Tag: iShares

XEQT, TEQT, VEQT, ZEQT, HEQT Fee Showdown

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Summary: Although iShares(XEQT/XGRO) and Vanguard(VEQT/VGRO) get all the love, the all-in-ones from BMO and TD are actually the current winners in the “lowest all-in-one fee award”. Given how similar they are to their competitors, I see no reason not to park money there.

I’m a fan of all-in-one1 ETFs in my retirement portfolio. If you’re new to the world of all-in-ones, you might want to start here. There’s at least five competing families of products out there, courtesy of iShares (XEQT, XGRO, XBAL et al), TD (TEQT, TGRO, TBAL et al), Vanguard(VEQT, VGRO, VBAL et al) BMO(ZEQT, ZGRO, ZBAL et al) and GlobalX2 (HEQT, HGRO, HBAL et al). We’ve taken a look at some of them “under the hood”, so to speak, but didn’t really find super-significant differences.

One facet I haven’t looked at yet is the fees each of these companies charge. As I’ve shown elsewhere, small differences can add up if you have significant investments or are holding them for a significant time.

With the news that iShares is reducing their management fees, (BMO did earlier this year) I figured it was time to do a head-to-head fee comparison for the four major families.

Here you have it:

CompanyRelevant TickersManagement Fee3
iSharesXEQT, XGRO, XBAL et al0.17%, effective Dec 18, 2025
VanguardVEQT, VGRO, VBAL et al0.17%
TDTEQT, TGRO,TBAL et al0.15%
BMOZEQT, ZGRO, ZBAL et al0.15%
Global XHEQT, HGRO, HBAL et al0.18%

TD and BMO are the low fee winners at the moment, but the gap has narrowed significantly from earlier in the year. I like low fees, and so I’ve started to invest in these families.

  1. Technically called “asset allocation” ETFs, which is good, since asset allocation is how I view my own portfolio. ↩︎
  2. Formerly known as Horizons, which explains the stock tickers used here. ↩︎
  3. Most of the time I use MER (Management Expense Ratio) to report on fees, but since a few of these companies have lowered their Management fees this year, and since MER is only calculated annually, the MER values only become relevant again on Jan 1. They are a few basis points higher than the management fee, but just a few. Most of the cost is buried in the management fee. ↩︎

Underlying indices of all-in-ones

RobH1 Comment

(New to asset allocation ETFs aka all-in-ones? Here’s a good place to start.)

Asset allocation ETFs can be purchased from any number of companies. In this article, we look at 4 of the biggest names:

  • TD, with TEQT, TGRO, TBAL et al
  • Blackrock/iShares with XEQT, XGRO, XBAL et al
  • BMO with ZEQT, ZGRO, ZBAL et al
  • Vanguard with VEQT, VGRO, VBAL et al

The blueprint for each of these ETFs are similar: pick Canadian, US, International and (where applicable1) bond indices, pick a target percentage allocation for each slice of the pie, and carry on…

I previously talked about the variations in percentage allocation (the size of the pie slices) between the major funds over here.

But what about the indices that each of the major fund families track? What’s in the pie? Are there significant differences? Here’s a summary of what I found:

TD
iSharesBMO Vanguard
TEQT, TGRO, TBALXEQT, XGRO, XBALZEQT, ZGRO, ZBALVEQT, VGRO, VBAL
CAD EquitySolactive Canada Broad MarketS&P/TSX Capped Composite
S&P/TSX Capped Composite		FTSE Canada All-Cap
US EquitySolactive US Large Cap CAD IndexS&P Total MarketS&P 500
S&P Midcap 400
S&P SmallCap 600
CRSP US Total Market
Int’l EquitySolactive GBS Developed Markets ex North America Large & Mid Cap CADMSCI EAFE® Investable Market, MSCI Emerging Markets Investable MarketMSCI EAFE Index, MSCI Emerging Markets IndexFTSE Developed all-cap, FTSE Emerging all-cap
Bonds FTSE Canada Universe Bond IndexFTSE Canada Universe Bond Index and othersFTSE Canada Universe Bond Index and othersBloomberg Global Aggregate Canadian Float Adjusted Bond

So there is variation in the pie recipes (the underlying indices), but is it really of any significance? At a glance, I wonder how different the offerings from iShares and BMO actually are — the same index providers show up in each. Without looking at what stocks are actually found in each of these, here’s a quick take, simply based on the names of the indices:

  • Canadian Equity: All of these funds hold the broad Canadian market, over three different index providers23. iShares and BMO use a capped index, which, in theory, should limit exposure to the very largest Canadian businesses somewhat.
  • US Equity: Three different index providers seen here (Solactive, S&P and CRSP). TD only holds large US companies, the others hold smaller and midsized US companies. In the last ten years, this has been a winning strategy, but it’s not always been that way.
  • International Equity: Three different index providers: Solactive, MSCI, FTSE. TD excludes emerging markets (e.g. Brazil, Russia, Taiwan, China, India). The others don’t.
  • Bonds: Hard to tell just based on the names, but three of them use the same FTSE index. Vanguard uses a Bloomberg index. So I’ll say that it’s likely that Vanguard’s bond portfolio will look different from the other three.

In a future post, I’ll delve into what the main holdings of each of these funds are in each of these categories to see what differences emerge. And whether these differences actually matter!

  1. This excludes 100% equity funds like XEQT, naturally ↩︎
  2. The “composite” in “Capped Composite” means “all the stocks of the TSX”. ↩︎
  3. Solactive, S&P and FTSE ↩︎

What’s in my RESP portfolio?

RobH1 Comment

As summer shifts into fall, I’m reminded that it’s back-to-school time. Or “Dad, I need money for tuition” time. I still have kids attending higher education, still making withdrawals from the family RESP we set up shortly after the birth of son #1, almost 25 years (!) ago now. RESP investing is a bit different from retirement investing given the (hopefully) shorter timelines of RESP investing1. Here’s how I approach it.

In the early days of the RESP, the contributions were invested in mutual funds; these were dark days, long before the rise of very cheap ETFs. Mutual funds were the ONLY way to make routine contributions (which I made, monthly, without fail — Pay Yourself First and all that). I had an 80/20 mix of equities and bonds in the first 18 years or so of its existence: 4 funds, one for US Equity, one for Canadian equity, one for international equity and one for bonds. I don’t remember the specifics of which ones and what percentages exactly. But the fund kept growing, thanks to market returns as well as CESG grant money, which I took full advantage of2!

As son #1 came close to entering post-secondary studies, I shifted the portfolio to a 60/40 mix using individual ETFs like HXS for US Equities, HXT for Canadian Equities, HXDM for International Equities, and CBO for Bonds. The GlobalX funds didn’t throw off dividends3 and so I just had to deal with the periodic (monthly) distributions of CBO, which ultimately were set to DRIP4.

I made the decision to move to 60/40 over 80/20 to preserve a bit more of the capital in the event of some kind of market meltdown5. Growth gets curtailed somewhat as a result, but there’s less volatility.

But I finally realized that all of this was completely unnecessary thanks to all-in-one ETFs. So now, the RESP has exactly ONE holding — XBAL, an all-in-one from iShares that takes care of the 60/40 split for me. And this is set to DRIP as well, so every quarter the RESP picks up a few more XBAL shares.

You can see how XBAL has preformed over the past 15 years or so. I’m comparing it to the 80/20 XGRO ETF from the same family, one that features prominently in my ETF All-Stars page6:

In a future post, I’ll explain how I fairly divide the RESP among my two sons — in essence, I pretended that the RESP was a mutual fund, with each son receiving the same number of units on the day the first withdrawal was made. Withdrawals are henceforth made in units, not dollars, and the unit price fluctuates with the value of the RESP.

How are you managing your RESP? Let me know at comments@moneyengineer.ca.

  1. Less time to build wealth, shorter runway for decumulation ↩︎
  2. As a certified cheapskate, it’s hard for me to resist free money of any kind. ↩︎
  3. They are “corporate class” ETFs that use a clever structure to avoid paying out dividends; all growth is buried in the increase of the ETF’s price. I still hold some of these in my non-registered accounts. ↩︎
  4. Dividend Reinvestment Plan. Instead of getting cash in the RESP account, the DRIP buys additional shares of whatever generated the dividend in the first place. ↩︎
  5. One may ask why I chose to stick with 80/20 in retirement, which is against some conventional wisdom. I figured that the RESP decumulation phase would be over a much shorter time period (say 5-10 years) and so I would be less able to wait for a market bounce-back. In retirement, I’m hopeful that decumulation will take much, much longer, and so with 80/20 I have a better chance of outliving my savings. ↩︎
  6. Chart is courtesy http://www.dividendchannel.com, featured on Tools I Use. When I rolled the comparison all the way back to 2007 the 60/40 XBAL actually OUTPERFORMED the (supposedly) more risky XGRO. Can’t explain that one. ↩︎

Comparing asset-allocation ETFs: what’s the right allocation?

RobH1 Comment

I’ve talked about my approach to investing before, which is slavishly devoted to maintaining a constant asset allocation across all my accounts. And as I’ve mentioned, my current targets are:

  • 20% is Canadian Equity, 36% is US Equity, and 24% is International Equity, for a total of 80% equity overall
  • 15% bonds
  • 5% cash

My allocation targets were picked to align with XGRO1, which, over time, will make up more and more of my retirement portfolio2.

As I’ve written elsewhere, these are pretty broad categories and could be sub-divided further. I’ve not bothered with this myself, but I thought it would be an interesting exercise to survey what the major all-equity and high-growth funds have under the hood. And so, I present this comparison:

A few notes on the above:

  • Canadian Equity: Some use an all-cap index (TGRO, VGRO) while some use a capped composite index (ZGRO, XGRO).
  • US Equity: VGRO and XGRO use an all-cap index, TGRO sticks to large cap, and ZGRO holds large, mid and small cap indices. TGRO is a bit of an outlier because it doesn’t hold small cap..
  • International Equity: TGRO takes an all countries approach, whereas the other three split between developed and emerging markets. Net effect is pretty much the same thing.
  • Bonds: Here you find the greatest variation; VGRO is the only ETF to hold bonds outside of North America whereas TGRO holds only Canadian bonds. XGRO and ZGRO are pretty similar, with XGRO having a bit more Canadian bond exposure over ZGRO.

The most notable difference between my allocations and the average allocation of the big 4 funds is that I have more international exposure than other funds, and that’s because I’ve chosen to hitch my wagon to the iShares/XGRO family.

The reason? I started investing in the iShares family some time ago because it was the family that my old provider (QTrade) allowed me to trade without fees. With my current provider (Questrade), all of the families are free to trade, and hence my continued devotion to iShares/XGRO no longer holds that attraction — I could buy any of the all-in-ones. (Indeed, I’ve actually been adding some TD all-in-ones because their management fees are a bit lower).

But this exercise has given me food for thought; perhaps I have a bit too much bias to the international equity portion of the portfolio. But honestly, I can’t believe it makes that much of a difference, and churning my portfolio simply to reduce my international exposure a point or two seems unnecessary3.

  1. Why XGRO and not an all-in-one from another company? Read on. ↩︎
  2. I’m slowly converting my main holding (AOA, which trades in USD) to XGRO on a quarterly basis so that I’m never over exposed to foreign exchange variations. I convert a percentage of these holdings annually, corresponding to the percentage at which I’m draining my RRIF. ↩︎
  3. Running some numbers through https://www.dividendchannel.com/drip-returns-calculator/ demonstrates that XGRO is the bottom of the performance pile over the past 5 years or so as compared to TGRO, ZGRO and VGRO. The difference isn’t massive, and the window is short because these funds haven’t been around all that long, but it’s another data point to consider…p.s. the tool above doesn’t (yet?) understand the 3 for 1 reverse split ZGRO undertook in August, so best to end any simulation involving the BMO funds at August 1,2025. ↩︎

The Cost of Asset Allocation ETFs

RobH3 Comments

Readers will know that I’m a fan of the asset-allocation ETF. In fact, the vast majority of my retirement savings are dedicated to them. (New to the concept of asset allocation ETFs? Here’s an intro.)

Owning asset-allocation ETFs means you can quite literally invest and forget. The target asset allocations are maintained automatically for you, eliminating the all-too-common desire to tinker/experiment/play and mess with your returns in the process.

As with all things investing, there’s no such thing as a free lunch. This automatic asset re-allocation is reflected in the MER1 of the asset-allocation ETFs. So what’s this automatic management actually costing the holder of the all-in-one?

To work out the answer to that question, you have to look at how the asset-allocation ETF in question is built. Some people refer to asset allocation ETFs as “funds of funds” and this is actually quite an apt description, since most asset-allocation ETFs are just constructed by buying up index ETFs issued by the same company.

For example, iShares and TD each have an all-equity asset allocation ETF, named XEQT and TEQT2, respectively. Here’s what’s actually under the hood of each of them:

(I tried to keep the colours consistent between the two: red is Canadian equity, blue is US Equity, and other colours are international equity).

The thing about the MER of an all-in-one is that it already includes the MERs of the funds from which it is built. The tip-off is phrases like this one in iShares’ literature:


…MER includes all management fees and GST/HST paid by the fund for the period, and includes the fund’s proportionate share of the MER, if any, of any underlying fund in which the fund has invested…

https://www.blackrock.com/ca/investors/en/literature/product-brief/core-etf-portfolios-product-brief.pdf3

What this means is you can work out what the MER would be if you decided to simply manage the underlying funds yourself, and in so doing, figure out the premium that the all-in-one is adding to the mix.

I did this exercise, and here’s what I found:

XEQTTEQT
MER of component parts40.103%0.089%
All-in-one MER50.20%0.17%
MER premium for all-in-one60.097%0.081%
Annual premium cost per $1000 invested7$0.97$0.81

I offer a few takeaways from this analysis:

  • The MER costs I’m talking about here are lower than a factor of 10 (at least) that what’s charged by typical investment advisors and bank-backed mutual funds
  • The cost premium of the all-in-one is small, but it’s higher than I expected; even small percentage differences are greatly amplified when you work out (say) the 10 year cost of using these products.

The alternative of managing the constituent parts can be a cheapskate alternative and can save real money over time8, but one must beware of

  • The added complexity inherent in managing a portfolio of multiple ETFs. The XEQT/TEQT example is the simplest one; if you add bonds to the mix (e.g. XBAL/TBAL) you will need to add a few more ETFs to replicate the all-in-one. I used to manage my portfolio without using all-in-ones. I enjoyed it (you may have noticed I have a deep interest in investing). In retirement I have chosen to be practical and have attempted to create an environment that won’t be cognitively overwhelming as I get older.9
  • The greater likelihood of straying from the plan due to inaction or emotion kicking in. I myself didn’t put a lot of credence to this argument, but people smarter than me have pointed out that this is probably the one biggest factor that derails investment plans.
  1. The MER (Management Expense Ratio) is the cost of operating the ETF, expressed as a percentage. You don’t directly pay MER fees, but they reduce the overall returns of your investments. Lower MERs = more money for you. ↩︎
  2. No points for originality here ↩︎
  3. In teeny tiny letters at the bottom of page 1 ↩︎
  4. Weighted MER of each of the component ETFs. ↩︎
  5. You can find these on the ETF pages for XEQT and TEQT ↩︎
  6. Subtract 2 previous rows ↩︎
  7. Just multiply. Watch those decimal points, though. ↩︎
  8. I’m ignoring trading costs which aren’t zero but ought to be very small. Rebalancing assets is necessary of course but is perhaps a monthly, quarterly or annual exercise. ↩︎
  9. And even a portfolio just based on all-in-ones may prove to be too much to handle at some point. I’ve started to pay a bit more attention to the services offered by robo-advisors. ↩︎