XEQT vs. VEQT: This Comparison Is Closer Than You Think (But Here’s the Winner)

Both XEQT and VEQT are tier-1 all-equity​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ ETFs. Both give you the entire global stock market in a single trade. Both auto-rebalance, both are eligible for your TFSA and RRSP, and both are sold by firms that have no business going bankrupt anytime soon. If you own VEQT, you are not making a mistake. That much needs to be said upfront, because the rest of this article is going to make the case that XEQT is measurably better on several dimensions that actually matter, and the reasons have almost nothing to do with which fund had a better year.

Why “13,000 Stocks” Is a Misleading Number

The most common argument for VEQT goes​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ something like this: it holds over 13,000 stocks, while XEQT holds around 9,000, so VEQT must be more diversified. This argument sounds intuitive. It is also wrong, and the reason why is genuinely interesting.

According to research from the Canadian​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ Portfolio Manager Blog, when you compare VEQT’s listed holdings against the actual indexes its underlying ETFs track, something unusual shows up in the emerging markets sleeve. VEQT appears to hold over 1,100 more emerging market stocks than its benchmark index actually contains. The explanation is share class duplication. Companies like Agricultural Bank of China trade on multiple exchanges simultaneously, with each listing appearing as a separate line item in the fund’s holdings data. You are not getting 1,100 extra companies. You are getting the same companies counted twice, or sometimes three times, across different share classes and exchanges.

Once you strip out the duplicates, VEQT’s​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ headline holding count collapses significantly from its advertised 13,000-plus figure. That still leaves VEQT with more unique holdings than XEQT’s 8,741 securities. But this is where the raw stock count stops being a useful number entirely.

The number of stocks in an ETF tells​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ you almost nothing about how diversified it actually is. What matters is how evenly those stocks are weighted. A portfolio of 13,000 stocks where one name controls 5% of the fund is less diversified than a portfolio of 9,000 stocks where no single name exceeds 2%.

The Metric Nobody Talks About: Effective Number of Stocks

There is a concentration-adjusted measure​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ called the “effective number of stocks.” The math is straightforward: you square each holding’s portfolio weight, sum those squared weights across the entire fund, and take the reciprocal of the result. The output tells you how many equal-weight positions would produce the same level of concentration as the actual fund. A fund with 10,000 holdings where one company takes up 50% would have an effective stock count close to 2. A perfectly equal-weight fund of 10,000 stocks would have an effective stock count of exactly 10,000.

The Canadian Portfolio Manager Blog​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ ran this calculation for both funds. XEQT’s effective number of stocks comes out at approximately 198. VEQT’s lands at approximately 180. XEQT holds thousands fewer individual securities, and yet it achieves a higher effective diversification score. The reason is XEQT’s allocation mix: its lower weighting to Canada (around 25%) and higher weighting to international developed markets (around 25%) tilts the portfolio toward the regions where the effective number of companies is higher relative to total assets.

The Canadian Home Bias Problem, and Why XEQT Handles It Better

Canada represents roughly 3% of global​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ stock market capitalization. VEQT allocates roughly 30% of its portfolio to Canadian equities. XEQT allocates roughly 25%. Both funds are overweight Canada relative to market cap, which is a defensible choice because it reduces currency risk and avoids foreign withholding taxes on Canadian dividends. The debate is not whether to own more Canada than a pure global market-cap weight would suggest, but how much more.

The TSX is famously concentrated. Financials​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ and energy together account for close to half of the index’s value. The six big banks alone make up a substantial portion of a typical Canadian equity ETF. When you hold 30% of your all-equity portfolio in Canada versus 25%, you are not just getting “more Canada,” you are getting a meaningful additional tilt toward a market dominated by half a dozen banks and a handful of energy companies. That dynamic works well in some environments and drags in others.

Historical research cited by the Canadian​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ Portfolio Manager Blog suggests that since 1970, the lowest-risk blended allocation has typically involved around 24% Canadian equities combined with 76% foreign stocks. XEQT’s 25% Canadian weighting sits almost exactly at that historical reference point. VEQT’s 30% sits five percentage points above it. Neither number is wrong, but XEQT happens to land closer to where the long-run risk-adjusted evidence points.

The practical effect shows up in effective​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ diversification. Canada’s equity market has fewer meaningfully independent companies than most investors realize. When you concentrate more of your portfolio there, the effective stock count of your total portfolio drops, because you are adding heavily to a corner of the market where correlations between companies are already very high. XEQT’s lower Canada allocation is part of why its effective diversification score beats VEQT’s despite the smaller headline holding count.

The MER Gap: Small Number, Real Money

A note on timing here, because the fee​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ story shifted in late 2025. Vanguard cut VEQT’s management fee from 0.22% to 0.17% in November 2025. BlackRock followed about a month later and cut XEQT’s management fee from 0.18% to the same 0.17%. The management fees are now identical. However, published MER figures include operating expenses and taxes on top of the management fee, and they are calculated from the prior year’s actual expenses, so they lag behind management fee changes. As of current reporting, XEQT’s MER is 0.20% and VEQT’s is 0.24%.

The full convergence of MER figures​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ will take time to work through. Even once they converge, XEQT has historically carried a lower total cost because of its more efficient fund structure. For planning purposes, the current 0.04% spread is the verified baseline.

Four basis points sounds like rounding​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ error. Over a career of investing, it compounds into something real. On a $100,000 portfolio growing at a long-run average of 7% annually, the difference between paying 0.20% and 0.24% in annual fees accumulates to a meaningful gap over 30 years, driven entirely by the compounding effect of slightly more money staying invested rather than being skimmed off each year. Scale that to a $250,000 RRSP and the gap widens further. That figure will never show up on a fee statement. It simply never compounds into your account in the first place.

If you want a deeper breakdown of how XEQT’s fee structure works internally, including whether you pay double on the underlying ETFs (you do not), the full XEQT fee breakdown covers the mechanics in detail.

What the Return Data Actually Shows

Return comparisons between XEQT and​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ VEQT over short periods are mostly noise, but they are worth examining to correct a common misconception. According to data from the Canadian Portfolio Manager Blog, XEQT posted calendar-year returns of 17.05% in 2023, 24.67% in 2024, and 20.45% in 2025. VEQT’s returns over the same period were essentially identical, with the two funds posting the same return in 2025 and VEQT running marginally behind in the prior two years, largely due to its lower US equity weighting and higher Canadian allocation during a period of US market outperformance.

XEQT targets 45% US equities at all​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ times, rebalancing back to that fixed weight regardless of what markets are doing. VEQT’s US allocation floats with market cap, which has historically kept it slightly below XEQT’s US exposure during periods when US equities outperform. This is not a flaw in VEQT’s design. Vanguard’s approach lets the US allocation grow during bull markets and shrink naturally after corrections, which has theoretical merit. In practice, the US market’s structural scale over the past decade has meant XEQT’s fixed allocation to America has worked in its favour more often than not.

The honest framing is this: neither​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ fund’s return history is long enough to make strong claims about which construction methodology will outperform over the next thirty years. What you can say is that XEQT’s US weighting reflects a deliberate structural choice, not luck, and that the effective diversification advantage is a feature of the fund’s design rather than a temporary condition.

XEQT and VEQT posted essentially the​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ same 2025 return despite meaningfully different portfolio construction philosophies. The real differences compound quietly over decades, in fees, in effective diversification, and in the microstructure costs most investors never think about.

Liquidity, AUM, and Why Your TFSA Cares About This

XEQT manages approximately $12 billion​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ in assets. VEQT manages roughly $10 billion. Both are large by Canadian ETF standards, and both trade on the TSX with adequate daily volume for retail investors transacting in amounts up to hundreds of thousands of dollars without meaningful market impact.

There is a practical edge worth noting.​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ Larger AUM tends to attract more market makers, which tightens the bid-ask spread over time. Research on Canadian ETF market microstructure confirms that true ETF liquidity is driven by the liquidity of the underlying basket rather than on-screen trading volume, so neither fund has a structural liquidity problem. For investors using platforms like Wealthsimple or Questrade who execute regular buys inside a TFSA or RRSP, a consistently tighter bid-ask spread on XEQT means real execution cost is marginally lower on every trade. Use limit orders on both funds, and the difference becomes minimal. But XEQT’s AUM lead gives it a slight structural advantage in market microstructure that complements its fee and diversification edges.

For TFSA investors specifically, both ETFs carry the same withholding tax treatment: approximately 15% on US dividends, because the Canada-US tax treaty does not extend its withholding exemption to TFSAs. In an RRSP, that withholding tax disappears entirely under the treaty for both funds. This is the most important account-level consideration for either ETF, and it applies identically to XEQT and VEQT since they hold the same types of underlying US equity exposure. For a full comparison of all-equity options beyond just these two, the best all-in-one ETF guide covers the broader landscape.

The Real Winner: XEQT, With a Clear Head

VEQT is an excellent fund. If you own​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ it, you are not making a financial mistake. You are getting global equity diversification at a low cost with automatic rebalancing, and that alone puts you ahead of the majority of Canadian investors still sitting in bank-sold mutual funds charging 2% or more annually.

But when you compare the two funds on​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ the dimensions that are measurable and durable, XEQT comes out ahead on every one. It achieves a higher effective number of stocks despite holding fewer individual securities. Its Canadian weighting sits closer to the historically referenced range for risk-adjusted returns. Its MER is lower on current reporting, and its cost advantage only narrows once VEQT’s MER catches up to the fee cuts Vanguard made in late 2025. Its AUM lead gives it a marginal but real liquidity advantage. And its fixed regional weights mean you always know exactly what you own and in what proportion.

The one scenario where choosing VEQT​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ might be reasonable is if you already hold it and switching creates friction or capital-gains exposure in a non-registered account large enough that the transaction cost exceeds the projected long-term benefit. In a TFSA or RRSP where there are no capital-gains implications on a switch, that friction does not exist. The math points one direction.

For Canadian investors starting from​‌‌​‌​‌​​‌‌​​​‌​​‌‌‌‌​​​​‌‌​​‌​‌​‌‌‌​​​‌​‌‌‌​‌​​‍​​​​​​​​​‌‌‌​‌​‌​​‌‌‍‌‌​‌​‌​‌​​‌‌‌‌​‌​​‌​‌‌‌​‌​​​‌‌​ scratch on Questrade or Wealthsimple, buying XEQT and leaving it alone remains the default recommendation. It is not a complicated call. The evidence is clear enough that hedging the answer with “both are basically the same” undersells a real and measurable advantage.

Frequently Asked Questions

Is XEQT actually more diversified than VEQT despite holding fewer stocks?
Yes, according to concentration-adjusted analysis from the Canadian Portfolio Manager Blog. XEQT’s effective number of stocks is approximately 198 versus VEQT’s 180. VEQT’s larger headline holding count includes over 1,100 duplicates from share-class inflation in emerging markets, and its heavier Canadian weighting concentrates the portfolio in a smaller set of meaningfully independent companies.

Does the MER difference between XEQT and VEQT matter if I’m just starting out?
Yes, even at small portfolio sizes. The 0.04% gap is modest today but compounds over 20 to 30 years of investing. Both funds now share the same 0.17% management fee following late-2025 cuts, but XEQT’s published MER of 0.20% remains lower than VEQT’s 0.24% until the official figures catch up to the new fee structure.

Should I switch from VEQT to XEQT inside my TFSA or RRSP?
Inside a TFSA or RRSP, there are no capital-gains tax consequences from selling one ETF and buying another, so the switch itself is cost-free beyond any transaction fees your broker charges. The long-term advantages of XEQT are real but not dramatic in the short term, so the decision comes down to whether you prefer holding the marginally better-structured fund going forward. For most investors, consolidating to XEQT in a registered account is a reasonable and low-friction move.

Do XEQT and VEQT have the same withholding tax treatment?
Yes. Both ETFs hold US equity funds as underlying assets, and both face approximately 15% US withholding tax on dividends in a TFSA, FHSA, or non-registered account. In an RRSP, the Canada-US tax treaty eliminates that withholding entirely for both funds. Withholding tax treatment is not a differentiating factor when choosing between them.