XEQT vs VGRO: The Bond Question

The one-line summary

If you have a long time horizon and can handle watching a portfolio drop 30% without selling, XEQT will likely leave you with more money at the end. If a 30% drawdown would cause you to sell or lose sleep, VGRO is the better tool regardless of the return difference.

What is VGRO?

VGRO is the Vanguard Growth ETF Portfolio, a one-fund solution listed on the Toronto Stock Exchange. It holds seven underlying Vanguard ETFs covering global equities and Canadian bonds, targeting an 80% equity and 20% fixed income allocation.

VGRO launched in January 2018, about 18 months before XEQT. It was one of the first all-in-one asset allocation ETFs available to Canadian investors and helped establish the product category that XEQT and the other iShares funds later joined. As of early 2026, VGRO manages roughly $4.5 billion in assets, making it one of the most popular multi-asset ETFs in Canada.

The 20% bond allocation is not incidental. Vanguard designed VGRO explicitly for investors who want growth but need some ballast during market declines. The bonds reduce volatility and the depth of drawdowns, at the cost of lower expected long-run returns. For investors who genuinely need that ballast, the tradeoff is worthwhile.

Holdings and structure

Both funds provide global equity exposure. The difference is what comes alongside it. XEQT holds four iShares equity ETFs covering the entire global market. VGRO holds the Vanguard equivalent of those equity ETFs plus two bond funds that together represent 20% of the portfolio.

One structural detail worth noting: VGRO overweights Canada at roughly 23% of equities compared to Canada's global market weight of about 3%. XEQT does the same at 25%. Both funds apply home-country bias deliberately, on the theory that Canadian investors benefit from reduced currency risk on a portion of their portfolio. If you hold your investment in Canadian dollars and plan to spend in Canadian dollars, some Canadian equity exposure makes sense.

Cost comparison

XEQT charges 0.20% per year. VGRO charges 0.24%. On a $100,000 portfolio, that is a $40 annual difference. Over 25 years at 7% gross return, that difference compounds to approximately $4,800 in favour of XEQT, before considering the different return profiles of the two funds.

The cost difference is real but not the primary decision factor. Both funds are extremely cheap by any reasonable standard. The 0.04% difference should not be the reason you choose one over the other. The right frame is: given the cost difference is negligible, which asset allocation is actually right for my situation?

Historical returns

XEQT launched in August 2019. VGRO launched in January 2018. Both funds have lived through the COVID crash of 2020, the 2022 rate hike bear market, and a strong 2023 to 2025 recovery. The 100% equity allocation of XEQT has outperformed over this period, as expected when equities outperform bonds.

Since XEQT inception in August 2019 through end of 2025, XEQT returned approximately 94% total. VGRO returned approximately 65% over the same period. This is not a small difference. It reflects the fundamental arithmetic: 100% equity in a strong equity period beats 80% equity. The bonds in VGRO held it back during a run when equities dominated.

The important caveat: we have not had a sustained multi-year bear market since these funds launched. The 2022 drawdown was sharp but recovered within roughly 18 months. In a prolonged bear market where equities decline for two or three years, bonds would outperform equities during that period, and VGRO would hold up better. The period since 2018 has been unusually good for equities. Past performance in an unusual period should not dictate long-term asset allocation decisions.

Volatility and drawdowns

The 20% bond allocation in VGRO is not decorative. It meaningfully reduces drawdowns during equity market declines. During the March 2020 COVID crash, XEQT fell roughly 30%. VGRO fell roughly 23%. That 7-percentage-point difference is the bond allocation doing exactly what it is supposed to do.

For investors who are genuinely sensitive to drawdowns, that 7-point difference matters. Someone with $200,000 invested would have seen $60,000 evaporate in XEQT versus $46,000 in VGRO at the bottom of the COVID crash. Both figures are uncomfortable. One is meaningfully worse.

When bonds actually matter

Bonds earn their place in a portfolio in specific circumstances. Understanding those circumstances is the honest way to make this decision, rather than defaulting to one allocation without understanding why.

Bonds reduce portfolio volatility. This matters if you are close to retirement and cannot afford a large decline right before you need the money. A 30% portfolio decline two years before you retire is a real financial problem if you are drawing down assets in the near term. Bonds reduce the probability and depth of that scenario.

Bonds also matter if volatility affects your behaviour. An investor who holds through every crash with VGRO will do better than an investor who sells XEQT in a panic. If the higher volatility of a 100% equity fund causes you to make bad decisions, the lower-volatility option is mathematically superior for you even if its expected return is lower.

Bonds do not matter much if you have a 20-plus-year horizon, a stable income, an emergency fund, and no history of panic-selling. For a 30-year-old with three decades until retirement, the bond allocation in VGRO is almost certainly reducing long-run wealth rather than adding value. Time is the best volatility buffer available.

One additional consideration worth knowing: in periods of rising interest rates, bonds can decline in value alongside equities. The 2022 period demonstrated this sharply. The traditional role of bonds as a portfolio hedge assumed interest rates would fall when equities fell. That correlation broke down in 2022. VGRO's bonds did not provide the protection investors expected that year.

Who should pick which

The decision is not about which fund is objectively better. It is about which allocation matches your situation. Here is a clear framework.

The verdict

For most Canadian investors under 45 with stable income and a long horizon, XEQT will produce better outcomes. For investors closer to retirement, with lower risk tolerance, or with a history of selling during downturns, VGRO is the more appropriate choice even at slightly lower expected returns.

The 0.04% MER difference is not a factor worth weighing. The asset allocation difference is. If you are genuinely uncertain, consider your behaviour during the COVID crash of 2020 and the 2022 bear market. If you held through both, XEQT is probably right for you. If you made changes, reduced your contributions, or felt genuine financial distress, VGRO's smoother ride is worth the expected return cost.

If you decide on VGRO, you should also know that the iShares equivalent of VGRO is XGRO, which holds the same 80/20 allocation at a slightly lower MER of 0.20%. Both are excellent funds. The issuer difference (Vanguard versus iShares/BlackRock) is not meaningful for practical purposes.

Both funds are available commission-free on Wealthsimple. Both belong to a category of investment products that have genuinely improved outcomes for Canadian retail investors by making global diversification cheap and automatic. Either choice is vastly better than a bank mutual fund. For the full comparison of all-in-one ETFs available in Canada, see our complete guide to the best all-in-one ETFs in Canada.