XEQT vs VEQT: how to compare them

XEQT and VEQT are the two tickers Canadians most often end up choosing between: both are single-ticker, all-equity funds, one from iShares and one from Vanguard. Almost everything written about the choice ranks them. This page does not, because the honest answer is that the decision turns on facts about you that a web page does not have.

What a page can usefully do is tell you which axes actually differ, where each current number lives, and what the switch costs if you already hold one. That last part is the bit almost nobody covers, and it is the part that can cost real money.

Start here: they are more alike than the debate suggests

Both are asset-allocation ETFs. You buy one ticker and own a diversified portfolio of stocks; the fund holds other funds from its own family and rebalances between them for you, so you never place a rebalancing trade yourself. XEQT is the iShares Core Equity ETF Portfolio, and its issuer states that it targets a strategic allocation which is entirely equity.

One-ticker ETF portfolios covers how that structure works, what the management fee is actually buying, and the two mistakes that undo the reason for holding one. If you have not read that, read it first: it matters more to your outcome than which of these two you pick.

The axes that actually differ

Five things separate two all-equity one-ticker funds. Only the first two tend to get argued about, and the last three are usually what a reader is really asking.

1. The home-country weight. Every Canadian all-equity fund holds more Canada than Canada's share of world markets. How much more is a deliberate choice by the manager, the two families choose differently, and it is the single biggest source of return difference between them. It is also the number most likely to have changed since the last article you read about it.

2. The index family underneath. The two managers build on different index providers, which means slightly different definitions of what counts as a large-cap stock, how quickly new companies enter, and which emerging markets are included at all.

3. The management fee. Published on the fund's own page, and the two are close enough that the home-country weight will usually dominate it. The investment fee drag calculator shows what any gap between two cost levels compounds to over a holding period, using the two figures you read off the fund pages.

4. Whether you already own one. If you hold either fund in a non-registered account, switching is a sale. See below; it frequently settles the question.

5. What else you hold. An all-equity fund is not a portfolio on its own if you also hold individual stocks or another fund. Two funds can hold the same companies without either one telling you, which is the concentration problem that look-through exists to solve.

Where to get each number, rather than from here

This page names no fee, no weight, no holding count and no return, on purpose. A fund family changes fees, adjusts target weights and launches and merges products, and a number republished here is a copy that goes stale without telling anybody. The issuer's own page is authoritative and current, and it is the page a fund's own compliance team maintains.

For each fund, the ETF Facts document is the two-page summary that carries the management expense ratio and the asset mix, and the holdings tab lists what it actually owns. Read both for both funds, on the same day, and you have a comparison nobody can have written for you six months ago.

The part that costs money: switching is a disposition

If you hold one of these in a non-registered account and sell it to buy the other, that is a disposition. You realise whatever gain or loss you are sitting on, it lands on your return for that year, and your new position starts a fresh cost base. Switching inside a TFSA, RRSP or FHSA has no such consequence.

Two things follow that are worth knowing before you decide.

A gain makes switching expensive in a way the fee difference rarely justifies. The tax is due now, and the fee saving arrives a fraction of a percent a year. Whether that trade is worth making is your call, but it should be made with both numbers in front of you rather than one.

At a loss, the superficial loss rule is about identical property. The rule denies your loss when you, or an affiliated person, buy back identical property within 30 days either side of the sale and still hold it at the end of that window. Two funds from different fund families tracking different indexes are not identical property, which is why this specific switch is generally not the case the rule was written for. That is the mechanism, not a clearance for your situation: the assessment is on the facts, and this is the kind of question worth an accountant rather than a web page.

Tax-loss selling covers the rule and its 30-day windows properly, and adjusted cost base explained covers what the new position's cost base becomes.

What you still have to track either way

A one-ticker fund removes the rebalancing job. It does not remove the record keeping, and two of these in particular catch people out.

• Adjusted cost base, if you hold it in a non-registered account. Every purchase changes it, reinvested distributions change it, and a return of capital distribution reduces it. See return of capital and your ACB.
• What the fund holds through to, if you own anything else. Your all-equity fund and your individual holdings can concentrate on the same companies without either statement showing it.

Common questions

Is XEQT or VEQT better?

Neither this page nor Luum will answer that, and any page that does is guessing about your tax situation, your other holdings and your timeline. The axes above are what the answer turns on; the current numbers are on the two fund pages.

Can I just hold both?

You can, and holding two asset-allocation ETFs is covered in one-ticker ETF portfolios. The short version is that it does not diversify you much, because the two hold overlapping companies, and it does give you two cost bases to track instead of one.

Does switching between them trigger the superficial loss rule?

The rule applies to identical property repurchased within 30 days. Two funds from different families tracking different indexes are generally not identical property, so the rule is usually not what stops a loss being claimed on this switch. That is the mechanism rather than advice about your own return, and the facts of a particular case decide it.

If I hold one in my TFSA and one in my non-registered account, does anything change?

The tax treatment differs by account, and the allocation question does not: your targets apply to everything you own added together, not to each account separately. That is the subject of asset location across accounts, and it is where per-account thinking most often goes wrong.

Do I still need to track anything if I only own one ticker?

Yes, in a non-registered account. One ticker is still a security with a cost base that moves every time you buy and every time it pays a distribution that is classed as a return of capital.