XEQT vs XBAL: What is 60/40?

The summary

XBAL is a genuinely more conservative product than XEQT, XGRO, or VGRO. It is designed for investors who need significant capital preservation alongside some growth. For most working-age Canadians, XBAL holds too many bonds. For retirees drawing down capital, it deserves serious consideration.

What is XBAL?

XBAL is the iShares Core Balanced ETF Portfolio, part of the same iShares all-in-one family as XEQT and XGRO. It launched in June 2019 and targets a 60% equity, 40% fixed income allocation. It holds five underlying iShares ETFs: three equity funds and two bond funds.

XBAL sits at the conservative end of the iShares all-in-one suite. The full spectrum from most to least aggressive is: XEQT (100% equity), XGRO (80/20), XBAL (60/40), and XCNS (40/60 conservative). Each fund provides a one-ticket globally diversified portfolio at a cost of 0.20%, automatically rebalancing to its target allocation.

As of early 2026, XBAL manages approximately $1.2 billion in assets. It is smaller than XEQT by a significant margin, which reflects the market's preference for the higher-equity option among Canadian investors who have learned from watching XEQT outperform during the post-2019 equity bull market.

What is a 60/40 portfolio?

The 60/40 portfolio is one of the most cited allocation models in investing history. The concept is simple: hold 60% in growth assets (equities) and 40% in defensive assets (bonds). The bonds provide income and stability; the equities provide long-run growth. Together they are supposed to offer a smoother ride than 100% equity with meaningfully higher returns than 100% bonds.

The 60/40 model was built on a key assumption: that bonds and equities would be negatively correlated, meaning bonds would rise when equities fell. During most of the period from the 1980s through 2020, that correlation held. Interest rates were in a decades-long decline, which pushed bond prices up whenever equity markets fell and investors sought safety.

That assumption broke down badly in 2022. When the Bank of Canada and the Federal Reserve raised interest rates aggressively to fight inflation, both equities and bonds fell simultaneously. A 60/40 portfolio had nowhere to hide. This was the worst year in decades for balanced portfolios and raised legitimate questions about whether the 60/40 model remains valid in higher-rate environments.

The honest answer is that bonds still have a role, particularly for investors with short time horizons who cannot afford to wait years for recovery. But the case for holding 40% bonds as a 35-year-old with three decades until retirement is weaker than it was before 2022.

Holdings comparison

XEQT holds four equity ETFs covering the entire global market. XBAL holds those same equity exposures at 60% weight, plus two bond funds making up the remaining 40%.

Cost: identical

Both XEQT and XBAL charge 0.20% MER. The cost difference is zero. This makes the comparison entirely about which asset allocation is right for your situation, not which fund is cheaper. Both are available commission-free on Wealthsimple and most major Canadian brokerages.

Returns and volatility

Over any extended period where equities outperform bonds, XEQT will produce higher total returns than XBAL. The tradeoff is higher volatility and deeper drawdowns. Since both launched in 2019, XEQT has significantly outperformed XBAL because equities substantially outperformed bonds over that period.

During the COVID crash of March 2020, XEQT fell roughly 30%. XBAL fell roughly 18%. The 40% bond allocation meaningfully cushioned the decline. For a retiree drawing down their portfolio, that 12-point difference is consequential. For a 30-year-old with 30 years to recovery, it is a temporary number that history suggests will be fully recovered.

The 2022 bond problem

The defining investment event of 2022 was the simultaneous decline of equities and bonds. This broke the traditional logic of the balanced portfolio and is a genuinely important data point for anyone considering XBAL.

When central banks raised rates aggressively in 2022, bond prices fell alongside equity prices. XBAL's 40% bond allocation provided only marginal protection compared to a pure equity fund that year. The correlation that underpins the 60/40 model, that bonds rise when equities fall, did not hold in a rising rate environment.

This does not mean bonds are useless. It means their protective value depends on the interest rate environment. In periods where equities fall because of recession fears and investors flee to safety, bonds typically do their job. In periods where equities fall because of rising rates, bonds may also fall. The 2022 experience is a useful reminder that no asset allocation is universally protective.

Who XBAL is actually for

XBAL is genuinely appropriate for a narrower set of investors than XEQT or even XGRO. The 40% bond allocation makes sense in specific circumstances.

XBAL is a reasonable choice for investors who are in or very near retirement and are actively drawing down their portfolio. A retiree taking 4% to 5% of their portfolio annually cannot afford to wait three years for a 30% equity crash to recover. The lower volatility of XBAL reduces the risk of selling depleted assets to fund withdrawals. For a detailed look at retirement drawdown strategy, see our guide on XEQT withdrawal strategy in retirement.

XBAL may also suit investors in their late 50s or early 60s who are within five years of retirement and cannot afford a large portfolio decline at the wrong moment. The traditional glide path approach suggests gradually shifting from equity to balanced as retirement approaches, though the optimal timing depends heavily on individual circumstances.

What XBAL is not suitable for is a working-age investor with 15 or more years until retirement who simply wants to be cautious. For that investor, the bond allocation will reduce long-run wealth more than it reduces meaningful financial risk, because they have time to recover from equity drawdowns. XGRO at 80/20 is more appropriate if some bond cushion is genuinely wanted at that stage.

The full iShares spectrum

iShares offers four all-in-one ETFs at the same 0.20% MER, covering every major allocation from 100% equity to 40% equity. Understanding where you sit on that spectrum is more useful than choosing between two specific funds.

Verdict

For most Canadian investors under 55 with a long time horizon, XEQT is the better choice. The 40% bond allocation in XBAL will drag on long-run returns significantly while providing only modest protection during equity downturns.

XBAL earns its place for investors in or near the drawdown phase of their financial life who cannot absorb large portfolio declines. For the working-age investor who wants some bond exposure for psychological comfort, XGRO at 80/20 is the more appropriate middle ground between XEQT and XBAL. See the complete all-in-one ETF comparison for the full picture.