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New 100% Equity Allocation ETF from Vanguard (VEQT)

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  • Feb 19th, 2019 3:12 am
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Dec 6, 2010
453 posts
140 upvotes

New 100% Equity Allocation ETF from Vanguard (VEQT)

Vanguard launched this new ETF, this is a great addition to VGRO and VBAL family. The ticker code is VEQT

The breakdown is
Vanguard U.S. Total Market Index ETF - 38.9%
Vanguard FTSE Canada All Cap Index ETF - 30.0
Vanguard FTSE Developed All Cap ex North America Index ETF - 23.6
Vanguard FTSE Emerging Markets All Cap Index ETF - 7.5

Link to the news:
https://www.vanguardcanada.ca/individua ... folios.htm

Link to the fund:
https://www.vanguardcanada.ca/individua ... /?overview

They also launched Conservative Income ETF Portfolio (VCIP) with 20/80 allocation - https://www.vanguardcanada.ca/individua ... /?overview
15 replies
Newbie
Sep 14, 2017
67 posts
55 upvotes
What happens if you hold it in RRSP? Do you still pay withholding tax on the US part of the dividend?
Deal Addict
Feb 26, 2017
1695 posts
1792 upvotes
gta_guy wrote: Vanguard launched this new ETF, this is a great addition to VGRO and VBAL family. The ticker code is VEQT

The breakdown is
Vanguard U.S. Total Market Index ETF - 38.9%
Vanguard FTSE Canada All Cap Index ETF - 30.0
Vanguard FTSE Developed All Cap ex North America Index ETF - 23.6
Vanguard FTSE Emerging Markets All Cap Index ETF - 7.5

Link to the news:
https://www.vanguardcanada.ca/individua ... folios.htm

Link to the fund:
https://www.vanguardcanada.ca/individua ... /?overview

They also launched Conservative Income ETF Portfolio (VCIP) with 20/80 allocation - https://www.vanguardcanada.ca/individua ... /?overview
You will lose the withholding tax on a Canadian ETF for the US portion of the index fund. Nyse:VT is one I have owned in the past but your only going to get about 5% Canada.

Unless you have the funds in USD I'm not sure its worth buying a US index fund.
Deal Guru
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Mar 9, 2007
13606 posts
8561 upvotes
Think of the Childre…
yeah...pass.

WOULD SOMEBODY THINK OF THE CHILDREN!!!
Member
Oct 31, 2014
217 posts
88 upvotes
Edmonton, AB
VCN / XAW combo is cheaper

and if you want to add any bond allocation you just add ZAG

Boom, you have the Couch Potato 3 ETF ... at a cheaper cost
Deal Guru
Jan 27, 2006
14891 posts
7837 upvotes
Vancouver, BC
I'm actually somewhat puzzled at how they arrived at the allocation levels. After all, the breakdown doesn't reflect the market sizes around the world. If anything, it's heavily weighted to North America - 69%. I can see where they would get the US allocation as they are approx 40% of the whole world's market cap but Canada at 30% seems high when we represent approx 3% of the world.
Deal Addict
Oct 4, 2009
2602 posts
1465 upvotes
Montreal
craftsman wrote: I'm actually somewhat puzzled at how they arrived at the allocation levels. After all, the breakdown doesn't reflect the market sizes around the world. If anything, it's heavily weighted to North America - 69%. I can see where they would get the US allocation as they are approx 40% of the whole world's market cap but Canada at 30% seems high when we represent approx 3% of the world.
They’re not trying to replicate world market caps, they are tailoring their offerings to Canadian investors and incorporating an appropriate home bias as per their own research. All non Canadian holdings are based on market cap.

Nice addition to their lineup, somewhat surprised they bothered with a 20% equity fund.
Deal Addict
User avatar
Feb 1, 2012
1365 posts
1817 upvotes
Thunder Bay, ON
Vanguard has published a report on home bias for Canadian investors:
https://www.vanguardcanada.ca/documents ... s-tlor.pdf

Their asset allocation ETFs align with the conclusions of their analysis.
Conclusion
In light of empirical analysis and qualitative
considerations, we have demonstrated that Canadian
investors should consider increasing their exposure to
global equities. Strict adherence to this principle would
indicate an allocation to Canadian equities close to 4%;
however, we have also demonstrated that diversification
benefits can be achieved through less than fully marketproportional
allocations. These higher allocations to
Canadian equities may also be considered reasonable
because they would allow Canadian investors to benefit
from exposure to both global and Canadian equities while
remaining sensitive to investor preferences. However,
over time and as the global markets become more
integrated and home bias less relevant, this decision may
warrant revisiting.
Question is whether past is prologue, or is it different this time. Never ending debate.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
Deal Guru
Jan 27, 2006
14891 posts
7837 upvotes
Vancouver, BC
S5 wrote: They’re not trying to replicate world market caps, they are tailoring their offerings to Canadian investors and incorporating an appropriate home bias as per their own research. All non Canadian holdings are based on market cap.

Nice addition to their lineup, somewhat surprised they bothered with a 20% equity fund.
But replicating an incorrect portfolio in the first place isn't a good place to start especially considering everyone has been telling Canadian investors to look outside of Canada to increase returns and increase diversification. Yes, the risk may be increased (or at least seem that way) but this is an ALL equity portfolio so the idea of increased risk should be a given.
Deal Guru
Jan 27, 2006
14891 posts
7837 upvotes
Vancouver, BC
Deepwater wrote: Vanguard has published a report on home bias for Canadian investors:
https://www.vanguardcanada.ca/documents ... s-tlor.pdf

Their asset allocation ETFs align with the conclusions of their analysis.


Question is whether past is prologue, or is it different this time. Never ending debate.
So, basically, they are doing so from a pure marketing standpoint when they themselves believe that it's better to increase foreign exposure.
Newbie
Feb 5, 2019
1 posts
Great article as usual

I have the following question regarding the taxable account:
Now that Vanguard introduced the all equity etf:VEQT I have three options: (60% stocks 40% bonds)

Option 1: VUN (30%) , VIU (25%) VEE (5%) and ZDB(40%): Bond ETF more efficient in taxable account
Option 2: VEQT (60%) ZDB (40%)
Option 3: VBAL (the bond part not as tax efficient as ZDB)
Which one do you thing would be more tax efficient in the taxable account.
Re-balancing multiple ETF's is not an issue for me

Thanks
Deal Addict
User avatar
Oct 14, 2001
1670 posts
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GMA
We could start a never-ending discussion on the benefits and drawbacks of home-bias. If you're OK with home bias of VEQT, buy it. If not, XAW is always a viable option.

I'm personally not against some home bias but not as much as VEQT. Canada's stock market cap weight is ~3% while VEQT allocates 30% to Canadian equities. I'd like an option where you could have an home bias of 3-400% (something like 9-12% of Canadian equities) instead of the current 1000%.
Deal Fanatic
Feb 4, 2015
6119 posts
2587 upvotes
Canada, Eh!!
Thanh wrote: We could start a never-ending discussion on the benefits and drawbacks of home-bias. If you're OK with home bias of VEQT, buy it. If not, XAW is always a viable option.

I'm personally not against some home bias but not as much as VEQT. Canada's stock market cap weight is ~3% while VEQT allocates 30% to Canadian equities. I'd like an option where you could have an home bias of 3-400% (something like 9-12% of Canadian equities) instead of the current 1000%.
Use XAW in quite a few of our accts.
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Sr. Member
Jul 1, 2006
665 posts
460 upvotes
DrewB49165 wrote: Great article as usual

I have the following question regarding the taxable account:
Now that Vanguard introduced the all equity etf:VEQT I have three options: (60% stocks 40% bonds)

Option 1: VUN (30%) , VIU (25%) VEE (5%) and ZDB(40%): Bond ETF more efficient in taxable account
Option 2: VEQT (60%) ZDB (40%)
Option 3: VBAL (the bond part not as tax efficient as ZDB)
Which one do you thing would be more tax efficient in the taxable account.
Re-balancing multiple ETF's is not an issue for me

Thanks
If your primary concern is tax efficiency in a taxable account then you'd probably want to look at the Horizons products. HXS, HDXM, HBB. At least for the US, EAFE and bond exposure. They don't have anything for emerging unfortunately. They do have HXT as well for the Canadian market, but generally speaking income from Canadian sources is pretty tax efficient unless you are in the higher tax brackets... at which point HXT could also make sense.

I think these allocation ETFs are largely built for convenience - one stop shopping as it were. I don't think tax efficiency is really what they are aiming for.
Deal Addict
Jul 14, 2006
2275 posts
2950 upvotes
Anyone able to find VEQT on the Apple Stocks app?

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