what XEQT charges. Over 30 years, that still adds up to tens of thousands in unnecessary fees.

I think about it this way: would you pay someone $74,000 over your lifetime just to slowly move your money from stocks to bonds? Especially when you could do the same thing yourself with two or three mouse clicks every few years?

For most people, the answer is no.

5. The “Glide Path” Argument: Do You Actually Need Automatic De-Risking?

The entire selling point of target-date funds comes down to one thing: the glide path. The automatic, gradual shift from stocks to bonds as you approach retirement.

It sounds smart. It sounds safe. But let’s think critically about whether you actually need it.

The case for the glide path:

• It prevents you from being 100% in equities right before retirement
• It removes the emotional temptation to stay too aggressive
• It provides a disciplined approach that doesn’t require your attention

The case against the glide path:

• Most glide paths are generic and don’t account for your specific situation
• They assume everyone retiring in the same year has the same risk tolerance (they don’t)
• They often become too conservative too early, sacrificing years of potential growth
• A 50-year-old with a government pension and no debt has a very different risk profile than a 50-year-old who is self-employed with a mortgage
• You might retire at 55, or 67, or never fully retire – the fund doesn’t know that

Here’s what really gets me: many target-date funds start de-risking 20+ years before the target date. If you buy a 2055 fund today, it might already be holding 10-15% bonds. That’s a drag on your returns when you have decades of time to ride out market volatility.

With XEQT, you stay at 100% equities for as long as it makes sense for your situation. When you’re ready to de-risk – based on your actual life circumstances, not an arbitrary calendar – you make the switch on your own terms.

6. Why XEQT + Manual Adjustment Is the Better Strategy

Here’s the approach I recommend, and it’s what I personally follow: hold XEQT for the growth phase of your investing life, then manually adjust when you’re ready.

The XEQT approach to retirement planning:

1. Ages 20-45 (or whenever you’re 15+ years from retirement): Hold 100% XEQT. Let the global equity exposure compound. Don’t overthink it.

2. 10-15 years from retirement: Start introducing some fixed income. You could sell a portion of XEQT and buy XBAL (iShares Core Balanced ETF, 60% equity / 40% bonds) or add a dedicated bond ETF like ZAG.

3. 5-10 years from retirement: Shift your allocation further. Maybe you’re now 60% XEQT and 40% XBAL, or you’ve added GICs for the money you’ll need in the first few years.

4. At retirement: You’ve built a portfolio that matches your actual needs – your pension situation, your spending plans, your risk comfort level.

This approach gives you something a target-date fund never can: personalization. You’re making decisions based on your real life, not a one-size-fits-all formula.

And the best part? This “manual adjustment” happens maybe 3-5 times over your entire investing career. We’re talking about spending 20 minutes every few years to review and rebalance. That’s it. That’s the entire workload that target-date funds charge you tens of thousands of dollars to avoid.

The iShares family makes this especially clean. XEQT (100% equity), XGRO (80/20), XBAL (60/40), and XCNS (40/60) all use the same underlying index funds. Moving between them is as simple as selling one and buying another.

7. The Flexibility Advantage: Don’t Lock Yourself In

One of the biggest problems with target-date funds is that they lock you into someone else’s timeline. And life rarely goes according to plan.

Scenarios where a target-date fund works against you:

• You retire early. Your 2055 target-date fund is still holding heavy equities because it thinks you have 29 more years. You’d need to sell and find something else.
• You retire later than expected. Your fund has already shifted to mostly bonds, dragging your returns when you could have stayed more aggressive.
• You receive an inheritance or windfall. Your risk capacity changes overnight, but the fund doesn’t know that.
• Interest rates shift dramatically. The bond portion of your target-date fund might be performing poorly, but you can’t adjust the allocation.
• You want to access some money for a home purchase. The fund’s allocation might not match what you need for a shorter-term goal.

With XEQT, you have complete flexibility. You can:

• Hold it for 40 years without touching it
• Sell half tomorrow if your plans change
• Pair it with any other investment in any proportion
• Hold it in any account type (TFSA, RRSP, FHSA, non-registered)
• Set up automatic recurring purchases on Wealthsimple
• Switch to a different all-in-one ETF whenever your risk tolerance changes

That flexibility is worth a lot more than an automated glide path, in my opinion.

8. Who Target-Date Funds Might Actually Work For

I’ve been making a strong case for XEQT, but I want to be fair. There are some people for whom target-date funds genuinely make sense.

Target-date funds could be right for you if:

• You’re in a workplace plan with limited options. If your employer offers a group RRSP or DPSP and the only decent option is a target-date fund, it might be your best choice within that plan. The fee difference matters less when it’s employer-matched money.
• You truly, absolutely will never look at your portfolio. If you know in your heart that you will never spend even 20 minutes adjusting your investments – ever – then an automated glide path has genuine value. A slightly more expensive fund that you actually stick with beats a cheaper fund you mismanage.
• You have strong anxiety about investing decisions. Some people genuinely lose sleep over asset allocation choices. If removing that decision entirely is worth the extra cost to your mental health, that’s a valid trade-off.
• You’re investing a small amount in a workplace plan. If you’re contributing $200/month to a group plan and the target-date fund has a reasonable MER (under 0.50%), the simplicity might outweigh the cost difference.

But here’s the thing: if you’re reading this article, you’re probably not in that category. The fact that you’re researching XEQT vs target-date funds means you’re engaged enough with your finances to handle the XEQT approach. And that puts you ahead of most Canadians.

9. How to Build Your Own “Target-Date” Strategy With XEQT

Let me give you a concrete, step-by-step plan. Think of this as a DIY target-date strategy that saves you thousands in fees.

Step 1: Open a Wealthsimple account

You’ll want a platform with zero commissions and fractional shares so you can invest any dollar amount. Wealthsimple is my top pick for Canadian investors buying XEQT.

Step 2: Determine your investing timeline

How many years until you need this money? Be honest with yourself. If you’re 30 and planning to retire at 60, that’s 30 years.

Step 3: Choose your current allocation

• 15+ years to retirement: 100% XEQT
• 10-15 years to retirement: 80% XEQT + 20% XBAL (or ZAG)
• 5-10 years to retirement: 60% XEQT + 40% XBAL
• Under 5 years to retirement: 40% XEQT + 40% XBAL + 20% GICs or CASH.TO

Step 4: Set up automatic contributions

Use Wealthsimple’s recurring buy feature to invest on a schedule. Weekly, biweekly, or monthly – whatever matches your pay cycle. This is your dollar-cost averaging engine.

Step 5: Review once a year

Every January (or whenever you like), spend 15 minutes reviewing your allocation. If you’re still more than 15 years from retirement, do nothing. If you’ve crossed a threshold, make the adjustment.

Step 6: Adjust when life changes, not when the market does

The key difference between this approach and a target-date fund: you adjust based on real life events (job change, marriage, inheritance, early retirement plans), not just the calendar.

That’s it. Six steps. Total annual time commitment: about 15-30 minutes. Total fee savings over a career: potentially $50,000-$100,000+.

I’ve been following this approach for years now, and I can tell you – it’s not complicated. The hardest part is the initial setup, and even that takes less than an hour.

10. The Final Verdict

Let me summarize everything we’ve covered.

Choose XEQT if:

• You want the lowest possible fees (0.20% MER)
• You’re comfortable making 3-5 allocation changes over your lifetime
• You value flexibility and control over your investments
• You invest through a discount brokerage like Wealthsimple
• You want full transparency into what you own
• You’re reading investing articles (yes, this one counts)

Choose a target-date fund if:

• Your workplace plan offers one with reasonable fees and matching contributions
• You genuinely will never review or adjust your portfolio
• The peace of mind of full automation is worth the extra cost to you

For the vast majority of Canadian investors, XEQT is the better choice. The fees are lower, the flexibility is greater, and the “work” involved in managing your own glide path amounts to a few minutes per year.

Target-date funds solve a real problem – the risk that people will never adjust their portfolio as they age. But they solve it with an expensive, inflexible tool when a simple, cheap solution exists.

Buy XEQT. Set up automatic contributions. Review once a year. Adjust when your life changes. That’s a retirement strategy that will serve you better than any target-date fund in Canada.

This page is updated regularly to reflect the latest MER data and fund availability. Last reviewed: March 2026. For more on XEQT, check out our guides on what XEQT is, XEQT’s MER explained, and the best platform to buy XEQT in Canada.