Vanguard All Equity ETF (VEQT)_ My New One-Ticket Investing Solution

Vanguard changed the self-directed investing game in Canada with the launch of its new suite of asset allocation ETFs. Now investors can get an ultra low cost, globally diversified portfolio of equities and bonds with just one product. The funds first came in three flavours – VCNS, VBAL, and VGRO – each with a different target asset allocation for the conservative, balanced, and growth-minded investor. Shortly after came the sweetener, at least for me, when Vanguard introduced an all-equity version called VEQT.

Asset allocation ETFs take away the biggest pain point for DIY investors by removing the need to periodically re-balance when adding new money or whenever markets veer off course. Simply buy units of a single ETF and hold, and/or add new money as needed. Vanguard’s professional managers take care of the rest so you can enjoy a mostly hands-off investing experience.

What is VEQT?

The Vanguard All Equity ETF Portfolio trades under the ticker symbol VEQT. It’s one of five asset allocation ETFs offered by Vanguard. Just like the name suggests, VEQT’s asset allocation is made up of 100 percent equities. VEQT is a “fund of funds”, meaning it’s a wrapper that contains four other Vanguard ETFs. Here’s what’s under the hood:

  • Vanguard US Total Market Index ETF 39.8%
  • Vanguard FTSE Canada All Cap Index ETF 29.8%
  • Vanguard FTSE Developed All Cap ex North America Index ETF 23.0%
  • Vanguard FTSE Emerging Markets All Cap Index ETF 7.4%

While investors are often cautioned not to put all their eggs in one basket, in this case with just one ETF your investment portfolio would have exposure to more than 12,200 stocks from around the globe. It doesn’t get much more diversified than that.

Sector weightings for VEQT include:

  • Financials 26.3%
  • Industrials 13.5%
  • Technology 12.1%
  • Consumer Services 10.5%
  • Oil & Gas 9.5%
  • Consumer Goods 9.0%
  • Health Care 7.6%
  • Basic Materials 6.0%
  • Utilities 3.0%
  • Telecommunications 2.5%

Finally, VEQT (like all of Vanguard’s asset allocation ETFs) comes with a management fee of 0.22 percent. The total management expense ratio (MER) will be known at a later date but it is expected to be 0.25 percent.

VEQT | My New One-Ticket Investing Solution

It was January 2015 when I sold all of my dividend stocks and switched to an index investing strategy. At the time I went with a two-ETF solution comprised of Vanguard’s FTSE Canada All Cap Index ETF (VCN), and Vanguard’s FTSE Global All Cap ex Canada Index ETF (VXC). This was a variation on the three-fund model portfolio popularized on the Canadian Couch Potato blog (the third fund being Canadian bonds – VAB).

The simple two-fund portfolio worked out great for me, growing by a total of 41.43 percent in the three years from January 2015 to January 2018. Last year was more challenging and the two-fund portfolio lost 4.25 percent after a weak fourth quarter sunk the stock markets.

I wasn’t looking to make a change but back in February 2019 Vanguard launched VEQT – adding the 100 percent equity allocation ETF to its product mix. I was intrigued enough and so on March 4th of this year I wrote about potentially adding VEQT to my portfolio in an effort to reduce my home country bias.

One comment on that blog struck a chord with me and caused me to eventually change my mind:

“I think you’re over complicating things, and should just go with VEQT in both accounts. The one fund asset allocation ETFs are a game changer for DIY investors, so why mess with the simplicity of them? There are good reasons to have some home bias anyway – we spend in Canadian dollars so it’s not great to have too much exposure to foreign currency risk, especially in retirement. Historically, about 30% home bias has been the sweet spot for reducing portfolio volatility.”

He was right. The simplicity of the one-fund solution far outweighed any benefits I’d gain from tinkering with the Canadian equity exposure in my portfolio.

On March 6th I pulled the trigger, replacing VXC and VCN in my RRSP and TFSA accounts with my new one-ticket solution, VEQT.

Selling VXC and VCN

Foreign Withholding Taxes with VEQT

One thing I did consider before making the switch to VEQT was foreign withholding taxes. The U.S. government levies a 15 percent tax on dividends paid to Canadians. Since I had foreign equity exposure through VXC, the estimated foreign withholding tax “drag” on my portfolio was around 0.48 percent (on top of the 0.27 percent MER). That made holding VXC relatively costly at a total of 0.75 percent.

I downloaded Justin Bender’s Foreign Withholding Tax calculator at his Canadian Portfolio Manager blog and determined that VEQT only had an expected foreign withholding tax of 0.24 percent – or just half of the taxes imposed on VXC. Combined with the lower expected MER of 0.25 percent and the total all-in costs for my new one-fund portfolio would be just 0.49 percent.

Final thoughts

Four years ago I decided to shed my behavioural biases and follow the overwhelming evidence that investing in a low cost, broadly diversified portfolio of index funds will lead to better investor outcomes. I achieved this with a two-ETF portfolio because at that time a one-fund solution did not exist.

Then along came the balanced ETF. Pioneered in Canada by Vanguard but now offered by the likes of iShares, Horizons, and BMO, these asset allocation ETFs are what do-it-yourself investors like me have been waiting for.

Cheaper than using a robo-advisor, and easier to manage than an unwieldy portfolio of multiple ETFs, a one-ticket solution gives investors the best of both worlds.

Still, I didn’t have what I was looking for until the all-equity ETF (VEQT) came along. It was my “Desert-Island” pick for a panel that chose the best ETFs for a MoneySense feature.

100 percent equity allocations aren’t for everyone. I’ve got a long time horizon, high risk tolerance, years of investing experience, plus a defined benefit pension backstopping my retirement. VEQT works for me. You might be better suited for VBAL, or VGRO.

The bottom line is there’s an asset allocation ETF – a one-ticket solution – for every self-directed investor who wants to simplify their holdings, lower their costs, and broaden their diversification. Are you ready to make the switch?

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63 Comments

  1. sam on May 23, 2019 at 4:29 am

    i bought veqt as my first ever investment in stocks.Thanks for this article.

    • Robb Engen on May 23, 2019 at 11:03 am

      Hi Sam, glad you enjoyed it!

  2. Paul Marshman on May 23, 2019 at 6:54 am

    The devil of index investing is that you’re swept along by whatever winds are driving the world markets. That’s served you well in a period of rising markets, but I wonder how happy you’ll be in the coming years if we experience a prolonged downdraft, as some are predicting. As you say, this fund is better suited to younger investors with a long timeline than to retirees. What are the dividend yields of these funds?

    • Robb Engen on May 23, 2019 at 11:13 am

      Hi Paul, to address your first comment about index funds being at the whim of the market – the idea that one can simply get in and out of the market and participate in all the upside with none of the downside sounds great in theory, but is a disaster in practice.

      The evidence is clear, no one can time the market with any sort of long term reliability or skill, so investors are better off staying invested. Markets historically go up two-thirds of the time so you’re best to participate in the roller coaster rather than trying to time your way on and off the ride.

      I’m sure there will be a correction or prolonged downturn at some point. I hope so since I’m still in the accumulation phase and can get more ETF units with every purchase.

      Retirees may shudder at the thought of a downturn but I’d suggest that any money invested should not be relied on for immediate retirement income. A bucket approach would be more desirable where you spend from a cash or fixed income “bucket” first before needing to sell any equities.

      Rather than looking to dividend yield, retirees generate retirement income by selling shares as needed. I’ve linked to this many times but this is the best explanation I’ve seen on the subject: https://www.moneysense.ca/save/retirement/a-better-way-to-generate-retirement-income/

      • Grant on March 6, 2020 at 1:57 pm

        Dale, I’m not sure that you can reliability pick the dividend stocks that will provide increasing income and lower volatility. I think you are decreasing the diversification of the portfolio, by doing this, which will giver a wider dispersion of returns so decrease the statistical reliability of the outcome. Don’t you think it’s safer to stick with simple and rely on bonds to deal with sequence of return risk?

    • Dale Roberts on May 26, 2019 at 6:04 am

      @Paul Marshman, I agree with Robb’s observations that a simple asset allocation approach has worked well in the past. But we need some bonds in the mix for managing sequence of returns risk, and emotional behaviour.

      That said, greater income and income growth, along with lower volatility stock mix both reduce that sequence of returns risk. Simple works, but we can tweak to improve slightly. We can reduce the need to sell stocks in market declines.

      I like some juicier income and lower volatility US Achievers for my ‘semi retirement’ or whatever this is, ha.

  3. Potato on May 23, 2019 at 7:08 am

    Hi Robb, on the train so I haven’t double-checked your math, but it looks like you’re over-stating the reduction in foreign withholding taxes by comparing your entire new portfolio (VEQT) with just a portion of your old portfolio (VXC), rather than adjusting for the portion that VXC made up. Same for the MER. If your allocation is similar, it should be a wash. If you’re adjusting your allocation in the switch and reducing your home-country bias, then you’ll likely end up with more FWT.

    • Robb Engen on May 23, 2019 at 7:28 am

      Hi John, I was comparing VXC to VEQT straight up for simplicity. You’re right that the reduction in MER and FWT is only slightly less when compared to my 20/80 VCN/VXC portfolio.

      According to Justin’s calculator my old portfolio had a MER of 0.23% and FWT of 0.38%.

      The new portfolio has an estimated MER of 0.25% and FWT of 0.24%.

      Since my portfolio is now 100% VEQT and it has a 30% Canadian allocation, the FWT drag is lower.

      • Dale Roberts on May 26, 2019 at 5:59 am

        Thanks Robb and John, interesting to watch your subtle shifts. Of course the bigger picture is the bigger concern and you do everything right by keeping fees low and investing on a regular schedule.

        According to Justin’s calculator you’ll give up almost a quarter of the foreign income?

        Dale

      • Potat on May 27, 2019 at 12:09 am

        Ah, ok, it’s because VXC holds US-listed international funds and gets hit with an extra layer of FWT, whereas VEQT uses Canadian-listed underlying funds.

  4. Alberta A. on May 23, 2019 at 8:23 am

    I really like the “simplicity” of having to deal with only one ETF, or maybe 2 or 3 ETFs, to be more conservative.

    That’s great if you are younger and starting on the road of investment. You buy one ETF, and forget it until decades later!

    But, what about people who are already in their retirement (no pension plan, except CPP and OAS), and are DIYers?

    They need some monthly income to put food on the table, and to pay for utilities (no mortgage). I don’t know VEQT yield, but it may not be enough to bring in the monthly paycheck.

    Moreover, can we trust any financial businesses to put all of our eggs in one ETF?

    Let’s say someone retired in her mid-60s with a 1.5M$ portfolio (getting there myself), should she sell everything to move to a one (or 3) ETF portfolio?

    Still confused about the “one-poney” solution 🙂

    • Robb Engen on May 23, 2019 at 11:21 am

      Hi Alberta, please see the link I posted in the reply to Paul’s comment. Don’t get hung up on dividend yield. Selling shares is the equivalent of creating your own dividend.

      Also, don’t confuse one ETF with putting all your eggs in one basket. As I explained, these asset allocation ETFs are “funds of funds” – a wrapper that contains several other ETFs. There is truly no need to hold multiple ETFs – in fact that defeats the purpose and the benefits that an all-in-one ETF delivers.

      Vanguard manages over a trillion dollars world wide. They’re not going anywhere. If you’re paranoid about an investment firm going under please check out the Canadian Investor Protection Fund which insures your money in case of insolvency:

      For an individual holding an account or accounts with a member firm, the limits on CIPF protection are generally as follows:

      – $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), plus
      – $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus
      – $1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.

      • Andy on November 11, 2019 at 4:23 pm

        Hi Robb,
        Just a comment on using VBAL as a one ETF solution. I recently emailed Dan Bortolloti about using VBAL as my one ETF when using the total return approach as you mentioned in the link here:
        https://www.moneysense.ca/save/retirement/a-better-way-to-generate-retirement-income/
        He suggested I would need greater flexibility to (buy/sell) stocks using his total return method.
        Using VEQT for the equity portion and VAB for the bond along with 5 years of GIC ladder protection could be a feasible way to accomplish this.
        Because the GIC’s are part of the safer money portion, you would have to add them to whatever % you invest in VAB as your total income portion of the portfolio.
        For example:
        a 60/40 portfolio might look like this depending on what portion you are dedicating to each of the 5 GIC’s in the ladder.
        If you had 1 million to invest for example:
        60% VEQT (600,000)
        20% VAB (200,000)
        20% GIC’s (5- 40,000 GIC’s each maturing every year over 5 years).
        This way, you could sell or buy from VEQT and VAB to maintain your portfolio balance.
        I think the all-in-one ETF’s are a great solution for accumulation, but to use this method when decumulating requires a little more thought as outlined in Dan’s article.

        • Robb Engen on November 11, 2019 at 4:36 pm

          Hi Andy, thanks for your comment. You (and Dan) are right in that the ‘balanced’ asset allocation ETFs are certainly less flexible for retirees looking to use the ‘bucket’ method for generating retirement income. I like what you’ve proposed – VEQT for the equity bucket, VAB for the bonds, and rolling GIC ladders for the maturing cash.

    • Derrick Voogd on May 24, 2019 at 8:55 am

      The biggest difference for individuals in the retirement phase (vs. accumulation) is really just equity to bond allocation. Robb does a great job above explaining the 100% equity portfolio of VEQT. If I was in your shoes Alberta A I would still use a one-fund portfolio, but have a larger bond allocation. VCNS has 60% bonds, and VBAL has 40% bonds – both great options for someone in your situation.

      • Mari-Ann on August 3, 2019 at 8:39 am

        Following Alberta’s post as am I’m in a similar position and age and am a very conservative investor. However I am learning and making changes. I like the idea of some equities but am happy with GICs too. We have found our greatest wealth builder is our salaries and we manage to save each month. I’m going to look into the vanguard conservative etf fund. Can I directly invest with vanguard or have to open a roboadvisor account?

        • Robb Engen on August 5, 2019 at 9:24 am

          Hi Mari-Ann, there’s nothing wrong with investing conservatively, especially if you’re a great saver to begin with. No need to open a robo-advisor account.

          What you’ll have to do is open a discount brokerage account online (all the big banks have a discount brokerage arm – I’m with TD Direct Investing, but there’s RBC Direct, BMO Investorline, CIBC Investor’s Edge, Scotia iTrade, etc.).

          Once that’s set up it’s just a matter of funding your account and then buying the appropriate ETF. If it’s the Vanguard conservative all-in-one portfolio then look for the ticker symbol VCNS.

  5. Ronado on May 23, 2019 at 8:24 am

    What does this look like income tax ways (internal wi fund and external) and especially for non-registered accounts and what do u recommend for non – registered accounts. R u saying that the dividends r taxable in an RRSP as well as TFSA as i thought RRSP are free from foreign tx. thks Robb

    • Robb Engen on May 23, 2019 at 11:32 am

      Hi Ronado, the foreign withholding taxes are unavoidable even inside an RRSP or TFSA. Basically any Canadian listed ETF that holds foreign securities will have to pay foreign withholding taxes (it’s 15% of the dividends, so we’re talking about maybe 0.3 to 0.4% max). You don’t pay it, the tax is withheld at the source.

      One way to avoid foreign withholding taxes is to hold U.S. listed ETFs directly. Doing so means dealing in U.S. currency, which comes with its own fees when converting from Canadian dollars. You can avoid these currency conversion fees with a move known as Norbert’s Gambit. This adds further complexity that I’m not willing to do at this point, but might need to look at as my portfolio grows.

      Finally, the asset allocation ETFs are perfectly fine for your non-registered or taxable account. You can file for a foreign tax credit using Schedule 1 (Canada). This ensures that you don’t pay tax on the same income in both Canada and the foreign jurisdiction. Form W8 can also be filed to reduce the amount of withholding from U.S. dividends.

      • catherine on July 21, 2020 at 2:32 pm

        Hi Robb,

        is it schedule 1 OR w8? i never filed a W8 from my memory and have a lot of individual
        US listed stocks in my non registered portfolio.

  6. Sandy Fry on May 23, 2019 at 10:34 am

    Interested to hear a response to Alberta A’s question.

  7. Paul Cameron on May 23, 2019 at 6:24 pm

    By being 100% equity you are missing out on the benefits of rebalancing. I’ve seen studies that show a 90/10 allocation will out perform the 100/0 as it forces the sale of the high performing asset and the purchase of the underperforming asset.

    • Robb Engen on May 23, 2019 at 10:14 pm

      HI Paul, since VEQT is a fund of funds it will still benefit from rebalancing between its Canadian, U.S., and International holdings. And, since Vanguard does this automatically behind the scenes, that means I don’t have to make a judgement on when to rebalance on my own.

    • Ian on May 23, 2019 at 10:17 pm

      VEQT is composed of four ETFs and is automatically rebalanced. If euro stocks soar and Canadian stocks sink, the phenomenon you describe will still occur.

      Edit: beat me by three minutes Robb haha

      • Robb Engen on May 23, 2019 at 10:22 pm

        Ha! Nice – thanks for jumping in!

  8. Dave on May 23, 2019 at 6:51 pm

    Robb did you ever find any evidence to back that guys claim that “Historically, about 30% home bias has been the sweet spot for reducing portfolio volatility”?

    • Robb Engen on May 23, 2019 at 10:17 pm

      Hi Dave, are you suggesting I just blindly followed a recommendation from a random internet commenter? 😉

      Yes, there is wide-spread evidence that confirms this: https://www.pwlcapital.com/overweight-canadian-stocks-model-etf-portfolios/

      • Dave on May 24, 2019 at 7:03 am

        I dunno Robb, random internet commenters only have your best interests at heart, why wouldn’t you believe us??

        Thanks for the link! Like you I have been underweight Canada for awhile and while I had seen the 30% weighting recommended in multiple places I hadn’t seen any evidence to back it up.

  9. Cory on June 8, 2019 at 4:49 am

    Hi Robb,

    I recently moved all my money from a TD-e series couch potato portfolio into veqt.
    One thing I’m curious about though, is why is there no mention about dividends? With the e-series funds I used a drip to re-invest the dividends. Is that what veqt does automatically? I noticed vgro pays dividends?

    • Robb Engen on August 2, 2019 at 9:26 am

      Hi Cory, sorry I missed this comment. You’ll have to wait until the product has gone through a full year of returns before the 12-month trailing yield will be published. I’d expect it to be somewhere in the 2% range. I haven’t seen a distribution yet so I suspect it will be paid at the end of the year.

      When I held VCN and VXC, distributions were paid quarterly (not on a DRIP) into my cash account and then I just reinvested when I made my next contribution.

      • Cory Dettweiler on August 2, 2019 at 12:00 pm

        Ok, that makes sense. Thanks Robb!

  10. Brendan on August 2, 2019 at 8:49 am

    Great article. I’ve been waiting for a product like this as I am still young and in it for the long haul. Because of this I plan to re-invest dividends. Is there anywhere to find the expected annual yield % or will we just have to wait for the first year before Vanguard can give us a number? Or will it most likely share the average 2% of the TD E-Series strategy? Apologies if this question has already been blowing up your inbox!

    • Robb Engen on August 2, 2019 at 9:29 am

      Hi Brendan, I agree – VEQT is a great product for a young person with a long time horizon and a clear vision. As I mentioned to Cory above, they’ll post the trailing dividend yield after the fund has been on market for a year. But I suspect it will be in the 2% range and either paid quarterly or annually into your cash account.

  11. Adam on September 3, 2019 at 6:09 pm

    Sorry for commenting so late on this. For any dividends received from VEQT, why wouldn’t you use a DRIP? Are you saving it as cash until the price goes down before re-investing? I figured DRIP would make sense if we aren’t trying to time the market completely but I could be missing something. Thanks!

  12. Dennis on November 20, 2019 at 8:26 am

    I would like to know the various taxable distributions that VEQT will generate. I intend to hold it in my non registered account. I have a DB pension and sufficient liquidity and a HELOC to buffer me.
    Then again VEQT will be no more than 5% of my non registered investments, as I need to first understand it’s tax efficiency and more so whether I have to track the ACB or will Questrade when I sell any units.
    I do not have the time or patience to compute ACB’s and I need the dividend plus interest income to be under 2%. I need clarity before I invest in VEQT. I seem to see the total MER being 0.55. Is that the current experience? Thanks

  13. Albert on December 27, 2019 at 10:46 pm

    Hello Rob, before you consolidated your investment to the VEQT solution, I wonder have you also considered XEQT by iShares? If so, can you explain the reasons for going with VEQT instead of XEQT? Many thanks.

    • Robb Engen on December 28, 2019 at 12:32 am

      Hi Albert, XEQT didn’t exist when I made my decision to switch to VEQT.

      XEQT didn’t launch until Aug 13, 2019.

      You can’t go wrong with either of these ETFs if you’re looking for an all-in-one “all-equity” solution.

  14. OJ Junior on January 17, 2020 at 7:20 am

    Hi, I have read some of your blogs and I can say very interesting. Question: To reduce foreign withholding taxes, why didn’t you go with VT in your RRSP and VEQT in TFSA?

    I have XEQT in my TFSA and my Corporation Margin. I did Norbert’s gambit and invested all my RRSP in Vanguard Total World Stock ETF (VT)

    Thanks for your hard work teaching Canadians/people ways to save and invest.

    • Grant on January 20, 2020 at 3:17 pm

      Andy, I used to think this about using a single fund, like VBAL, in the deaccumulation phase, but it is not correct as Ben Felix at PWL Capital explained to me as follows. During a crash, you might think that selling some VBAL is selling some stocks when the price is down. Not so because as VBAL is effectively rebalanced daily with fund cash flows, when you sell some VBAL, you are simply selling some stocks that were bought that same day with the proceeds of bonds. So you are really just selling those bonds along with the bonds already in the fund (the 40%). I hope that is clear. So you don’t need to complicate your portfolio in the deaccumlation phase by separating stocks and bonds and adding GICs. You can simply sell off slivers of VBAL as needed.

    • Robb Engen on January 28, 2020 at 8:56 am

      Hi OJ, thanks! I considered going that route with U.S.-listed ETFs but decided that for now I’m sticking with VEQT in both accounts. I like the approach you’re taking, though. We’ll see if I change my mind once my RRSP hits the $250k – $300k mark.

  15. Chuck on January 28, 2020 at 1:39 am

    Robb, Thank you for the enlightening advice!

    I am just about to make the jump and transfer ~50k of high MER mutual funds into an etf. I am researching the ‘penalties’ to do so…LSC DSC etc. Can’t wait to get out!

    33 years old no kids. Current broker net me ~8% since 2016. Not bad by any standard and they inspired me to learn about the market and investing in it. Now I know more – so time for a change. A standard ETF (ie IVV) would have net me 14%+ over the same period…

    VEQT seems well suited for my goals and risk tolerance. I currently make monthly contributions of a few hundred dollars to my brokerage and they in turn buy me mutual funds. If I switch to this ETF – I think these will incur trading fees from my other (big bank) brokerage. I know – I can switch brokers – but I’m hoping to avoid that for the time being. Vanguard ETFs are not approved for PACs. IShares are (XEQT). I am a bit confused – would PACs typically incur brokerage fees? Do they count like normal ‘trades’?

    How do you manage your VEQT ETF? Is it with a handful of ‘bulk’ buys throughout the year? Do you time these based on share price? Sorry – new to all this. I assume that since both EQT funds have no Yield – that I need not worry about DRIP. Right? Is the VEQT ETF something you buy monthly or yearly? And do you recommend using questrade or wealth simple instead of my current brokerage (through a big Canadian bank)?

    • Robb Engen on January 28, 2020 at 9:04 am

      Hi Chuck, thanks for your comment. You can purchase VEQT for free on either the Questrade platform or the Wealthsimple Trade platform. I recently switched to WS Trade for my own RRSP and TFSA: https://boomerandecho.com/wealthsimple-trade-review/

      The reason why I switched has because I did not want to incur a $9.99 fee every time I bought VEQT.

      Alternatively, you could choose XEQT (iShares) and purchase it for free via Qtrade or Scotia iTrade (you can also use Questrade or WS Trade to buy XEQT for free): https://canadiancouchpotato.com/2020/01/28/how-to-set-up-a-hands-off-etf-portfolio/

      Both VEQT and XEQT will distribute dividends annually, so you should be able to set up a DRIP (or just reinvest the cash yourself). They don’t show the yield yet because the funds are so new. Once they’ve been around for a year you’ll see the 12 month trailing dividend yield.

      • yafray on February 2, 2020 at 2:07 pm

        Is VEQT an ETF ? I am confused. I though Questrade is a free buying platform when buying ETFs

  16. Chuck on January 28, 2020 at 3:40 am

    Most of my questions were answered in the above comments. Sorry.

    ETFs are traded like stocks – so do incur a trading fee. There yield for this ETF will be established later in 2020 – but DRIP not so important. You just take it as ‘cash’ and reinvest. Is this typically the default setting?

    Two questions remain – with an ETF like this one – how often do you buy? How do you decide when? And do you recommend questrade etc as an alternative to my big bank brokerage? Also any tips on avoiding mutual fund penalties?

    • Robb Engen on January 28, 2020 at 9:09 am

      Hi Chuck, yes – ETFs trade like stocks and most brokerages will charge $9.99 per trade. You can avoid these fees by using one of the brokers I mentioned above. DRIPs are not set up by default so you’ll need to set that up with your broker. I don’t bother since I use WS Trade now and can reinvest it on my own without incurring a fee.

      I make regular contributions to my TFSA ($1k per month to catch up on some unused room) so I buy every month in that amount. I’d recommend Questrade or Wealthsimple Trade if you want to avoid the fees. Read my WS Trade review to see if it’s a good fit for you (it’s not for everyone).

  17. Chris on February 5, 2020 at 4:17 pm

    Hi Robb,

    Good article. Right now I have XAW as my RRSP ETF and VEQT as my TFSA EFT. I started this way to identify which of the two would perform better, and so far, VEQT is outperforming XAW. I thought XAW would do better, given the higher US exposure and tracking the S&P 500, so I used that in my RRSP, but VEQT is outpacing XAW.

    The problem is I am currently putting all investment money into my RRSP, in order to max it out and claim tax benefits. At this point, I don’t really need a TFSA, it was more to experiment with how the two rival all in one funds would perform.

    I am considering selling off XAW and placing my RRSP with VEQT and leaving my TFSA as is. This way I will get some Canadian exposure, and XAW and VEQT are similar in their US and International market exposure. And as mentioned, VEQT seems to be outpacing XAW.

    What are your thoughts on this?

    • Robb Engen on February 5, 2020 at 10:29 pm

      Hi Chris, thanks. It’s perfectly reasonable to hold VEQT in both your RRSP and TFSA (that’s what I’m doing) as long as you’re comfortable with 100% equity exposure. I’d caution you not to make a move purely based on performance, though. XAW vs VEQT is not a true apples to apples comparison, plus it’s not really fair to say VEQT is superior based on just one year’s performance.

      What I’m saying is, switch because the make-up of VEQT is something you are comfortable with holding for the long term, not because it outperformed XAW in a short period of time.

  18. Annu on February 6, 2020 at 9:25 am

    I have some cash to invest in my registred accounts approx 70k, I would like to buy VEQT. however, I am a little skeptical buying it all at once since the markets are crazy high now. Do you think it’s better to invest a little every month spanning across 3-4 months?

  19. Paresh on March 5, 2020 at 11:09 pm

    Hi Robb,
    Great ever Gold article! BTW I think the total cost for VEQT will be 0.71 % (0.2 % Management fees, + 0.25 % MER + 0.24 % FWT drag) or am I missing something? The blog post doesn’t account for management fees.

    Thanks,

    • Robb Engen on March 6, 2020 at 11:30 am

      Hi Paresh, thanks! The management fee is included in the MER, so you don’t actually add those two together. The MER includes the management fee plus the fund’s day-to-day operating expenses, such as record keeping, fund valuation costs, audit and legal fees, and costs for sending out prospectuses and annual reports. The MER includes another important item – harmonized sales tax (HST).

  20. Paresh on March 6, 2020 at 12:55 pm

    Hi Robb,
    Thanks for the clarification Robb.
    This is music to my ears :), that management fee is included in the MER hence the total cost for VEQT is 0.049 %. I guess then this will be the case for all of Vanguard Asset Allocation ETFs, correct (VBAL, VGRO etc.).

  21. George on April 20, 2020 at 3:15 pm

    Hello all,

    I’m with TD Webbroker. Nice user interface, good customer service, but $9.99 per trade. It gets expensive.

    Does anyone here use Webbroker? If so, do you know if there is a way that I could buy multiple stocks without being charged the $10 for each individual stock purchase or sale that I make?

    I only have $1,000 invested in total, allotted to 24 individual Canadian and US stocks, plus a couple of international stocks too (I own an average of 4 shares per individual stock that I own) plus I also own 2 Vanguard Total ETF VEQT Fund stocks. Is owning 1 Vanguard VEQT stock sufficient, or should I buy like 10 or 20 of them to increase my earnings?

    Given my overall portfolio makeup, can anyone tell me if I have done it in a good way? Should I sell all of my individual stocks and buy as many Vanguard Total ETF VEQT Funds as I can buy for $1,000? Is there another better stock portfolio strategy that you would suggest for me?

    Lastly, is there a better no fee online brokerage that I should consider using i.e., Schwaub, Questrade? The problem is that if I sold all of my holdings with Webbroker, I would be charged roughly $200 just in selling fees to sell my 24 individual stocks – $10 charge for each transaction. Or should I just stick with Webbroker to avoid the selling costs that I would incur?

    I would really appreciate it if someone could provide me with some guidance, as I have only been at this for only 3 years, so I am still a ‘newbie’. I am 54 years old.

    Some good advice from a seasoned trader would be greatly appreciated. Please post your response right here in the comments section.

    Thank you so much.

    George

    • Pacific on April 21, 2020 at 11:21 am

      Hi, George, I used to use TD Webbroker but when I found out that they only have PDF’s available for downloading year-end transactions (i.e., NOT .CSV’s!!) I stopped using them. I contacted them to tell of my needs, but deaf ears with no response (several times). I switched to QTrade, (not Questrade) where the fees are less, and the downloads are of several formats. Love the uncluttered screen, compared to TD.

      However, more important to tell you is I believe that individual stocks should only become a consideration if one has over $50,000 – $100,000 to invest. Otherwise, the fees involved are too much (as you have discovered). Under about $50K I would only use ETF’s with a low MER.

      Finally, note that if you open an account in another institution, you can request the stocks be transferred over, you don’t have to sell them to move to elsewhere.
      Hope my experiences help, been investing in stock markets for 10+ years, made mistakes, learned well.

      • George on April 23, 2020 at 10:21 am

        Thank you so much Pacific. I really appreciate your advice. Now that I know, I will switch to QTrade.

        OPTION #1: What would be the best earnings I could expect, from my 23 individual stocks and 2 Vanguard ETFs when the market turns around. How long could I realistically expect to see any decent earnings, even if only a meager amount, if I just let the money compound, and leave the stocks alone for like 10 years? Even if could only make a couple thousand bucks I would be happy, as I would use the profits to buy more stocks.

        OPTION #2: what if I just buy 1 or 2 stocks of Facebook, Microsoft, or Apple? In time couldn’t the earnings, dividends, and compounded earnings together with the principal make for a decent profit down the road, even if to just make back the $1,000 I initially invested? At least then I could play with the profit and not necessarily use my out of pocket money.

        OPTION #3: should I just sell all of my stocks and buy as many Vanguard VEQT ETFs as I can for $1,000? In 10 years could I possibly at least earn back the amount I initially invested which in this case would be $1,000? Is it possible that with all of these Vanguard ETFs I could make at least $1,000 in profit?

        Base on all of your years of experience trading stocks, which of the above 3 scenarios should I go with considering all of the pros and cons of each option?

        Thank you so much again for your help in sharing your wisdom with me.

        It proves that there are people out there that care enough about others to help them. In this life, we give help when we can, and hopefully receive it when we need it. I’ve already learned a couple of valuable things from you.

        God Bless,

        George

        • Robb Engen on April 23, 2020 at 10:51 am

          Hi George, given that you have a small amount to invest ($1,000) there’s absolutely no need to complicate this decision. You need to identify your risk tolerance and find an appropriate mix of stocks and bonds that will help you achieve your goals.

          As for how much you can earn – well, nobody can predict the future but it’s reasonable to suggest that over a 10 year time horizon an ETF like VEQT could produce returns in the 6-8% per year range.

          Remember, VEQT is one ETF that actually holds tens of thousands of stocks from around the globe. They’re just packaged together in one “wrapper” to make it easier for investors to diversify and eliminate the need to rebalance multiple ETFs.

          Investing in individual stocks, even large ones like Facebook, Microsoft, or Apple, is incredibly risky and will give you the least reliable outcome over the next 10 years. Companies go in and out of favour all the time, and there’s no way to predict which ones will outperform in the future.

          Finally, to be blunt, you need to forget the notion of “playing” or “trading” with your investment dollars. That’s the quickest way to lose all your money. Instead, buy a diversified ETF and leave it alone for 10 years.

  22. Geoff on April 21, 2020 at 4:44 pm

    Vanguard All Equity ETF (VEQT): My New One-Ticket Investing Solution – Based on the current COVID-19 impacts and market volatility, do you still feel the same about this ETF?

    • Robb Engen on April 23, 2020 at 10:43 am

      Hi Geoff, I don’t believe the investment strategy should change based on market conditions.

      I chose VEQT for its low cost and global diversification. I knew full well that a market crash or correction was possible given my 20+ year time horizon. I’m not going to panic based on the current environment. In fact, for investors in their accumulation years (like me), this is a great opportunity to add more units of VEQT at a discount.

      Index investors always need to be prepared for volatility and have an asset mix they can be comfortable with in good times and bad. That means not being greedy and increasing risk when markets are rising, and not being fearful and decreasing risk after declining markets.

      As a 100% equity portfolio, VEQT may have the highest expected returns for the long term (over VGRO and VBAL, for example), but with that comes a higher degree of volatility.

      On March 23, VEQT was down 27% for the year. Today it’s only down 11.6% for the year. No one likes to lose money, but that’s well within the expected range of outcomes in the short term. I’m holding on.

      • Peter on May 2, 2020 at 6:36 pm

        Hello Robb,

        first of all, thanks for sharing this great article. I really like it. And also the chance to have the possibility to ask questions, thanks for that.

        My question is regarding taxes for VEQT in TFSA and non-registered accounts. I am hoping to get some thoughts from your side to find out if I am on the right track:

        Little Peter invested $20.000 in VEQT.
        $10.000 is invested in TFSA and the other $10.000 in a non-registered account.

        Assumptions: 7%p.a growth and 2.5% annual dividens.

        First TFSA:
        > I read on Jasons FWT Calculator that VEQT in a TFSA has a 0.22% tax drag
        > Means, my annual dividens are $228 (2.28% after FWT) – is that correct?
        > What happens if Peter sells his VEQT with a gross growth of7%? Does Peter get all the 7% of capital gains or does Peter have to pay FWT on the capital gains too?
        > Is it correct that the taxes will be withheld automatically and there is nothing to do for me?
        > In my understanding, I never have to report anything regarding my TFSA in my annual tax return, is that correct?

        Second non-registered account:
        > I read on Jasons FWT Calculator that VEQT in a non-registered account has a 0.02% tax drag
        > Means, my annual dividens are $248 (2.48% after foreign tax credit) – is that correct?
        > What happens if Peter sells his VEQT with a gross growth of7%? Peter is paying on 50% on his capital gain the captial gain tax, correct?
        > In case of a captial gain/loss, I simply declare this on my annual tax return, correct?
        > And if my non-registered account exceeds 100k, I do have to report this too, correct? (or only if the foreign part exceeds 100k?)

        Thank you already for your time. I am trying to get a rough picture of how to calculate my profit once I retire.

        Thanka again and have a nice day,
        Peter

        • Robb Engen on June 19, 2020 at 10:52 am

          Hi Peter, sorry I missed this comment. FWT is a 15% withholding tax applied to foreign dividends. So, you’re right about the expected dividends received in each of the TFSA and non-registered accounts (using Justin Bender’s FWT calculator).

          The tax is automatically withheld so you don’t have to do anything.

          FWT does not apply to capital gains, so no worries there either.

          As for capital gains in your non-registered account, this only applies when you sell – at which time you would pay taxes on 50% of the capital gain. This amount gets added to your total income for that tax year.

  23. Mike Wood on June 19, 2020 at 10:27 am

    I have invested in VEQT and have wanted to clarify if the underlying ETfs are CAD-Hedged or not. Just based on their names it doesn’t look like they are, but I wondered if someone could confirm that.

    • Robb Engen on June 19, 2020 at 10:45 am

      Hi Mike, the underlying ETFs held within VEQT are not CAD-hedged – they hold their stocks directly.

  24. Pascal on June 21, 2020 at 8:45 am

    I’m 40 years old, and i am considering XEQT and XGRO.

    Would it make sense to have XETQ in TFSA account and XGRO in RRSP ?

    Or am I young enough to go “all-in” XEQT?

    Any thoughts?

  25. Cat on July 21, 2020 at 2:56 pm

    I am 34 years old and planning to do XEQT. I know i have time on my side to do an all equity portfolio. My question is when you need to change your asset allocation as you get older. Do you sell your existing all in 1 etfs ie XEQTand then buy XGRO then next time you sell again and buy XBAL? whats the implications of doing this in your registered and non registered accounts where i have 4 ETFS in all account for a global porfolio mix since 2014 + individual us/cad stocks (50% of entire portfolio and the majority were before i was introduced to index funds but cant seem to pull the trigger to sell so i just balance those and started buying index funds to at least cushion me from
    very bad individual stock plays knowing i could underperform/ outperform the indices)

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