Why We Choose VEQT Over XEQT

They Look the Same on a Spreadsheet

Let's get this out of the way: if you buy XEQT instead of VEQT, you'll probably be fine. Both are all-in-one, globally diversified, 100% equity ETFs designed for long-term Canadian investors. Both have an effective management fee of 0.17%. Both hold thousands of stocks across dozens of countries. Over their shared history, their returns have been virtually identical.

So why does this site exist? Why "BuyVEQT" and not "BuyXEQT"?

Because investing isn't just about the numbers on a spreadsheet. It's also about who you're trusting with your money, how the company behind your ETF is structured, and whether their incentives are aligned with yours. When you look past the MER and into the foundations of these two products, a clear picture emerges — and it favours VEQT.

The Companies Behind the Ticker

This is where the story diverges sharply.

Vanguard was founded in 1975 by John C. Bogle with a radical idea: what if an investment company was owned by its own investors? Under Vanguard's mutual ownership structure, the company is owned by its US-based funds, and those funds are owned by the people who invest in them. There are no outside shareholders. There is no stock ticker for Vanguard. No one on Wall Street is buying Vanguard shares and pressuring management to extract more profit from you.

This isn't marketing language — it's the legal and financial reality of how Vanguard operates. When Vanguard reduces fees, the savings flow directly to investors because the investors are the owners. There's no tension between "shareholder returns" and "client returns" because they're the same people.

BlackRock, the company behind XEQT and the entire iShares lineup, is a publicly traded corporation on the New York Stock Exchange under the ticker BLK. It has external shareholders — institutional investors, pension funds, hedge funds — who expect BlackRock to grow its revenue, increase its profit margins, and deliver returns to them. As of 2025, BlackRock manages over $12 trillion in assets, making it the largest asset manager on the planet.

This isn't inherently evil. BlackRock is a well-run company that has delivered competitive products. But there's a fundamental structural tension: when BlackRock's leadership sits in a boardroom, they're balancing two sets of interests — the investors in their funds and the shareholders of BlackRock Inc. Those interests don't always point in the same direction.

When Vanguard's leadership sits in a boardroom, there's only one set of interests to consider: the people who invest in their funds.

That structural difference matters more than any basis-point difference in MER ever will.

The Pioneer and the Fast-Follower

Vanguard didn't just build VEQT. Vanguard invented the entire category of investing that makes VEQT possible.

In 1976, John Bogle launched the first index mutual fund available to ordinary investors — the First Index Investment Trust, now known as the Vanguard 500 Index Fund. The financial industry mocked it as "Bogle's Folly" and called it "un-American." Wall Street firms that profited from active management saw Bogle's low-cost index fund as a direct threat to their business model. They were right.

Nobel laureate Paul Samuelson later ranked Bogle's invention alongside the wheel, the alphabet, and the Gutenberg printing press. Warren Buffett has repeatedly recommended Vanguard index funds as the best option for most investors. The entire movement toward low-cost, passive, diversified investing — the philosophy that underpins every all-in-one ETF on the market today — traces back to Bogle and Vanguard.

In Canada, Vanguard launched its asset allocation ETF suite in 2018, starting with VCNS, VBAL, and VGRO. VEQT, the 100% equity version, followed in January 2019. It was the first all-equity, single-ticket global ETF available to Canadian investors.

XEQT launched seven months later, in August 2019. BMO's ZEQT didn't arrive until 2022.

There's nothing wrong with being second to market. But when you choose VEQT, you're choosing the product built by the company that created this entire approach to investing. When you choose XEQT, you're choosing a competitive response from a publicly traded asset manager that saw Vanguard's success and followed.

The Vanguard Effect

There's actually a name for what Vanguard does to the investment industry. Economists call it "The Vanguard Effect" — the tendency for competing asset managers to reduce their fees after Vanguard enters a market or cuts prices.

You've seen this play out in real time in Canada. In November 2025, Vanguard reduced VEQT's management fee from 0.22% to 0.17%. Within about a month, BlackRock followed by cutting XEQT's management fee from 0.18% to 0.17%.

This pattern repeats globally: Vanguard leads on cost, and the industry follows. If XEQT's fees are competitive today, it's in large part because Vanguard forced that outcome. The question is: do you want to invest with the company that drives fees down for the entire industry, or the one that reluctantly matches?

A Smarter Approach to Global Allocation

Beyond ownership and philosophy, there's a meaningful difference in how VEQT and XEQT construct their portfolios.

VEQT starts with a 30% allocation to Canadian equities (what Vanguard calls a deliberate "home-country bias"), and then allocates the remaining 70% according to prevailing global market capitalisation weights. This means VEQT's international allocation adapts organically as global markets shift. If US markets shrink relative to the rest of the world, VEQT's US allocation will drift down accordingly. If emerging markets grow, VEQT's exposure will grow with them. The non-Canadian portion of VEQT is essentially a market-cap-weighted global portfolio that adjusts itself.

XEQT takes a different approach. It uses fixed target weights: 25% Canada, 45% US, 25% developed international, 5% emerging markets. These are static allocations set by BlackRock, rebalanced to those fixed targets at their discretion. If global market dynamics shift dramatically, BlackRock may adjust the targets — but it's a human decision, not a systematic one.

Why does this matter? Market-cap weighting follows momentum and global economic reality rather than an asset manager's fixed opinion about what the "right" allocation should be. If you believe that markets are generally efficient at pricing relative value across countries, market-cap weighting is the more philosophically consistent approach. XEQT's fixed weights represent an active allocation decision wearing passive clothing.

The Canadian Home Bias — A Feature, Not a Bug

Both VEQT and XEQT overweight Canada relative to its true global market-cap weight of roughly 3%. VEQT holds about 30% in Canadian equities; XEQT holds about 25%.

Some investors see this as a flaw. We see VEQT's stronger Canadian tilt as a deliberate advantage for Canadian investors, for several reasons.

Your life is denominated in Canadian dollars. Your mortgage, your groceries, your retirement expenses — all in CAD. Holding more Canadian equities means more of your portfolio's income and growth is naturally aligned with the currency you spend. This reduces the impact of currency fluctuations on your real purchasing power.

Canadian equity dividends receive preferential tax treatment. Eligible Canadian dividends benefit from the dividend tax credit, which means you keep more of the income in a taxable account compared to foreign dividends.

Vanguard's own research supports a moderate home-country bias for Canadian investors, specifically because it lowers portfolio volatility and improves after-tax returns without significantly sacrificing diversification. The 30% allocation isn't arbitrary — it's the product of research into what actually benefits Canadian investors.

If you're building your life in Canada, betting a bit more on Canada isn't blind patriotism. It's practical portfolio construction.

Broader Diversification Under the Hood

Here's a detail that often gets overlooked: VEQT holds approximately 13,700 stocks. XEQT holds approximately 9,300.

Part of this difference comes from index methodology. VEQT uses FTSE and CRSP indices, which tend to include more small-cap and micro-cap stocks than the S&P and MSCI indices used by XEQT. The FTSE Canada All Cap Index that underlies VEQT's Canadian allocation captures more of the market than the S&P/TSX Capped Composite used by XEQT.

VEQT also allocates more to emerging markets (roughly 7% vs XEQT's 5%), giving you broader exposure to the economies that are expected to drive a growing share of global GDP over the coming decades.

More holdings and broader index coverage means you own more of the global market. For a product whose entire purpose is to give you diversified exposure to global equities, casting the wider net is the approach that better serves the mission.

What This All Adds Up To

On a spreadsheet, VEQT and XEQT are close enough that you could flip a coin and be fine. We don't dispute that. If you already hold XEQT, switching to VEQT purely to match our preference would be pointless — the tax drag and transaction cost of switching would likely outweigh any benefit.

But if you're making the choice today — picking one for the first time and planning to hold it for decades — the intangibles matter. And the intangibles favour VEQT:

You're investing with a company that's owned by its investors, not by Wall Street shareholders. You're choosing the pioneer that created index investing and has spent 50 years driving costs down for everyone. You're getting a portfolio that uses market-cap weighting for its global allocation rather than fixed human judgment. You're getting broader diversification with more holdings across more markets. And you're getting a Canadian home bias that's backed by research and aligned with the practical reality of living and spending in Canada.

XEQT is a good product from a competent company. VEQT is a good product from a company built from the ground up to serve you.

That's why we buy VEQT.

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This article represents the editorial position of BuyVEQT.com. We believe in transparency: this site exists to advocate for VEQT and the investing philosophy it represents. This is not financial advice. Both VEQT and XEQT are excellent products and individual circumstances vary. Do your own research and consider consulting a qualified financial advisor before making investment decisions.