The Motley Fool Says "Don't Buy XEQT."
Here's Why They're Wrong.

The article in question

In September 2025, The Motley Fool Canada published a piece titled "Everyone's Saying Just Buy XEQT. Please Don't." It has been widely read, syndicated on Yahoo Finance, and is currently ranking on page one when Canadians search for XEQT. It makes three specific arguments against XEQT and recommends VDY, TGRO, and ZMMK as superior alternatives.

The article is worth engaging with seriously, because it is not obviously wrong at first glance and it is clearly influencing how some Canadians think about passive investing. But when you examine each argument with data rather than assertion, the case against XEQT does not hold up. This article goes through all three claims point by point.

To be clear at the outset: the Motley Fool article acknowledges that XEQT is a good ETF. The author writes "I'm fond of it." The argument is not that XEQT is bad. It is that it is not right for everyone. That is a perfectly reasonable claim. But the specific scenarios the author presents as evidence are more problematic than they appear, and the alternatives recommended have their own significant drawbacks that go unmentioned.

One thing you should know before reading

The Motley Fool's business model is built on selling stock-picking subscription services. Their flagship product, Stock Advisor Canada, charges subscribers a monthly fee to receive individual stock recommendations. Every article they publish includes a call to action directing readers toward those paid services.

This does not mean the article is wrong. It means you should read it with the business context in mind. A publication whose revenue comes from active stock-picking subscriptions has a structural tendency to publish content that emphasises the complexity and limitations of passive index investing. That tendency does not require any bad faith — it simply reflects the natural alignment of editorial focus with commercial interest. The same is true of every financial media outlet, including those that earn commission on mutual fund sales.

This site also has a commercial relationship: we receive affiliate compensation when you open a Wealthsimple account through our links, and we disclose that clearly. The difference is that our recommendation (buy XEQT, hold it, contribute regularly) does not require you to pay us anything ongoing or to keep returning to us for more advice. We mention the conflict because you deserve to know it exists on both sides.

Argument 1: "XEQT is too volatile"

The article's first argument is that XEQT is 100% equities with no bonds, making it too volatile for some investors. During corrections, it can drop double digits. The recommended solution is adding ZMMK, a money market fund, to reduce volatility.

This argument is technically accurate and then immediately misapplied. Yes, XEQT is 100% equities. Yes, it fell 33% in the COVID crash of March 2020. Yes, it fell 18% during the 2022 rate-hike bear market. All of this is true. Here is what the article does not tell you.

The COVID crash recovery took approximately five months. The 2022 correction recovery took approximately 14 months. Both recovered to new all-time highs. Every XEQT drawdown since inception has fully recovered. An investor who held a 50/50 XEQT/ZMMK portfolio would have recovered faster in dollar terms during drawdowns, but would have significantly underperformed during the much longer periods of market growth. The question is not whether XEQT is volatile. It is whether the volatility is appropriate for your specific time horizon.

For a 35-year-old building retirement savings, the correct response to XEQT's volatility is not to add a money market fund. It is to verify that you have an emergency fund, automate contributions, and not look at your portfolio during corrections. The volatility is not a bug. For long-term investors, it is precisely what generates the long-run return premium over bonds and cash.

The article's recommended hedge, ZMMK (BMO's money market ETF), currently yields approximately 2.77% and costs 0.13% in MER. It is, by design, a near-zero-risk, near-zero-return product. For someone who genuinely cannot tolerate a 20% drawdown, holding some ZMMK is sensible. But the article presents this as a general recommendation rather than a specific solution for a specific investor type. The investor who truly cannot tolerate volatility should probably be in XBAL or XGRO, not XEQT plus a money market ETF. The latter requires rebalancing, adds complexity, and involves a tax event in non-registered accounts.

More importantly, if you are genuinely worried about volatility to the point of considering a money market allocation, the right diagnosis is that you are holding more equity than your risk tolerance allows. The right treatment is not to hold a money market fund alongside 100% equity exposure. It is to hold a different asset allocation entirely: XGRO at 80/20 or XBAL at 60/40. The article never mentions this.

Argument 2: "XEQT has low yield"

The article's second argument is that XEQT's yield of approximately 1.94% is too low for income-focused investors, and that VDY, a Canadian dividend ETF yielding around 3.92%, is a better option for those seeking income.

This argument proves too much. It is accurate that XEQT is not an income product. The article is completely correct that investors who need current income from their portfolio should not use a 100% global equity growth ETF as their primary income source. No serious advocate of XEQT has ever claimed otherwise. The "just buy XEQT" community is overwhelmingly focused on accumulation: Canadians in their 20s, 30s, and 40s building long-term wealth, not retirees drawing current income. Arguing that XEQT is a poor income vehicle is like arguing that a hammer is a poor screwdriver.

But the more interesting question is whether VDY is actually better than XEQT on a total return basis, meaning price appreciation plus dividends, which is what actually builds wealth. And here the article's case falls apart completely.

XEQT has delivered an annualised total return of approximately 12.98% since inception in August 2019. VDY holds approximately 56 stocks, with its top 10 holdings making up over 70% of the entire fund. Those top holdings are dominated by Royal Bank, TD Bank, Scotiabank, Canadian Natural Resources, and a handful of other Canadian financial and energy giants. VDY is not a diversified global ETF. It is a concentrated bet on the continued dominance of Canadian banks and energy companies.

There is also a significant tax problem with VDY that the article glosses over. Canadian investors holding VDY in a TFSA receive dividends that are tax-free, which is fine. But those dividends consume TFSA contribution room permanently: you cannot reinvest them inside the TFSA unless you have available room. In a non-registered account, dividends are taxable income in the year received, even if you immediately reinvest them. XEQT's lower yield means lower annual taxable events in a non-registered account, and more of the growth is in the form of deferred capital gains, which you control the timing of. For most Canadian accumulators, XEQT's tax profile is strictly better than VDY's.

Finally, VDY's geographic concentration is exactly the kind of home-country bias risk that the passive investing community has spent decades arguing against. Canada represents approximately 3% of global equity markets by weight. A fund that is 100% Canadian equity is not diversified global investing. It is a large-cap Canadian financial and energy sector bet. Whether that bet has paid off historically is irrelevant to whether it represents sound diversification going forward.

Argument 3: "Forced emerging markets exposure"

The article's third argument is that XEQT's 5% emerging markets allocation, covering China, India, Taiwan, South Korea, Brazil, and others, is a meaningful risk that investors should be able to opt out of. The recommended alternative is TGRO, which excludes emerging markets entirely.

Five percent. XEQT's entire emerging markets allocation is five percent of the fund. Let that settle for a moment. The article treats a 5% allocation to a globally diversified index of developing market companies as a significant enough risk to recommend switching funds entirely. This is not a well-calibrated risk assessment.

The argument against emerging markets exposure, including regulatory crackdowns, geopolitical tensions, and currency risks, is a real argument, and there are serious institutional investors who make it. But the same risks exist in every part of XEQT's allocation. US equities at 45% of the fund carry regulatory, political, and currency risk. Canadian equities at 25% carry concentration risk in financials and energy. International developed markets carry their own geopolitical and currency risks. The question is not whether emerging markets carry risk. Every equity investment carries risk. The question is whether 5% in a globally diversified emerging markets index is a risk worth avoiding by choosing a fundamentally different product.

Removing the 5% emerging markets exposure from a portfolio reduces the expected long-run return, because emerging markets, precisely because they carry higher risk, have historically compensated investors with higher returns over long periods. Avoiding that 5% entirely, rather than accepting it as the price of global diversification, reflects a risk aversion that is not obviously correct for long-horizon investors.

Notice what the table above shows. XEQT is not overweight emerging markets. At 5%, it is significantly underweight relative to the actual global market weight of approximately 11%. If anything, investors who are concerned about emerging markets exposure and want a truly market-cap-weighted global portfolio would note that XEQT already discounts their concerns relative to what the global market dictates.

VDY examined: what the article does not tell you

The article recommends VDY as the superior alternative for income-focused investors. Here is what it does not tell you about VDY.

VDY holds approximately 56 stocks. Its top 10 holdings represent over 70% of the entire fund. Those holdings are overwhelmingly Canadian banks (Royal Bank, TD, Scotiabank, Bank of Montreal, CIBC) and Canadian energy and pipeline companies. This is not global diversification. This is a concentrated bet on the Canadian financial sector.

In the COVID crash of March 2020, Canadian bank stocks fell hard. VDY dropped significantly and, crucially, several of the underlying holdings froze dividend increases. An investor who owned VDY for income in March 2020 received less income than expected precisely when they were most likely to be worried about it.

On total return since XEQT's inception in August 2019: XEQT has outperformed VDY over the same period. The article never mentions this. It compares XEQT's yield to VDY's yield and declares VDY the winner. It does not compare total wealth generated for an investor who held each fund with dividends reinvested over the same period. That is the only comparison that matters for someone still in the accumulation phase.

For a genuinely income-focused retiree who needs to draw 4% or more per year from their portfolio and wants to avoid selling units, VDY has genuine merit. But the article is being read by a general investing audience, not exclusively by retirees. Recommending a concentrated Canadian dividend ETF to someone who is 30 and building retirement wealth because they like the idea of a higher yield number is poor advice dressed up as risk management.

TGRO examined: what the article gets right and wrong

TGRO is a more interesting alternative than VDY, and the comparison deserves a fair hearing. TGRO is TD's growth all-in-one ETF with an 0.17% MER, 90% equity, 10% Canadian bonds, and no emerging markets exposure. The article is correct that it is cheaper than XEQT on MER.

But TGRO is not the same product as XEQT and the comparison is not straightforward. First, TGRO holds 10% bonds. Over a long enough horizon, bonds reduce both volatility and expected return. The 0.03% MER advantage over XEQT (0.17% vs 0.20%) is not nothing: it compounds meaningfully over 30 years, but it comes with a structural change in asset allocation that may not suit every investor.

Second, TGRO launched in August 2020, one year after XEQT. The Motley Fool article cites TGRO's three-year annualised return of 15.74% versus XEQT's 13.72% as evidence of superior performance. This comparison period conveniently starts after the COVID crash and captures a period when Canadian and US large-cap equity, TGRO's heaviest weights, performed exceptionally well. It does not include the 2022 correction, because 2022 was bad for both. Three-year performance windows starting in the recovery from a crash are among the least informative data points in investing.

Third, TGRO's underlying indices, Solactive Canada Broad Market, Solactive US Large Cap, and Solactive Developed Markets ex-North America, are different from XEQT's underlying indices. Solactive indices are cheaper to license than MSCI or S&P indices, which is part of how TD keeps the MER low. Whether they track the same economic exposures with the same fidelity over long periods is an open question. BlackRock's XEQT uses S&P and MSCI indices, which have longer track records and tighter institutional acceptance.

TGRO is a legitimate choice for an investor who wants slightly lower volatility, no emerging markets, and can get TGRO commission-free at TD. It is not a clearly superior choice for every Canadian investor, and the article does not present the tradeoffs clearly.

Where the article is actually right

The article's core premise, that XEQT is not the right product for every investor in every situation, is correct. No honest XEQT advocate would claim otherwise. There are specific, real scenarios where XEQT is the wrong choice.

If you are investing through an FHSA and plan to buy a home in three years, you should not be in 100% equities. GICs or a conservative ETF like XBAL is appropriate. The article cites exactly this scenario with a real Reddit example, and on this specific point it is entirely correct. XEQT is a long-horizon equity fund. Using it as a short-term savings vehicle for a fixed-date large expenditure is a genuine misuse, and it is one that costs real people real money when markets fall at the wrong moment.

If you are already retired, in the drawdown phase, and need a predictable monthly income stream to cover expenses, XEQT alone is probably not sufficient. A combination of XEQT, a bond ETF, and possibly a dividend-focused fund makes more sense in drawdown. This is exactly what the drawdown sequence literature says.

If you are approaching retirement within five years and your entire portfolio is XEQT, a correction at the wrong moment could force you to sell units at depressed prices. Gradually shifting some allocation to XGRO or XBAL starting a decade before retirement is sensible. Nobody who thinks clearly about long-term investing disputes this.

These are the legitimate caveats. They apply to specific investor situations, not to XEQT as a product. The error in the article is presenting these edge cases as reasons why a general investing audience should not buy XEQT, when the correct lesson is that every investor needs to understand their time horizon and use the appropriate product for it.

The verdict

The Motley Fool article is correct that XEQT is not the right product for everyone. It is wrong in suggesting that the three scenarios it presents, volatility, low yield, and emerging markets, are general reasons to avoid XEQT.

Volatility is the price of long-run equity returns. Every XEQT drawdown since inception has recovered. The correct response to volatility you cannot tolerate is to hold less equity, not to bolt a money market fund onto a 100% equity position.

Low yield is a feature for accumulators in registered accounts, not a bug. Total return is what builds wealth. VDY's higher yield comes with geographic concentration in Canadian banks and energy, lower total return than XEQT since inception, and worse tax efficiency for non-retirees.

Emerging markets at 5% of the portfolio is not a meaningful risk factor for long-horizon investors. XEQT already underweights emerging markets relative to their global market-cap weight. Avoiding them entirely sacrifices expected return without meaningfully reducing portfolio risk.

XEQT is the right product for a specific, large, and clearly definable group of Canadian investors: those with long time horizons, adequate emergency funds, regular contribution habits, and the temperament to hold through market declines. That group includes most working-age Canadians saving for retirement. For them, just buying XEQT is not reckless. It is, based on the evidence, the highest-probability path to long-run wealth.

The Motley Fool makes a living recommending individual stocks that may or may not outperform a global index. That business model is legitimate. But when evaluating their arguments against passive index investing, it is worth remembering that the simplest possible investment strategy, buying XEQT every month and holding it for 30 years, is their fiercest commercial competitor.