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This is a VEQT review that covers the ETF’s key facts, ETF and stock holdings, returns, fees, how it compares to other all-in-one funds like VGRO and XEQT, and so on.
Asset allocation ETFs like VEQT are a great addition to any DIY investor’s “investment toolkit.” They provide a simple, low-cost way to quickly build a diversified portfolio without the stressful on-going maintenance.
If you’re a do-it-yourself investor, both seasoned and beginner, the Vanguard All-Equity ETF Portfolio (VEQT) or any one of the one-ticket ETF solutions could be a smart addition to your investment portfolio.
Ready? let’s start…
What is VEQT ETF?
VEQT is a 100% equity allocation ETF from Vanguard Canada and one of its 6 all-in-one diversified portfolios.
The portfolio’s objective is to provide investors with “long-term capital growth” by investing primarily in equity securities.
It is a Canadian denominated ETF that is listed on the Toronto Stock Exchange and was introduced in January 2019.
With more than 12,300 individual stocks at the time of writing, VEQT offers investors a quick way to build a portfolio that is diversified worldwide and across different sectors with a single purchase.
Unlike the other asset allocation ETFs from Vanguard, VEQT pays dividend annually.
Key Fund Facts:
- Dividend: Annually
- Account Eligibility: RRSP, RRIF, RESP, TFSA, DPSP, RDSP
- Asset Under Management: $508.3 million
- MER: 0.25%
- Inception date: January 29, 2019
- Equity Allocation: 100%
Companies with large capitalization make up about 81% of VEQT’s holdings as at November 2020. But we can further analyze the ETF’s holdings by other criteria such as funds held, underlying stocks, sector weightings and geographic or market allocation.
Vanguard VEQT does not hold individual stocks directly. It is a fund of funds, that is, it is invested in other Vanguard funds (ETFs) that have exposures to individual companies.
The four Vanguard ETFs that make up VEQT and their weights as at November 2020 are:
- Vanguard US Total Market Index ETF: 41.30%
- Vanguard FTSE Canada All Cap Index ETF: 30.80%
- Vanguard FTSE Developed All Cap ex North America Index ETF: 20.80%
- Vanguard FTSE Emerging Markets All Cap Index ETF: 7.90%
Though VEQT only holds other ETFs, we can look under the hood to know the individual companies that make up its assets.
As of Nov 2020, VEQT has a total of 12,350 holdings spread across the world. The top 10 stocks are presented below and contains some of the largest and most popular companies in both U.S. and Canada.
|Holding Name||% of Market Value||Sector||Market|
|Apple Inc.||2.05||Computer Hardware||US|
|Royal Bank of Canada||1.93||Banks||CA|
|Shopify Inc. Class A||1.92||Consumer Digital Services||CA|
|Amazon.com Inc.||1.51||Diversified Retailers||US|
|Canadian National Railway Co.||1.23||Railroads||CA|
|Bank of Nova Scotia||0.97||Banks||CA|
|Brookfield Asset Management Inc. Class A||0.93||Asset Managers and Custodians||CA|
Together, the VEQT’s top 10 holdings account for 15% of its market value.
The asset allocation ETF is diversified across sectors. Depending on when you check, the allocation to each sector may look very different.
For example, VEQT had a 26.2% allocation to Financials as at November 2019 but it was down to 18.70% in Nov 2020. On the other hand, Technology sector grew from 12.60% to 17.90% within the same period.
The sector weights as at November 2020 were:
VEQT has a heavier weighting to North America. Its exposure to Canada and U.S. stocks are about 70%, with the balance spread across 47 other markets across the world.
But the top 10 countries represent 90.6% of VEQT’s assets.
Here’s a summary of VEQT holdings:
- Built using 4 other Vanguard ETFS
- Over 12, 000 individual stocks
- Allocation to 50 markets across the world
- Top 3 sectors (Financials, Technology and Customer Discretionary) account for almost 50% of VEQT’s holding
- About 81 percent exposure to companies with large capitalization
The management fee for VEQT is currently 0.22%. Add the other operating costs of the fund and you get a management expense ratio (MER) of 0.25%
Given that the average mutual fund fee in Canada is above 2%, VEQT fees is a big bargain. That is, you’ll pay just $250 per year on a $100,000 portfolio compared to over $2,000 for the average mutual fund.
Investors don’t pay the fees directly; it simply reduces the returns of the fund.
In addition, you may have to pay some brokerage cost to buy the ETF.
The good news is:
Canadians now have the ability to buy ETFs and stocks without brokerage costs. More on this below.
|Management Expense Ratio||0.25%|
Vanguard VEQT Performance
VEQT has been trading for over a year so we have some returns data. But the ETF is relatively new, so it is difficult to compare its performance to other asset allocation ETFs.
The Year-to-date returns of VGRO as at Nov 2020 was 9.44%.
If you had invested $10,000 in VEQT since inception, your investment would have grown to $12,395.71 in November 2020.
How does VEQT Compare?
So how does the VEQT ETF compare to other funds, including the ones from Vanguard?
VEQT vs VGRO
Vanguard Growth ETF Portfolio (VGRO) is another asset allocation ETF from Vanguard. They both have the same fees but VGRO was introduced a year earlier on January 25th, 2018.
The biggest difference between the 2 is their asset allocations. While VEQT has a 100% equity allocation, VGRO has 80% exposure to equity and 20% to bonds.
VGRO ETF’s bond allocation is provided using 3 Vanguard funds for a total of 7 underlying ETFs.
Other asset Allocation ETFs from Vanguard include:
- Vanguard Balanced ETF Portfolio (VBAL): Classic 60:40 balanced portfolio
- Vanguard Conservative ETF Portfolio (VCNS): 40% equity allocation
- Vanguard Conservative Income ETF Portfolio (VCIP): 20% equity allocation
- Vanguard Retirement Income ETF Portfolio (VRIF): Introduced in Sep 2020, it has a 50% equity allocation but can go as high as 60%.
You can check this post for a full VGRO Review.
VEQT vs XEQT
iShares Core Equity ETF Portfolio (XEQT) is Blackrock’s all-equity ETF portfolio. Like VEQT, it is also 100% invested in equities and was introduced in August 2019.
XEQT holds 4 other iShares ETF, that collectively invests in over 9,000 underlying stocks.
The ETF has a slightly lower management fee and management expense ratio of 0.18% and 0.20% respectively.
If you’re looking for an all-equity ETF portfolio that is diversified worldwide, you really can’t go wrong with either of the two.
VEQT Vs VFV
Vanguard S&P 500 Index ETF (VFV) is also an all-equity ETF fund that invests in U.S. companies and tracks the S&P 500 index.
It is a Canadian dollar ETF that is listed on the Toronto Stock Exchange (TSX).
At an MER of just 0.09%, VFV has a much lower cost than VEQT. But it is a less diversified fund with 100% of its assets invested in U.S. This is not necessarily a problem when held as part of a larger well diversified portfolio.
Related Post: What Is Diversification And Why Is It Important?
VEQT vs Robo-advisors
By investing in VEQT, you’re effectively getting a similar service that robo-advisors provide from Vanguard. They’ll both rebalance your portfolio automatically at set intervals.
One big difference that is worth considering is the cost.
Questwealth Portfolio, Questrade’s robo-advisor offering, has a low management fee of just 0.25%. After adding the MER for the underlying ETF holdings, you can expect to pay about 0.40%.
On the hand, Wealthsimple, Canada’s most popular robo-advisor has a management fee starting at 0.50% for asset below $100,000. The underlying ETFs will add another 0.20% or thereabout to the total cost.
So based on cost alone, VEQT comes out on top. But you should remember that you still need to login to your brokerage account to place trades, and the brokerage fees can quickly add up if you’re paying commissions.
This isn’t a big concern because:
- You should be able to login to your account and place your buy trades in less than 5 minutes each time you need to add money to your account; and
- There are brokerages that lets you buy ETFs for free like Questrade and WealthSimple Trade.
Pros and Cons of VEQT ETF
Pros of VEQT:
- Provides instant global diversification with a single buy
- Automatic rebalancing requiring little maintenance going forward
- VEQT stock is priced low so it is easier to buy when you are investing small amounts of money at a time
- It can be held in registered accounts including TFSA, RRSP and RESP
Cons of VEQT:
- Slightly more expensive than Blackrock’s all-equity ETF offering (0.20% MER)
- With a 30% allocation to Canada, VEQT has a home bias.
All-equity ETF funds are not ideal for everyone. But this is not really a drawback of VEQT.
Investors should invest according to their risk appetite and Vanguard and other ETF providers have other funds with lower equities allocation.
Is VEQT right for you?
So is VEQT a good investment for you? It depends.
Robb Engen of Boomer and Echo picked the stock as his “Desert Island ETF Pick” – an ETF you would be comfortable holding for the long run if you got stranded on a desert with no access to your brokerage account.
But it is not for everyone.
A fund that is 100% exposed to equities may provide better returns but you should also be ready for the short-term swings.
Having a long-term investment horizon isn’t enough, you must be willing and able to tolerate the fluctuation.
VEQT may be right for you if you:
- have a long investment horizon
- can take the occasional volatility – that is, you have a higher risk appetite
- want to build a low-cost diversified portfolio at the fraction of the cost of mutual funds
- don’t want to spend time and money rebalancing your portfolio periodically
The fund may be ideal for parents that are just starting to save and invest for their kid’s post-secondary education using RESP. I wrote about how to build a DIY RESP model portfolio here.
How To Buy VEQT ETF
You should be able to buy VEQT at any of the brokerages in Canada.
But instead of paying about $10 per trade, you can buy VEQT for free at Questrade or WealthSimple Trade
Buy VEQT at Questrade
Questrade is Canada’s most popular online brokerage. You can buy ETFs for free but selling ETFs or trading individual stocks costs 1 cent per share ($4.95 minimum and $9.95 maximum)
You can get a $50 trade rebate when you sign-up for Questrade using the promo code in the link below. The promo code will be automatically applied when you create an account.
Buy VEQT at WealthSimple Trade
WealthSimple Trade is the brokerage offering from WealthSimple. It started as a mobile app but it is now available as a web version (still in beta mode).
Canadians can buy or sell both ETFs and stocks for free on the platform; a great way to save fees for DIY investors that invest small amounts on a regular basis.
The only trading fees at WealthSimple Trade is currency exchange fee on USD trades. Since VEQT is traded in Canadian dollars, you won’t have to deal with the fees.
VEQT has a 100% allocation to equities, with about 70% exposure to Canada and U.S. The balance of 30% is invested in other international markets (Developed and Emerging)
It depends. If you have a long investment horizon and above average risk tolerance, an all-equity one-ticket fund like VEQT may be ideal for you
The management expense ratio is 0.25%. You may also need to pay some commission to buy the ETF depending on the brokerage you use.
My VEQT review is positive. It is a great addition to the existing investment funds available to Canadians.
If you want to keep things simple, avoid periodic portfolio rebalancing, reduce the time it takes to monitor your holdings and you can tolerate the risk of an all-equity fund, then VEQT is worth considering.
Have any questions? Let me know in the comments. And if you liked this VEQT review , please share and subscribe for more.
Vanguard All-Equity ETF Portfolio Review
VEQT is a 100% equity allocation ETF from Vanguard Canada with the objective of providing investors with long-term capital growth.