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Vanguard VEQT All-in-One 100% Equity Portfolio ETF

In recent weeks, I’ve been writing about how it’s getting easier and cheaper to build a solid globally diversified portfolio using all-in-one ETFs.

For example, if you have long time frame until retirement, rather than buying multiple ETFs/mutual funds for equities and bonds, or a balanced fund that charges 2%, you can now buy a single ETF like iShares XGRO (80% equity/20% bond) at an MER of 0.21%.

Vanguard, iShares, and BMO each offer their own products and all of them very similar.   For example, Vanguard’s version of XGRO is VGRO, and BMO’s version ZGRO.   

But what if you are just starting out in your 20’s and have a super long time frame until retirement which would justify having no bonds in your portfolio?  Or if you have a defined benefit pension that you consider the bond portion of your portfolio.  Is there a product out there that is made up of 100% equity?

Cue Vanguard’s All-Equity ETF Portfolio (VEQT).  It’s Vanguard’s solution to a globally diversified 100% equity portfolio.  At an estimated MER of 0.25%, is it worth the convenience?  Or are you better off picking your own ETFs?

Holdings and Geographical Allocation

So with a 100% equity portfolio, one big requirement is strong geographical diversification.  In this case, VEQT has holdings representing:

  • Canada: 30.1%
  • U.S: 39.4%
  • International: 23.2%
  • Emerging Markets: 7.3%

Since VEQT is an ETF that holds other ETFs, these include:

  • Canada: Vanguard FTSE Canada All Cap Index ETF (VCN)
  • U.S: Vanguard US Total Market Index ETF (VUN)
  • International: Vanguard FTSE Developed All Cap ex-North America Index ETF (VIU)
  • Emerging Markets:  Vanguard FTSE Emerging Markets All Cap Index ETF (VEE)

Alternative Portfolios

There’s not much simpler than building a complete equity portfolio with a single ETF.  VEQT offers a solid product comprising of 40% US, 30% Canada, and 30% international (including emerging markets).

The only downside I can see is that it locks you into 30% Canada.  If you already have a lot of Canadian equity exposure, then you may not want that much in Canada from an ETF.

As an alternative, I would suggest you look at products like iShares Core MSCI All Country World ex Canada Index ETF (XAW).  The keyword in that product is the “ex Canada” which means except Canada.

As an alternative portfolio, you could build:

  • Canada: VCN/XIC
  • Rest of the World: XAW

Then decide on your own ratio.  Personally, most of my Canadian equity ownership is through Canadian dividend stocks, so our family owns a lot of XAW (or equivalent through XUU/XEF/XEC) as you can see here.

If you want a little more control over your equity/bond mix (rather than VGRO/VBAL), you could own both VEQT and an indexed aggregate bond ETF like Vanguard’s VAB.

If you are extra fancy, you could consider a slightly lower cost 3-ETF portfolio like:

  • Canada: VCN/XIC
  • Rest of the World: XAW
  • Bonds: VAB

Final Thoughts

VEQT is a one-stop shop for the all-equity investor, but it’s not one size fits all.  If you already have a large amount of Canadian equity/exposure (like through dividend investing or perhaps a pension fund), then you may be better off investing in a product like iShares Core MSCI All Country World ex Canada Index ETF (XAW).

With all these new choices to build a solid low-cost portfolio (even cheaper with commission-free ETF trading), it really is a great time to be an investor.

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11 Comments

  1. Linda Rocco on March 22, 2019 at 3:12 am

    VEQT is an amazing product but they missed the mark by not making it a Canadian-equivalent of VT.

    Having a home bias is one thing but having one of 10x is such a bad idea so XAW remain the best option.

  2. Catherine on April 7, 2019 at 1:51 pm

    Hi FT,

    I am new at investing on my own and wanted to see if what I planned by reading your blog would be good. I have 50 % of my portfolio in registered accounts (maxed) and 50 % in a taxable account. To have a 70 equity/ 30 bond ratio would it work to do this:
    Registered account: VGRO (70 %), VAB (30 %)
    Taxable account: VEQT (70 %), ZDB (30%)

    I would rebalance once or twice a year with VAB and ZDB.

    I read that people thinks there is too much canadian exposure with this ? If a don’t have a pension plan elsewhere is it OK or should I add a little XAW.

    Many thanks,

    Catherine

    • FT on April 8, 2019 at 9:53 am

      Hi Catherine, check out the post today about having “one big portfolio” (https://milliondollarjourney.com/maxed-out-rrsp-and-tfsa-now-what.htm). Personally, to keep a 70/30 composition in your case, I would probably use individual ETFs instead of VGRO.

      Depending on your contribution room, it could look something like:
      RRSP (40-50%): XAW (US/international/emerging markets)
      TFSA (30%-40%): VAB (fixed income) and possibly a REIT ETF like VRE
      Non-Reg (20%-30%): XIU or VCN.

      If you have extra funds for non-reg, if you have a spouse, you can fund his/her TFSA without any tax implications (unlike an RRSP).

      • Catherine on April 16, 2019 at 1:26 pm

        Thank you very much for your quick response, this helps a lot ! I will reorganize it this way. One last thing, if I maxed my allocation for VCN in my taxable account (20 %) and don’t have room left for contribution in my registered account, should I rebalance with ZNB in my taxable account ?

        • FT on April 16, 2019 at 1:50 pm

          I’m unfamiliar with ZNB, is that a typo?

  3. Catherine on April 16, 2019 at 2:21 pm

    Sorry for the typo ! I meant to write ZDB ( BMO Discount Bond ETF )

    • FT on April 16, 2019 at 4:56 pm

      For tax purposes, I would keep fixed income out of taxable accounts (if possible). However, ZDB is tax efficient in a non-reg account. I need to look into this ETF a little more, but Dan from Canadian Couch Potato does a great job explaining:
      https://www.moneysense.ca/columns/new-tax-efficient-etfs-from-bmo/

      Sounds like you have a good problem of having too much money. :)

  4. Jordan on September 8, 2019 at 1:18 am

    I purchase some veqt. Does it provide a DRIP? Dividend reinvestment purchase

    Thanks

    Jordan

    • FT on September 8, 2019 at 11:34 am

      Jordan, your broker should be able to enable a synthetic DRIP for any equity that pays a dividend.

  5. Linda Rocco on October 16, 2019 at 7:45 pm

    It’s now worth noting that Ishares now has an equivalent (iShares Core Equity ETF Portfolio XEQT) with a slightly smaller MER and a bit less exposure to Canada.

    Horizons also has the HGRO which is 100% equity.

  6. Dennis on November 6, 2019 at 12:48 pm

    I am 73 have a $40k DB pension, and CPP & $25k RIF withdrawal. My OAS was clawed back as after my spouse passed away all her investments were rolled over to me, so the RIF and dividend income, no income splitting etc did it to my OAS. Some folks say keep buying good dividend stocks, they are taxed at a lower rate and will reduce your average tax rate. Never miind the loss of the OAS and related pensioner benefits. Is that so?

    If not then I want to dramatically reduce my dividend based holdings in my non registered account. I need an ETF /s that are tax efficient and one that does not need me to re- balance. However I believe equities are the way to go without the 38% boost to their dividends for tax purposes.

    Can you suggest if VEQT or similar low cost, no need to re-balance ETF’s are significantly more tax efficient and the best way to invest to replace the dividend stocks like BCE.TO and the banks. I have the brokerage services of TDW and Questrade at my service.

    Thank you

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