Millionaire-Maker ETFs: XEQT vs VEQT Showdown

Let's cut through the noise. Investing feels like navigating a minefield sometimes, doesn't it? A million tickers flashing, endless analysis paralysis, self-proclaimed gurus shouting contradictory advice. It’s enough to make anyone consider stuffing their cash under the mattress.

But what if there was a simpler path? A way to capture broad market exposure, achieve instant diversification, and benefit from professional oversight, all bundled into one neat package you can buy with a single click?

Enter the world of all-in-one equity ETFs. These have exploded in popularity, particularly here in Canada. Think of them less as "autopilot" and more as a well-designed toolkit for building wealth without the constant tinkering.

Two names consistently rise to the top in this arena: XEQT from iShares (BlackRock) and VEQT from Vanguard. They both promise a streamlined route to equity growth, especially within tax-sheltered accounts like your TFSA or RRSP. But are they interchangeable? And critically, how do you decide which one belongs in your long-term strategy?

Let's put these heavyweights under the microscope.

Insights

• XEQT and VEQT offer simple, diversified, low-cost access to global equity markets, ideal for TFSA/RRSP investing.
• Key differences lie in Canadian equity allocation (VEQT 30% vs. XEQT 25%), management expense ratio (XEQT 0.20% vs. VEQT 0.25%), and underlying holdings structure.
• Both are 100% equity funds, carrying higher risk than balanced funds; suitability depends on your risk tolerance and time horizon.
• Historical performance has been nearly identical, but future returns depend on market conditions, not past results. Focus on structural fit, not chasing past percentages.
• The "best" choice depends on your existing portfolio, preference for Canadian market exposure, and desired level of control over specific allocations like the S&P 500.

Meet XEQT: The iShares (BlackRock) Contender

XEQT, managed by the global asset management giant BlackRock under its iShares brand, aims to provide hassle-free, diversified equity exposure. Forget the headache of picking individual stocks or figuring out when to rebalance between Canada, the US, and overseas markets.

Launched in August 2019, XEQT achieves this by holding a portfolio of other broad-market ETFs. As of early 2025, it holds four underlying iShares ETFs, giving you a slice of the global economic pie:

• US Total Market (ITOT): The largest piece, typically around 45%. This gives you exposure not just to giants like Apple and Microsoft, but thousands of smaller US companies too.
• Canadian Stocks (XIC): Around 25% of the fund. Your stake in Canadian banks, energy companies, railways, and other domestic players.
• International Developed Markets (XEF): Roughly 20%. Companies from established economies outside North America – think Europe, Japan, Australia (e.g., Nestle, Toyota, ASML).
• Emerging Markets (XEC): Approximately 5%. Exposure to potentially faster-growing, but also higher-risk, economies like China, India, Taiwan, and Brazil.

BlackRock periodically adjusts these target weights, aiming to reflect the global market landscape while maintaining diversification. It's a passively managed approach overall, designed to track market indices, not actively pick winners.

The management expense ratio (MER) – the annual fee covering management and operating costs – is competitive, sitting at 0.20% as of early 2025. That translates to $20 per year for every $10,000 you have invested. Keep in mind, this MER can change over time.

Now, let's talk returns. Since its inception in 2019 through early 2025, XEQT delivered impressive results, averaging approximately 12.4% per year. Sounds fantastic, doesn't it?

Hold on a second.

Both XEQT and its Vanguard rival were born just before and during an extraordinary bull market run, fueled partly by pandemic-era stimulus. Expecting 12%+ returns indefinitely is like planning your retirement based on winning the lottery. It's not a sound strategy.

Let's ground ourselves in reality. A more historically reasonable expectation for long-term global equity returns might be closer to 8-10% per year, though even that isn't guaranteed. What happens if we use a 10% average annual return for planning?

Imagine starting with $7,000 in your TFSA and diligently adding another $7,000 each year. That historical 12.4% average might tempt you with visions of over $2 million after 30 years. But using a more conservative 10% assumption, the projection lands closer to $1.26 million.

That's still an incredible outcome – potentially over a million dollars in growth – but setting realistic expectations is vital for staying the course during inevitable market downturns. Don't let recent high returns cloud your long-term judgment.

Enter VEQT: The Vanguard Alternative

VEQT is Vanguard's popular answer to the all-in-one equity ETF challenge. Launched slightly earlier than XEQT in January 2019, it follows a similar philosophy: provide broad, diversified equity exposure in a single, low-cost fund. Same game, slightly different playbook.

Like XEQT, VEQT is also passively managed and holds four underlying Vanguard ETFs:

• US Total Market (VUN): Around 46%. Very similar broad exposure to the US market as XEQT's ITOT holding.
• Canadian Stocks (VCN): A noticeably larger slice here, at 30% of the fund. This reflects a stronger "home country bias."
• International Developed Markets (VIU): Roughly 16%. Slightly less exposure to developed markets outside North America compared to XEQT.
• Emerging Markets (VEE): Around 7%. A bit more allocated to emerging economies than XEQT.

The most immediate difference you'll spot is that higher Canadian weighting (30% vs. XEQT's 25%). We'll dig into why that matters shortly.

VEQT's MER is slightly higher than XEQT's, at 0.25% as of early 2025. That's an extra $5 per year for every $10,000 invested. It's a small difference, but over decades, even small cost differences compound.

What about performance? Since inception, VEQT's returns have been almost indistinguishable from XEQT's, also averaging approximately 12.4% per year through early 2025.

So, the same reality check applies: use a conservative long-term return assumption (like 8-10%) for planning, not the stellar results seen during its initial years. The 30-year projection using 10% lands in the same $1.26 million ballpark as XEQT.

Both funds are offered by giants in the ETF world. BlackRock (iShares) and Vanguard are the two largest ETF providers globally, known for their low-cost index investing philosophy.

The Showdown: Key Differences That Matter

Okay, they look similar on the surface. Performance has been virtually identical. Their MERs are close. So, how do you possibly choose between them?

Forget trying to guess which one will outperform by a fraction of a percent next year. That's a fool's errand. Instead, let's focus on the structural differences that might actually influence your decision:

1. Canadian Allocation (Home Bias): This is arguably the most significant difference. VEQT allocates 30% to Canadian stocks (VCN), while XEQT allocates 25% (XIC). Why is this a big deal? The Canadian stock market represents only about 3% of the total global stock market value. Both ETFs are already significantly overweighting Canada relative to its global market cap – a common practice called home country bias. VEQT simply leans into this bias more heavily. Your choice here depends on your conviction: Do you want more exposure to the Canadian economy's fortunes (banks, resources, telecoms), or do you prefer slightly more global diversification? There's no single right answer; it's a strategic preference.
2. Expense Ratio (MER): XEQT is slightly cheaper at 0.20% versus VEQT's 0.25%. While a 0.05% difference seems tiny (just $5 per $10,000 invested annually), costs compound over time. Lower costs mean more of your money stays invested and working for you. All else being equal, lower fees are better. However, it's worth noting that other competitors like BMO (ZEQT at 0.18%) and Mackenzie (MEQT at 0.17%) now offer even lower MERs, making the XEQT/VEQT difference less of a deciding factor than it once was.
3. Diversification Nuance: Here’s where it gets interesting. VEQT holds more individual stocks – approximately 12,042 compared to XEQT's approximately 8,741 (as of late 2024). More stocks automatically means better diversification, right? Not quite. Because VEQT has a heavier weighting towards the relatively concentrated Canadian market (dominated by financials and energy) and slightly less in diverse international markets, some analyses suggest XEQT might offer slightly better effective diversification. Think of it like this: having 100 stocks spread across 10 different sectors might be more diversified than having 200 stocks concentrated in just 3 sectors. Measures like the "effective number of stocks" attempt to capture this, with some estimates putting XEQT around 198 and VEQT around 180. The takeaway? Don't just count the number of holdings; consider the concentration.
4. Rebalancing Approach: Both funds rebalance periodically to maintain their target allocations. Vanguard (VEQT) typically employs a more mechanical approach, rebalancing back towards target weights when allocations drift by a certain threshold (often 2%). BlackRock (XEQT) may allow for slightly more flexibility or tactical adjustments based on their market outlook, although both are fundamentally passive index trackers. The practical difference for long-term investors is likely minimal.
5. Underlying ETFs: Both use four underlying ETFs from their respective families (iShares for XEQT, Vanguard for VEQT). The specific indices tracked by the underlying US, International, and Emerging Market ETFs are very similar but not identical, leading to minor differences in holdings. This is unlikely to be a major decision driver for most investors.

These differences are subtle, but understanding them helps you align your choice with your investment philosophy.

Practical Considerations Before You Buy

Beyond the direct comparison, there are several practical points to understand about these all-in-one equity ETFs:

• 100% Equity = Higher Risk: Both XEQT and VEQT are all-equity funds. They don't hold any bonds or fixed income. This means they offer higher growth potential but also come with higher volatility and risk compared to balanced funds (like VBAL/XBAL or VGRO/XGRO). If market swings make you lose sleep, or if you have a shorter investment horizon, a 100% equity portfolio might not be suitable. Assess your risk tolerance honestly.
• Passive Index Investing: These are not actively managed funds trying to beat the market. They aim to replicate the performance of broad market indices, minus fees. This passive approach is a key reason for their low costs.
• Currency Exposure: While you buy XEQT and VEQT in Canadian dollars on Canadian exchanges (like the TSX), the underlying holdings include stocks from the US, Europe, Asia, and emerging markets, denominated in their local currencies (USD, EUR, JPY, etc.). These ETFs are unhedged, meaning their returns will be affected by fluctuations in the Canadian dollar relative to other currencies. A stronger CAD can reduce returns from foreign holdings, while a weaker CAD can boost them. This currency exposure is part of global diversification.
• Foreign Withholding Taxes (FWT): This gets a bit technical, but it's relevant for TFSA/RRSP investors. Dividends paid by foreign companies (especially US companies) are often subject to withholding taxes by the foreign government.The impact is generally small (often estimated around 0.10% to 0.30% drag on total return depending on dividend yields and market allocations), but it's a slight cost inefficiency inherent in holding foreign equities through Canadian-domiciled ETFs within registered accounts. It's usually considered an acceptable trade-off for the simplicity and diversification these funds offer.
  • In an RRSP, due to tax treaties (particularly with the US), withholding taxes on US dividends are typically waived when the US stocks are held directly or via a US-domiciled ETF. However, since XEQT and VEQT hold US stocks via Canadian-domiciled ETFs (ITOT/VUN), there's a layer of unrecoverable US withholding tax (usually 15%) on the US dividends before they even reach your RRSP.
  • In a TFSA, the US does not recognize it as a retirement account for treaty purposes, so US withholding taxes apply regardless of how the US stocks are held (directly, via US ETF, or via Canadian ETF like in XEQT/VEQT).
  • Withholding taxes also apply to dividends from other international developed and emerging markets, often with less favourable recovery options even in an RRSP.
• Liquidity: Both XEQT and VEQT are highly popular and trade with significant daily volume on the TSX. This means they generally have high liquidity – it's easy to buy and sell shares quickly without significantly impacting the price. Bid-ask spreads (the difference between the highest price someone is willing to pay and the lowest price someone is willing to sell) are typically narrow.
• How to Purchase: You buy these ETFs like individual stocks through a discount brokerage account (e.g., Questrade, Wealthsimple Trade, RBC Direct Investing, TD Direct Investing, etc.). You'll need to open an account (like a TFSA or RRSP), fund it, and then place a buy order for XEQT or VEQT using its ticker symbol. Minimum purchase is typically one share (prices fluctuate but often in the $25-$35 range per share), and some brokers now offer fractional share purchases. Standard trading commissions may apply depending on your broker, though many now offer commission-free ETF purchases. Using limit orders rather than market orders is generally recommended to control your purchase price.
• Distributions (Dividends): Both XEQT and VEQT collect dividends from the thousands of underlying stocks they hold and pay them out to unitholders quarterly (typically March, June, September, December). You can take these distributions as cash or, ideally for long-term growth, set up a Dividend Reinvestment Plan (DRIP) through your broker (if available) to automatically use the cash to buy more units of the ETF, often commission-free.
• Competitors Exist: While XEQT and VEQT are the most popular, other providers offer similar all-equity ETFs, sometimes with even lower MERs, like BMO's ZEQT (0.18% MER) and Mackenzie's MEQT (0.17% MER). Horizons also offers HGRO, which uses a total return swap structure to convert dividends into capital gains for potential tax efficiency in non-registered accounts (but has different risks). It's worth being aware of these alternatives.
• Review Official Documents: Before investing, always review the official Fund Facts sheet and prospectus available on the iShares/Vanguard websites. These contain detailed information about objectives, strategies, risks, fees, and holdings.

Analysis: How to Choose Your Player

Both XEQT and VEQT are excellent choices. They are well-designed, low-cost vehicles for building long-term wealth through diversified equity exposure. You likely won't make a catastrophic mistake picking one over the other.

But the "better" choice isn't universal; it depends entirely on your specific circumstances and preferences.

Here’s a framework for thinking through the decision:

First, consider your existing portfolio. What do you already hold? Is there significant overlap? For instance, many investors hold a dedicated S&P 500 tracker (like VFV, VOO, ZSP, or XUS) because they want concentrated exposure to large US companies. If that's your base, how does adding XEQT or VEQT fit?

XEQT already contains broad US exposure via ITOT. Adding XEQT means your overall US allocation is a blend determined by BlackRock's target weights within XEQT plus your separate S&P 500 holding.

VEQT also holds broad US exposure (VUN). If you pair VEQT with a separate S&P 500 ETF, you retain more direct control over the specific weight you assign to the S&P 500 relative to the broader market covered by VEQT. For someone who wants precise control over their S&P 500 tilt, combining VEQT with a separate S&P 500 fund might offer a cleaner structure than using XEQT.

This isn't about which ETF is superior in isolation. It's about which one integrates more effectively with your desired overall portfolio construction.

Next, revisit the Canadian exposure question. Do you believe the Canadian market warrants a 30% allocation (VEQT), or is 25% (XEQT) sufficient (or perhaps still too high compared to its ~3% global weight)? Your view on Canada's long-term economic prospects relative to the rest of the world should guide this decision.

Some argue the higher Canadian weight provides currency stability and familiarity, while others prefer maximizing global diversification by reducing home bias.

Then there's the cost difference. XEQT's 0.20% MER is lower than VEQT's 0.25%. While small, the savings from lower fees compound over decades. If all other factors are equal for you, the lower fee tilts towards XEQT.

Finally, some investors simply have a preference for one provider (BlackRock/iShares vs. Vanguard) based on brand reputation, customer service experiences, or a desire to consolidate assets if they already hold other funds from that provider (e.g., holding VFV might make adding VEQT feel organizationally simpler).

This is subjective but can be a valid tie-breaker.

Final Thoughts

Stop losing sleep over minuscule differences in past performance or expense ratios that amount to less than the cost of a fancy coffee each year. Trying to perfectly optimize between XEQT and VEQT can lead to analysis paralysis, which is far more damaging than picking either one.

Both XEQT and VEQT are excellent, low-cost tools for your investment toolkit. They solve the diversification challenge instantly and elegantly, especially within a TFSA or RRSP.

The real challenge isn't choosing between these two solid contenders. It's the struggle against inertia, against paying high fees for closet indexing, against letting emotions derail your strategy during market turbulence, and against simply not saving enough.

Concentrate on the actions that truly drive long-term wealth creation:

• Save consistently and invest regularly. Maximize those TFSA and RRSP contributions year after year.
• Choose a low-cost, diversified strategy that aligns with your risk tolerance and long-term goals (either XEQT or VEQT fits this description for the equity portion of a portfolio).
• Stay invested for the long haul. Tune out the daily market noise and resist the urge to time the market.
• Understand why you chose your specific allocation (especially the Canada weighting) rather than blindly following past returns or forum hype.
• Periodically review your plan (perhaps annually) to ensure it still aligns with your goals and circumstances, but avoid constant tinkering.

Whether you slightly prefer XEQT's lower fee and lower Canada weighting, or VEQT's higher Canada weighting and alignment with other Vanguard products, the most critical step is making an informed choice and then executing the plan with discipline.

Pick your ETF. Fund it consistently. Reinvest those distributions. Allow compounding to work its magic over time. That’s how you build serious wealth.

Did You Know?

As of early 2025, BlackRock (iShares) and Vanguard, the providers of XEQT and VEQT respectively, are the two largest ETF managers in the world, collectively overseeing trillions of dollars in assets globally. Their scale helps them keep fund costs low for investors.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Investing involves risk, including the potential loss of principal. The author may hold positions in securities mentioned. Always do your own research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. Fees and holdings are subject to change.