VEQT vs VGRO: Comparing the Higher-Risk Vanguard ETF Portfolios (2024)

Vanguard is a leader in the low-cost ETF space globally, offering a diverse lineup of ETFs for Canadians to invest in.

VEQT and VGRO are two ETF portfolios that are both offered by Vanguard, although you may be unaware of the key differences between the two funds.

Although mutual funds have recently been struggling to attract investors, ETF growth has increased from $1.85 billion in the month of September 2022 to $3.35 billion in the month of October 2022.

In this head-to-head comparison, I will go over which ETF portfolio is best across the following categories:

• Fees
• Performance
• Yield
• Length of track record and fund size
• Risk
• Underlying holdings

I will outline VEQT vs VGRO below and go over how the two ETFs stack up against each other.

Understanding All-In-One ETF Portfolios

VEQT and VGRO are both all-in-one ETF portfolios that are part of a full ETF portfolio suite from Vanguard. The main difference between each portfolio comes from each fund’s allocation towards fixed income and equities. This stock and bond weighting will differ based on each portfolio’s advertised risk profile.

All-in-one ETFs have simple naming conventions and look something like this most of the time:

• Very Conservative
• Conservative
• Balanced
• Growth
• Maximum Growth

 A very conservative ETF will likely be close to 100% invested in fixed income while a maximum growth ETF will be closer to a 100% investment in stocks. VGRO invests in both stocks and bonds while VEQT invests only in stocks.

VEQT vs VGRO: Fees

Both the Vanguard Growth ETF Portfolio and the Vanguard All-Equity ETF Portfolio are offered by Vanguard at identical management expense ratios.

Currently, both VEQT and VGRO are offered at a management expense ratio of 0.24%.

Relative to most ETFs and mutual funds, both VEQT and VGRO are offered at very low fees. The low management fees help you to grow your wealth faster, especially over longer periods of time as this effect compounds.

Fees verdict – VEQT and VGRO are tied since they are offered at identical management expense ratios.

VEQT vs VGRO: Performance

Performance is always an important topic of conversation when comparing any investments or investment funds. VEQT and VGRO have had a substantial difference in performance when looking at their performance over time.

An important thing to keep in mind when looking at the performance between VEQT and VGRO is that it is not an apples-to-apples comparison.

VEQT has a higher allocation to equities (more specifically, a 100% allocation to stocks) while VGRO has a small allocation to fixed income. Stocks tend to outperform bonds over the long term.

When comparing the performance between VEQT and VGRO over three years and one year, VEQT has outperformed in both cases.

Keep in mind that during a rising rate environment, bonds tend to perform extremely poorly. This is reflected in the short-term performance of VGRO, which has an allocation to bonds (while VEQT does not).

Although VGRO is positioned as a lower-risk alternative to VEQT, the rapid rate of interest rate increases around the world has caused the portfolio to actually drop in value more than VEQT. VGRO’s lower risk characteristics are likely more obvious over a full market cycle.

Performance verdict – VEQT has outperformed VGRO significantly over most periods of time, making it the clear winner. Be mindful that VEQT is the more aggressive portfolio, meaning that it aims to offer a higher rate of return.

VEQT vs VGRO: Yield

Investors that are looking for yield from their investments will be interested to know how often and what sort of distribution yield to expect from their investment.

VEQT pays distributions on an annual basis, while VGRO pays quarterly distributions to investors.

Since VGRO has an allocation to bonds, it can be expected to have a slightly higher distribution yield. When looking at the current 12-month yields for both VEQT and VGRO, VGRO’s yield is substantially higher.

A fund’s yield does not paint a full picture when it comes to the returns that an investor can expect. Although VEQT has a lower 12-month yield, it is expected to reward investors more in the form of capital gains (or the value of the ETF increasing).

Yield verdict – VGRO is the clear winner here due to not only offering distributions on a more frequent basis but also because it offers a substantially higher yield.

VEQT vs VGRO: Length of Track Record and Fund Size

Two key things that investors should be concerned with when investing in an ETF or a mutual fund are the length of the fund’s performance track record (how long since the fund was launched) as well as how large the fund is (measured by assets under management).

The inception dates for both funds are:

• VEQT: January 29, 2019
• VGRO: January 25, 2018

Both funds have a short performance track record, although VGRO is one year older than VEQT.

When it comes to fund size, both VEQT and VGRO are very large ETFs, with over one billion dollars in assets under management. VEQT currently has more than $2 billion in assets under management while VGRO has over $3.5 billion in assets under management. VGRO is a substantially larger ETF when it comes to assets.

Fund size is more important when considering newer funds that are very small in size (single-digit millions of assets under management). Funds that are unable to attract enough capital from investors early on run the risk of having to close down early due to profitability issues. This is not a risk for either VEQT or VGRO.

Length of track record and fund size verdict – when it comes to track record length and asset size, VGRO is a winner on both fronts with a longer track record and a larger asset base.

VEQT vs VGRO: Risk

Risk is another important factor to consider before investing in an ETF. Higher-risk investments come with higher potential returns but typically greater price swings in the short term. All ETFs are required by law to disclose a risk rating within their fund facts documents.

VEQT’s fund facts documents outline that the ETF portfolio comes with a medium risk rating. VGRO’s fund facts documents explain that the ETF comes with a low-to-medium risk rating, likely because the ETF also invests in bonds (a safer asset class).

VGRO has an asset allocation of roughly 80% to equities and 20% to fixed income, while VEQT has a 100% allocation to equities. VGRO has a relatively safer asset allocation and is the lower-risk option out of the two.

Choosing a lower-risk investment is not always the best course of action, especially if you are an investor with a high-risk tolerance and a long investment time horizon.

Risk verdict – when it comes to the riskiness of both ETFs, VGRO has both a lower risk rating from Vanguard as well as an allocation to fixed income (a safer asset class), making it the winner here.

VEQT vs VGRO: Underlying Holdings

VEQT and VGRO are different not only in terms of asset allocation but also in terms of what underlying holdings are in each.

VEQT currently has four underlying ETFs within its portfolio, all of which are stock ETFs:

• Vanguard US Total Market Index ETF
• Vanguard FTSE Canada All Cap Index ETF
• Vanguard FTSE Developed All Cap ex North America Index ETF
• Vanguard FTSE Emerging Markets All Cap Index ETF

VGRO currently has seven underlying ETFs within its portfolio:

• Vanguard US Total Market Index ETF
• Vanguard FTSE Canada All Cap Index ETF
• Vanguard FTSE Developed All Cap ex North America Index ETF
• Vanguard FTSE Emerging Markets All Cap Index ETF
• Vanguard Canadian Aggregate Bond Index ETF
• Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
• Vanguard US Aggregate Bond Index ETF CAD-hedged

Although VEQT can’t be labelled as a concentrated mandate, it does hold fewer underlying ETFs than VGRO. VEQT also only holds equity ETFs, while VGRO holds all of the stock ETFs held by VEQT, as well as a few Vanguard bond ETFs. This makes VGRO better diversified.

Underlying holdings verdict – VGRO is the winner here as it is better diversified by not only holding more ETFs than VEQT but also by holding fixed income, an asset class that increases diversification when combined with equity ETFs.

Frequently Asked Questions

VEQT vs XEQT

VEQT is Vanguard’s all-equity ETF portfolio, while XEQT is iShares’ core equity ETF portfolio. They are very similar in terms of structure and function and mainly differ in terms of asset manager provider (Vanguard and Blackrock).

I provide more details in both my overview of iShares’ all-in-one ETF series and Vanguard’s all-in-one ETF series.

VEQT vs VFV

While the VEQT ETF invests in several broad equity ETFs (and is a fund-of-funds), the VFV ETF is much simpler. VFV is another ETF from Vanguard passively tracks the S&P 500 Index and only invests in US large capitalization stocks.

While the VFV provides good exposure to US stocks, it is likely not a good one-ticket solution for most portfolios because it leaves you extremely under-diversified (across asset classes and geographies).

VEQT vs VTI

The VTI ETF is also a fund offered by Vanguard but is listed in the US and trades in US dollars. The VTI ETF is a good approach to investing in the US stock market across all market capitalizations (small, mid, and large).

Again, the VTI ETF provides good exposure to US stocks but is likely inappropriate as a one-ticket solution for most portfolios. VTI cannot be purchased in Canadian dollars and is not listed in Canada, unlike VEQT.

Which ETF is better for long-term investment, VEQT or VGRO?

Both VEQT and VGRO can be suitable for long-term investment, but their appropriateness depends on the investor’s risk tolerance and financial goals.

If you have a high-risk tolerance and are looking for potentially higher returns, VEQT might be more suitable. However, if you’re looking for a more balanced approach with some level of protection against market downturns, VGRO could be the better choice for long-term investment.

How do VEQT and VGRO compare in terms of tax efficiency?

Tax efficiency can be influenced by several factors, including the distribution type, turnover rate, and structure of the ETF. Both VEQT and VGRO are structured as ETFs, which are typically more tax-efficient than mutual funds due to their “in-kind” redemption process.

This process generally limits the realization of capital gains. VGRO, with its allocation to bonds, may generate interest income, which is fully taxable at an individual’s marginal rate in non-registered accounts.

On the other hand, VEQT, being fully invested in equities, may produce dividends which may qualify for the dividend tax credit in Canada, offering some tax advantage.

Which ETF is more suitable for a conservative investor, VGRO or VEQT?

For a conservative investor, VGRO is typically more suitable than VEQT. The reason for this is the asset allocation within each ETF. VGRO contains a mix of about 80% equities and 20% fixed income, providing a balance between growth and stability.

The fixed income portion acts as a buffer, dampening the overall portfolio volatility, which can be particularly appealing to conservative investors. On the other hand, VEQT is 100% invested in equities, making it more volatile and suitable for those with a higher risk tolerance.

Conservative investors who seek to preserve capital while achieving some level of growth might find VGRO more in line with their investment profile.

Our Final Verdict

Although the comparison is not between identical products, VGRO is an overall winner relative to VEQT because of its additional diversification and appropriateness for a larger portion of Canadian investors. Despite this, there are specific situations in which to consider investing in either VEQT or VGRO.

Both VEQT and VGRO are excellent as ETF portfolios relative to offerings from other investment managers in the all-in-one ETF space.

Take a look at my Vanguard all-in-one ETF series overview to find more specifics about VEQT and VGRO, as well as the other all-in-one ETF options available on Vanguard’s Canadian ETF shelf.