Vanguard All-Equity ETF Portfolio or VEQT ETF is an equity ETF that seeks to provide long-term capital growth to investors through investment in one or more ETFs managed by other Vanguard funds.
The underlying funds consist of index funds that provide exposure to equity markets. VEQT invests in over 13,000 individual stocks through four funds/ investments.
Pros of Vanguard VEQT ETF
- VEQT provides exposure to ETFs that are diversified across regions and industries.
- It is continuously monitored and rebalanced automatically.
Cons of Vanguard VEQT ETF
- Provides exposure to equity ETFs managed only by Vanguard.
- VEQT’s management fee is higher compared to an MER of 0.20% for XEQT ETF.
- VEQT has a medium risk indicator versus XEQT’s low-to-medium risk indicator.
Vanguard VEQT ETF Facts
- Inception Date: January 29, 2019
- Benchmark: Internal Composite
- Net Assets: $1,069M
- MER: 0.25%
- Distribution Yield: 1.37%
- Dividend Schedule: Annually
Vanguard VEQT ETF MER – Management Expense Ratio
VEQT’s management fee stands at 0.22% and MER is 0.25%.Its contemporary iShares XEQT ETF has an MER of 0.20%.
The MER is what Vanguard takes to manage the fund for you. It’s much cheaper than mutual funds and in some cases cheaper than investing on your own.
Mutual funds can charge over 2% and it robs you of your returns. It’s time to ditch your mutual funds and switch to ETF ASAP. Many brokers such as Questrade offer free ETFs. Couple the free ETFs with low MER and you are ahead of many.
Vanguard VEQT ETF Performance
Vanguard VEQT has underperformed the SP500 (VFV ETF) index but outperformed the TSX in the past 2 years.
As it stands, it has a total return since inception of 16.17% but the S&P500 has done better. Only 2 years of data exists which is not enough in my opinion to assess the returns and expectations over the long run and the same apply for XEQT from iShares.
Why complicate your portfolio? Stick to the S&P500 conglomerates that operate around the world already and support all the industries in those regions.
What’s the performance you should seak? All indexes are average, therefore don’t just diversify for the sake of diversifying.
Take your TFSA account as an example. The rules are the same for everyone and I mean everyone. The growth is ultimately a factor of your investment performance provided you make your TFSA contribution limit every year.
The annual performance of an ETF matters as you can see below the growth over 20+ years.
| wdt_ID | Year | Yearly Limit | Cumulative | 5% Growth | 10% Growth | Dividend Earner | Spousal |
|---|---|---|---|---|---|---|---|
| 1 | 2009 | 5,000 | 5,000 | 5,250 | 5,500 | Not Tracked | Not Started |
| 2 | 2010 | 5,000 | 10,000 | 10,762 | 11,550 | Not Tracked | Not Started |
| 3 | 2011 | 5,000 | 15,000 | 16,550 | 18,205 | Not Tracked | Not Started |
| 4 | 2012 | 5,000 | 20,000 | 22,628 | 25,525 | Not Tracked | Not Started |
| 5 | 2013 | 5,500 | 25,500 | 29,534 | 34,128 | $41,742 | Not Started |
| 6 | 2014 | 5,500 | 31,000 | 36,786 | 43,590 | $52,820 | Not Started |
| 7 | 2015 | 10,000 | 41,000 | 49,125 | 58,949 | $56,307 | Not Started |
| 8 | 2016 | 5,500 | 46,500 | 57,356 | 70,984 | $70,200 | Not Started |
| 9 | 2017 | 5,500 | 52,000 | 65,999 | 84,034 | $78,900 | $13,308 |
| 10 | 2018 | 5,500 | 57,500 | 75,074 | 98,487 | $96,937 | $58,818 |
| 11 | 2019 | 6,000 | 63,500 | 85,128 | 114,986 | $129,467 | $82,596 |
| 12 | 2020 | 6,000 | 69,500 | 95,684 | 133,030 | $153,993 | $95,906 |
| 13 | 2021 | 6,000 | 75,500 | 106,769 | 152,933 | $181,601 | $113,194 |
| 14 | 2022 | 6,000 | 81,500 | 118,407 | 174,827 | $183,031 | $144,633 |
| 15 | 2023 | 6,500 | 88,000 | 131,152 | 199,459 | $199,648 YTD | $157,213 YTD |
| 16 | 2024 | 6,500 | 94,500 | 144,536 | 226,555 | ||
| 17 | 2025 | 6,500 | 101,000 | 158,587 | 256,361 | ||
| 18 | 2026 | 6,500 | 107,500 | 173,342 | 289,147 | ||
| 19 | 2027 | 7,000 | 114,500 | 189,359 | 325,762 | ||
| 20 | 2028 | 7,000 | 121,500 | 206,177 | 366,038 | ||
| 21 | 2029 | 7,000 | 128,500 | 223,836 | 410,342 | ||
| 22 | 2030 | 7,500 | 136,000 | 242,902 | 459,626 | ||
| 23 | 2031 | 7,500 | 143,500 | 262,923 | 513,838 | ||
| 24 | 2032 | 7,500 | 151,000 | 283,944 | 573,472 | ||
| 25 | 2033 | 7,500 | 158,500 | 306,016 | 639,069 | ||
| 26 | 2034 | 7,500 | 166,000 | 329,192 | 711,226 | ||
| 27 | 2035 | 7,500 | 173,500 | 353,526 | 790,599 | ||
| 28 | 2036 | 7,500 | 181,000 | 379,078 | 877,909 | ||
| 29 | 2037 | 7,500 | 188,500 | 405,906 | 973,950 | ||
| 30 | 2038 | 7,500 | 196,000 | 434,077 | 1,079,595 |
Vanguard VEQT ETF Holdings
The Vanguard VEQT ETF invests in 4 different ETFs to bring the outlined geographical diversification.
- VUN – (41.14%) Vanguard US Total Market Index ETF
- VCN – (30.41%) Vanguard FTSE Canada All Cap Index ETF
- VIU – (20.62%) Vanguard FTSE Developed All Cap ex North America Index ETF
- VEE – (7.84%) Vanguard FTSE Emerging Markets All Cap Index ETF
VEQT ETF invests 100% in equities. The ETF has more than 80% exposure to large-cap funds, followed by ~8% in medium-cap funds, and ~5% in small-cap funds. The balance allocation is in medium-large and medium-small cap funds.
VEQT has exposure to financials (20%), technology (~17%), industrials (~13%), consumer discretionary (~13%), healthcare (~8%), basic materials (~7%), energy, utilities, consumer staples, telecom, real estate, etc.
VEQT is geographically diversified with large exposure to
- North America (~71% of fund allocation),
- Europe (~12%),
- Pacific (~8%),
- Emerging Markets (~8%), Middle East, and others.
Prominent countries of investment include the U.S., Canada, Japan, China, UK, France, Germany, Switzerland, Australia, and Taiwan.
Why hold Vanguard VEQT ETF
Vanguard is one of the popular all-in ETFs providers in Canada.
Though all-in equity funds provide better returns, they also have high exposure and are more volatile compared to balanced funds.
VEQT is not a high-risk ETF. Constant rebalancing is an added advantage. Because it can rebalance automatically, one can save a lot of time and trading fees. VEQT is an ideal ETF for investors looking for long-term growth solutions, are planning to hold the investment for the medium to long term, and are comfortable with a medium level of risk.
Its geographical and sector-based diversification also reduces the overall risk. VEQT is an easy way for Canadians to add diversified equity exposure across regions and is a good way to invest in diverse ETFs in one go.
All in all, VEQT is a good option if you don’t want all your eggs in the US economy. See below on how the holdings within VEQT compare to VEQT and VFV (My favorite ETF).
If you want the dividends, it’s not clear you will get the same growth but the the best banks and the best utility stocks will give you more income.