Vanguard All-Equity ETF Portfolio (TSX: VEQT) is often praised as a one-stop, diversified stock solution worldwide. And although it is a great investment for the right investor, I don’t think it is eligible if the smartest investment you can make today.
Although I cannot give personalized advice, I can point out some clear shortcomings in VEQT that can stop it from being the ultimate choice. Again, this is all my opinion, so YMMV.
Above average reimbursements
VEQT charges a 0.24% management cost ratio (EIA). At first glance, this is reasonable for a fully managed, diversified exchange -related fund (ETF) worldwide. However, competing ETFs for asset allocation now offer comparable exposure for 0.20% or even 0.18%. At that moment Veqt starts to look pricey compared to.
For a provider that has built his brand on cost -saving and the indexing of cheaper for everyone, it is surprising, if not a bit embarrassing, that Vanguard has not attached the reimbursement of VEQT to match colleagues. The difference may not seem that much, but every basic point comes up for decades.
Canada Bias
VEQT has a preference for home country, with around 30% of its portfolio assigned to Canadian shares. Vanguard says that it does this to reduce the currency risk and to improve tax efficiency, but in my opinion 30% is excessive.
Canada represents only about 3% of the global stock market. The weighting of VEQT is about 10 times that. Other ETFs for asset allocation usually keep Canadian exposure in the reach of 20% -25%. This is still overweight, but more reasonable.
If you already have Canadian dollars in your savings, have a house here and work for a Canadian employer, you are already heavily exposed to this country. Concentrating even more of your investments here only connects that risk.
Higher risk
VEQT consists entirely of shares – more than 12,000 shares worldwide. Although that level of diversification means that it does not go to zero, it still brings a complete market risk with shares. That means that it can (and has) double digits in a year in a year, such as during the COVID-19-Crash of 2020 or the Bears market of 2022.
That is great for investors with a high risk tolerance and decades to run volatility. But for pensioners or someone with a shorter time horizon, an all-stock portfolio is inappropriate. You need bonds or cash to smooth the return and protect capital.
The Bottom Line
Veqt is an excellent product for certain investors. It is cheap (if not the cheapest), diversified and easy to own worldwide. But “smartest” depends on your situation. For cost -sensitive investors, the reimbursement is a figure against it. For those who are already loaded with the Canadian exposure, the bias at home is another. And for anyone who cannot tolerate deep drawing, an allocation of all shares is simply not suitable.
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