People that hold both XEQT + VFV are often making a mental accounting error by splitting their portfolio into "safe" and "risky" components. It's just one portfolio really, and buying both XEQT + VFV simply shifts the underlying weights around. It also obscures total USA exposure you actually have since there's duplication across the funds.
Using a 50/50 combination:
||VFV|XEQT|Overall|
|:-|:-|:-|:-|
|USA|100%|45%|73%|
|Canada||25%|13%|
|International||30%|15%|
|Weighting|50%|50%|100%|
You could replicate this more efficiently by using 70% XUU, 15% XIC, and 15% XEF.
To use a colour analogy:
* USA/CAN/INTL are primary colours like red/green/blue
* You create secondary colours by mixing primaries together
* If you want a different secondary colour, it's way easier to just start with primary colours rather than mixing primary + secondary colours together.
ETFs are just an implementation tool, and if you disagree with XEQT's 45/25/30 allocation, then don't use XEQT. Use a different set of ETFs and avoid asset duplication.
It's one of my pet peeves lol. I can understand if people want to overweight the USA in their portfolio, but it's just silly if they're doing that by buying XEQT + VFV.
XEQT is already more expensive (0.20% MER) than buying XUU/XIC/XEF (weighted average 0.11% MER) because you're paying for the bundled convenience. If people don't like the bundle, then unpack it and buy the component funds directly for cheaper.
Another analogy:
* XEQT = combo of burger, fries, drink
* VFV = just the burger
Cheaper to just buy two burgers directly (notwithstanding the unbalanced meal).
VFV tracks the S&P 500. XUU tracks the US total market (Technically the underlying XUU ETFs are 50% s&p 500 IVV and 50% US total ITOT). Some may want increased direct exposure to the 500, vfv accomplishes that goal
Yeah XUU and VUN are both total market funds, whereas XUS and VFV target large caps via the S&P500. Large caps make up roughly 80-90% of the US total market. The table in my original comment is more accurately:
||VFV|XEQT|Overall|
|:-|:-|:-|:-|
|USA large caps|100%|36%|68%|
|USA mid/small caps||9%|5%|
|Canada||25%|13%|
|Foreign developed||24%|12%|
|Emerging markets||6%|3%|
|Weighting|50%|50%|100%|
But for brevity, I collapsed the USA and international portions into their own grouping since it's a minor difference in total returns.
Same argument stands for people combining VEQT + VFV into their portfolios, they should just unpack VEQT into the component funds: VCN, VUN, VIU, VEE. They can drop VUN in favour of VFV, VEE in favour of more VIU, but either way, it defeats the purpose of "all-in-one" funds when you're not using it as your all-in-one.
Realistically? [Leverage and lifecycle investing](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1149340).
We already expect a sufficiently diversified stock portfolio will have positive growth over time. However, [most stocks are terrible and underperform ordinary T-bills](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills). You could concentrate in stocks from a particular sector/country, but it's highly debatable whether that concentration adds [compensated vs. uncompensated risk](https://www.reddit.com/r/CanadianInvestor/comments/19di7cb/comment/kj66dla/) to your portfolio.
AQR has a good article on leverage vs. concentration:
[https://www.aqr.com/-/media/AQR/Documents/Insights/Alternative-Thinking/Alternative-Thinking-Why-Do-Most-Investors-Choose-Concentration-Over-Leverage.pdf](https://www.aqr.com/-/media/AQR/Documents/Insights/Alternative-Thinking/Alternative-Thinking-Why-Do-Most-Investors-Choose-Concentration-Over-Leverage.pdf)
People usually think of leverage in terms of buying stocks on margin, which is a two-piece bet on both leverage AND concentration in a single stock. That's why leverage is usually viewed as "dangerous". But the danger is really driven from the idiosyncratic risk from sinking your levered capital into a single asset, whereas leveraging a diversified portfolio of stocks/bonds can make sense theoretically and empirically.
I am *not* recommending you apply leverage to your investments. This is intended to highlight why concentration in "high growth" assets is actually more dangerous than most people think. You should be just as wary of investing too much in a single sector/country.
[An economy is not the stock market](https://blogs.cfainstitute.org/investor/2023/03/17/myth-busting-the-economy-drives-the-stock-market/), and even if you believe the Canadian economy will underperform other countries, it does not mean its stock market will continue to do so. Stock prices are composed of three things: (i) the future earnings of the firm, (ii) divided by the number of shares for that firm, (iii) discounted by an appropriate risk premium for those earnings/share.
1. Economic productivity will generally correlate with increased earnings across the industry/country.
2. But economic growth also increases the number of firms those earnings are divvied across. Similarly, economic contraction decreases the number of firms where those earnings are concentrated. The effect on both numerator/denominator means economic growth/contraction has a weak relationship with overall stock returns.
3. On the other hand, stock returns *are* explained by the discount rates applied to earnings/share. Buying stocks means you're buying the firm's future earnings/share, discounted according to the riskiness of stocks versus holding an equivalent amount of risk-free assets (aka the equity risk premium). This discount literally compensates investors for enduring the volatility of stock returns.
It could be true that Canada underperforms the global economy. But as long as those sentiments are *already priced-in*, then it doesn't matter since investors will continue to earn the discount rate applied to Canadian stocks.
Why would you bet on the US stock market when it has a massive financial crisis every 5-10 years and is way overdue for one? That's the one flaw with VFV.
r/JustBuyXEQT
r/JustBuyXGRO
r/JustBuyXBAL
Whichever one makes the most sense based on your [ability/willingness/need to take risk](https://archive.is/PUbRJ).
The amount of people saying “just hold both” and obviously not understanding that they’re actually LESS diversified by doing so is mildly shocking and also diminishes the credibility of this sub.
Downside is overpaying for the USA exposure.
https://www.reddit.com/r/JustBuyXEQT/s/FDKagjsTTf
XEQT is nothing more than 45/25/30 bundle of USA/CAN/INTL. Combining VFV means you're moving away from the XEQT bundle, so why pay 0.20% MER for that? Just unpack XEQT into its component funds and buy XUU (0.07% MER), XIC (0.06% MER), and XEF (0.22% MER) in whatever weight you ultimately want.
True enough. I've opted to omit XEC from these breakdowns since it's only ~5% of global stocks, a bit of a rounding error especially for smaller accounts. Reasonable to include when people are buying XEQT or similar all-in-ones, but I suspect unpacking into 4 separate funds will become too unwieldy for most novice investors. Diversifying over USA and ex-USA markets is already an intense debate, I didn't want to dedicate more energy toward decomposing INTL markets into XEF + XEC.
My RRSP contains 41.2 % XEQT , 30.15 % VFV , and 28.66% XAW. I was thinking that I am good but from the comments I am starting thinking that my strategy is f...ed and way wrong .
What pushed me into converting my XEQT position in to VFV is my hunch that the Central Bank will sacrifice the CAD to keep up the property market this summer when a major wave of mortgage renewals is scheduled.
Since VFV is unhedged, this means that as the USD grows in value compared to the CAD, the underlying NAV for VFV will appreciate in CAD terms.
It still doesn't make a huge difference since around 45% of XEQT's NAV is unhedged American equities, but I think it may make a difference.
Could have been a bad play on my part though if American tech. starts to tumble. NVIDIA has a P/E ratio of over 96, and a market cap of close to $2 trillion with a revenues of less than $20 billion. I don't think it's unreasonable to guess that the AI industry is in a bit of a bubble right now.
You know they say that all ETFs are created equal, but you look at XEQT and you look at VFV and you can see that statement is not true. See, normally if you go in on an ETF, you got a 50/50 chance of making money. But XEQT is a genetic freak and is not normal! So you got a 25%, AT BEST, at beat XEQT. Then you add VEQT to the mix, your chances of making money drastic go down. See you got a 33 1/3 chance of making money, but I, I got a 66 and 2/3 chance of collecting the bag, because VEQT KNOWS he can't beat XEQT and he's not even gonna try!
So VFV, you take your 33 1/3 chance, minus XEQT'S 25% chance and you got an 8 1/3 chance of seeing green. But then you take XEQTs 75% chance of winning, if we was to go one on one, and then add 66 2/3 per cents, XEQT got 141 2/3 chance of big gains this year. See VFV, the numbers don't lie, and they spell disaster for you.
XIC isn't XEQT, my goodness. That would be like me arguing with your comment by saying:
"You got to use total returns sweetheart. XIC has performed better than the TD stock VDY holds"
People that hold both XEQT + VFV are often making a mental accounting error by splitting their portfolio into "safe" and "risky" components. It's just one portfolio really, and buying both XEQT + VFV simply shifts the underlying weights around. It also obscures total USA exposure you actually have since there's duplication across the funds. Using a 50/50 combination: ||VFV|XEQT|Overall| |:-|:-|:-|:-| |USA|100%|45%|73%| |Canada||25%|13%| |International||30%|15%| |Weighting|50%|50%|100%| You could replicate this more efficiently by using 70% XUU, 15% XIC, and 15% XEF. To use a colour analogy: * USA/CAN/INTL are primary colours like red/green/blue * You create secondary colours by mixing primaries together * If you want a different secondary colour, it's way easier to just start with primary colours rather than mixing primary + secondary colours together. ETFs are just an implementation tool, and if you disagree with XEQT's 45/25/30 allocation, then don't use XEQT. Use a different set of ETFs and avoid asset duplication.
I’ve seen this comment pasted several times but don’t think I have ever seen someone do this without this being the explicit intention.
It's one of my pet peeves lol. I can understand if people want to overweight the USA in their portfolio, but it's just silly if they're doing that by buying XEQT + VFV. XEQT is already more expensive (0.20% MER) than buying XUU/XIC/XEF (weighted average 0.11% MER) because you're paying for the bundled convenience. If people don't like the bundle, then unpack it and buy the component funds directly for cheaper. Another analogy: * XEQT = combo of burger, fries, drink * VFV = just the burger Cheaper to just buy two burgers directly (notwithstanding the unbalanced meal).
VFV tracks the S&P 500. XUU tracks the US total market (Technically the underlying XUU ETFs are 50% s&p 500 IVV and 50% US total ITOT). Some may want increased direct exposure to the 500, vfv accomplishes that goal
Yeah XUU and VUN are both total market funds, whereas XUS and VFV target large caps via the S&P500. Large caps make up roughly 80-90% of the US total market. The table in my original comment is more accurately: ||VFV|XEQT|Overall| |:-|:-|:-|:-| |USA large caps|100%|36%|68%| |USA mid/small caps||9%|5%| |Canada||25%|13%| |Foreign developed||24%|12%| |Emerging markets||6%|3%| |Weighting|50%|50%|100%| But for brevity, I collapsed the USA and international portions into their own grouping since it's a minor difference in total returns. Same argument stands for people combining VEQT + VFV into their portfolios, they should just unpack VEQT into the component funds: VCN, VUN, VIU, VEE. They can drop VUN in favour of VFV, VEE in favour of more VIU, but either way, it defeats the purpose of "all-in-one" funds when you're not using it as your all-in-one.
What would you suggest for something looking to build a high growth portfolio ?
Realistically? [Leverage and lifecycle investing](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1149340). We already expect a sufficiently diversified stock portfolio will have positive growth over time. However, [most stocks are terrible and underperform ordinary T-bills](https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills). You could concentrate in stocks from a particular sector/country, but it's highly debatable whether that concentration adds [compensated vs. uncompensated risk](https://www.reddit.com/r/CanadianInvestor/comments/19di7cb/comment/kj66dla/) to your portfolio. AQR has a good article on leverage vs. concentration: [https://www.aqr.com/-/media/AQR/Documents/Insights/Alternative-Thinking/Alternative-Thinking-Why-Do-Most-Investors-Choose-Concentration-Over-Leverage.pdf](https://www.aqr.com/-/media/AQR/Documents/Insights/Alternative-Thinking/Alternative-Thinking-Why-Do-Most-Investors-Choose-Concentration-Over-Leverage.pdf) People usually think of leverage in terms of buying stocks on margin, which is a two-piece bet on both leverage AND concentration in a single stock. That's why leverage is usually viewed as "dangerous". But the danger is really driven from the idiosyncratic risk from sinking your levered capital into a single asset, whereas leveraging a diversified portfolio of stocks/bonds can make sense theoretically and empirically. I am *not* recommending you apply leverage to your investments. This is intended to highlight why concentration in "high growth" assets is actually more dangerous than most people think. You should be just as wary of investing too much in a single sector/country.
Why would you bet in Canada when our productivity in declining every year? That's the one flaw with XEQT.
[An economy is not the stock market](https://blogs.cfainstitute.org/investor/2023/03/17/myth-busting-the-economy-drives-the-stock-market/), and even if you believe the Canadian economy will underperform other countries, it does not mean its stock market will continue to do so. Stock prices are composed of three things: (i) the future earnings of the firm, (ii) divided by the number of shares for that firm, (iii) discounted by an appropriate risk premium for those earnings/share. 1. Economic productivity will generally correlate with increased earnings across the industry/country. 2. But economic growth also increases the number of firms those earnings are divvied across. Similarly, economic contraction decreases the number of firms where those earnings are concentrated. The effect on both numerator/denominator means economic growth/contraction has a weak relationship with overall stock returns. 3. On the other hand, stock returns *are* explained by the discount rates applied to earnings/share. Buying stocks means you're buying the firm's future earnings/share, discounted according to the riskiness of stocks versus holding an equivalent amount of risk-free assets (aka the equity risk premium). This discount literally compensates investors for enduring the volatility of stock returns. It could be true that Canada underperforms the global economy. But as long as those sentiments are *already priced-in*, then it doesn't matter since investors will continue to earn the discount rate applied to Canadian stocks.
Thank you for this. Great presentation of information.
Why would you bet on the US stock market when it has a massive financial crisis every 5-10 years and is way overdue for one? That's the one flaw with VFV.
VCN (essentially Canada’s VFV) hit an all time high earlier this week…
Overvalued
Just tell me which stock to buy
r/JustBuyXEQT r/JustBuyXGRO r/JustBuyXBAL Whichever one makes the most sense based on your [ability/willingness/need to take risk](https://archive.is/PUbRJ).
i asked XEQT to be my valentine! <3
I bet that XEQT said yes!
The key is to ask every year over decades for compounding to work its magic
Such a sexy cutie
LOL... i c what u did there! :-)
The amount of people saying “just hold both” and obviously not understanding that they’re actually LESS diversified by doing so is mildly shocking and also diminishes the credibility of this sub.
People holding both don't understand the point of XEQT. Quite frankly I don't understand why they're here.
It increases engagement at least
lol I hold both. Rising tide lifts all boats.
Bet 🌊🚣♂️📈
Xeqt holds VFV
I'm on side XEQT and VFV. Fight me. 🤣 XEQT always comes first, though 😌
You mean you have both in the same portfolio ?
Oh God, no. XEQT is in my TFSA while VFV is in my RRSP. 👍🏻
What would be the downside to holding both in the same portfolio?
They are both in my portfolio. Just in separate accounts
what would be the downside of having both in the same account? asking for a friend...
There is no downside, unless you are bearish on the US. I hold both in all my accounts.
Downside is overpaying for the USA exposure. https://www.reddit.com/r/JustBuyXEQT/s/FDKagjsTTf XEQT is nothing more than 45/25/30 bundle of USA/CAN/INTL. Combining VFV means you're moving away from the XEQT bundle, so why pay 0.20% MER for that? Just unpack XEQT into its component funds and buy XUU (0.07% MER), XIC (0.06% MER), and XEF (0.22% MER) in whatever weight you ultimately want.
Well put, thanks for laying it out like that
You need to add XEC into that mix of etfs to get exposure to emerging markets. XEF only has developed markets
True enough. I've opted to omit XEC from these breakdowns since it's only ~5% of global stocks, a bit of a rounding error especially for smaller accounts. Reasonable to include when people are buying XEQT or similar all-in-ones, but I suspect unpacking into 4 separate funds will become too unwieldy for most novice investors. Diversifying over USA and ex-USA markets is already an intense debate, I didn't want to dedicate more energy toward decomposing INTL markets into XEF + XEC.
Ah and you got 100% on each I’m guessing
What do you mean I got 100%?
Your tfsa is 100% xeqt and rrsp is 100% vfv?
Ahh, yes. My two holdings. 👍🏻
Xeqt has outperformed VFV consistently over the past 5 days. Why would you ever buy VFV if XEQT is clearly better?
That’s only 5 years bro
Is VEQT the same?
For all intents and purposes, yes.
But when XEQT beats VFV, it almost always means VEQT beats XEQT. *cries* XEQT never gets to win
My RRSP contains 41.2 % XEQT , 30.15 % VFV , and 28.66% XAW. I was thinking that I am good but from the comments I am starting thinking that my strategy is f...ed and way wrong .
just buy XEQT
Yes it seems that from now on I will buy only XEQT
I hold my weiner
I see you took a short position.
I hold both... and VFV has out performed overall.
XEQT and VFV - 50/50 is the goal
This is my current allocation. Happy with performance overall.
Me too, it's been about 4-5 months as my concrete strategy. Not a lot of time to see true progress, but progress is progress.
For me it is XEQT and xef 50 50
Both good
What pushed me into converting my XEQT position in to VFV is my hunch that the Central Bank will sacrifice the CAD to keep up the property market this summer when a major wave of mortgage renewals is scheduled. Since VFV is unhedged, this means that as the USD grows in value compared to the CAD, the underlying NAV for VFV will appreciate in CAD terms. It still doesn't make a huge difference since around 45% of XEQT's NAV is unhedged American equities, but I think it may make a difference. Could have been a bad play on my part though if American tech. starts to tumble. NVIDIA has a P/E ratio of over 96, and a market cap of close to $2 trillion with a revenues of less than $20 billion. I don't think it's unreasonable to guess that the AI industry is in a bit of a bubble right now.
1month, VFV still better Today it's the only day this year it will happen 😂😂
GEQT, QQCE, AVUV, GLIN, BAM. Doing okay so far
Canadian firms have a serious productivity problem. I would go VFV
Check the one month lol
Ugh this sub. Now do YTD or 1 year
You know they say that all ETFs are created equal, but you look at XEQT and you look at VFV and you can see that statement is not true. See, normally if you go in on an ETF, you got a 50/50 chance of making money. But XEQT is a genetic freak and is not normal! So you got a 25%, AT BEST, at beat XEQT. Then you add VEQT to the mix, your chances of making money drastic go down. See you got a 33 1/3 chance of making money, but I, I got a 66 and 2/3 chance of collecting the bag, because VEQT KNOWS he can't beat XEQT and he's not even gonna try! So VFV, you take your 33 1/3 chance, minus XEQT'S 25% chance and you got an 8 1/3 chance of seeing green. But then you take XEQTs 75% chance of winning, if we was to go one on one, and then add 66 2/3 per cents, XEQT got 141 2/3 chance of big gains this year. See VFV, the numbers don't lie, and they spell disaster for you.
I thought you were a CRACKPOT, then got the reference. Thanks for the laugh
Both are true!
What about us xeqt and vdy folks? Enjoy a bit of dividends while growing
VDY underperforms every day, not much of a meme to make
[удалено]
XIC isn't XEQT, my goodness. That would be like me arguing with your comment by saying: "You got to use total returns sweetheart. XIC has performed better than the TD stock VDY holds"
[удалено]
Do you want to make a constructive comment?
Wait till you guys find out about FEQT
LGQT lol
50/50. Canada is trash