Why Vanguard All-Equity ETF Portfolio (VEQT:CA) Is a Strong Buy for Long-Term Growth Investors in a Fragmented Market Landscape

In an era marked by geopolitical uncertainty, rapid technological disruption, and shifting monetary policies, long-term investors face a fragmented market landscape. Active management strategies, once hailed as a solution to navigate complexity, have underperformed passive alternatives in recent years due to high fees, inconsistent returns, and the difficulty of predicting macroeconomic shifts. Against this backdrop, the Vanguard All-Equity ETF Portfolio (VEQT:CA) emerges as a compelling option for growth-oriented investors seeking a low-cost, globally diversified, and volatility-managed approach to equity investing.

1. Cost Efficiency: A Foundation for Compounding Returns

The first pillar of VEQT's appeal lies in its 0.24% expense ratio, a figure that places it among the most cost-effective all-equity ETFs in the Canadian market. This low cost structure is critical for long-term investors, as even small differences in expense ratios can compound into significant gains over decades. For example, a $100,000 investment in VEQT would outperform a fund with a 0.5% expense ratio by over $15,000 in 20 years, assuming a 7% annual return.

Vanguard's passive management model eliminates the need for costly active trading and research, ensuring that investors retain a larger share of their returns. In contrast, active strategies—often touted as solutions to market complexity—typically charge 0.5% to 1.5% in fees, with no guarantee of outperformance. For investors prioritizing capital preservation and compounding, VEQT's cost discipline is a decisive advantage.

2. Strategic Global Diversification: Mitigating Regional and Sectoral Risks

VEQT's second strength lies in its broad geographic and sectoral diversification, which insulates investors from the idiosyncratic risks of individual markets or industries. The fund allocates assets as follows:
- 30–40% Canadian equities: Anchoring the portfolio in home markets while capturing growth in energy, financials, and materials.
- 30–40% U.S. equities: Exposure to innovation-driven sectors like technology and healthcare.
- 20% developed international markets: Balancing North American exposure with European and Japanese equities.
- 5–10% emerging markets: Access to high-growth economies like India and Brazil without overexposure to volatility.

This allocation ensures that no single region or sector dominates the portfolio. For instance, during the 2022 bear market, VEQT's 16.88% decline was only marginally worse than the 15.04% drop in the 60/40 balanced ETF (VBAL), despite lacking bond holdings. The fund's rebalancing mechanism—automatically adjusting weights to maintain target allocations—further reduces the risk of overconcentration.

3. Low-Volatility Exposure: A Hedge Against Market Turbulence

While all-equity portfolios are inherently more volatile than balanced or bond-heavy alternatives, VEQT's 2.66% annualized volatility (as of 2025) is remarkably low for a global equity fund. This is achieved through its diversified holdings and passive rebalancing, which smooth out short-term fluctuations. For context, the iShares Core Equity ETF Portfolio (XEQT:CA) matches this volatility, while the more concentrated Vanguard FTSE Canada Index ETF (VCE:CA) exhibits a 3.09% volatility.

VEQT's risk-adjusted performance metrics also stand out. Its Sharpe ratio of 1.43 and Sortino ratio of 1.90 (as of 2025) indicate that it delivers competitive returns per unit of risk compared to peers. While these figures lag behind VCE:CA's 1.85 and 2.43, respectively, they are offset by VEQT's broader diversification and lower drawdowns. For example, VEQT's maximum historical drawdown of -30.45% is less severe than VCE:CA's -35.92%, a critical distinction for long-term investors.

4. Active Management Risks in a Complex World

The fragmented market landscape has made active management increasingly perilous. Fund managers must navigate unpredictable interest rate cycles, supply chain disruptions, and regulatory shifts—factors that often erode alpha. For instance, the 2022 market environment, where both stocks and bonds declined simultaneously, exposed the limitations of active strategies reliant on traditional risk mitigation techniques.

VEQT, by contrast, sidesteps these risks through its passive, rules-based approach. Its structure ensures that investors are not reliant on the skill or foresight of a fund manager but instead benefit from the long-term growth of global equities. This is particularly valuable in a world where active managers have historically underperformed their benchmarks by a wide margin.

Investment Thesis: A Set-and-Forget Solution for Growth

VEQT is not a panacea for all market conditions, but it is a robust solution for investors with a long time horizon and a tolerance for equity volatility. Its combination of low costs, strategic diversification, and volatility management makes it an ideal core holding for portfolios seeking to capitalize on global growth while minimizing the risks of overconcentration or active missteps.

For those who fear the rising complexity of active management, VEQT offers a refreshing simplicity: a single ETF that encapsulates the global equity market in a cost-efficient, diversified, and passively managed wrapper. As markets continue to fragment, the ability to own a broad slice of the world's equities without the burden of constant decision-making will become increasingly valuable.

Final Recommendation: For long-term growth investors, VEQT:CA is a strong buy. It provides a low-cost, globally diversified, and volatility-managed exposure to equities—a rare trifecta in today's market. Pair it with a tactical allocation to low-volatility ETFs like SPLV or EFAV for further risk mitigation, but for the core of your portfolio, VEQT stands out as a set-and-forget solution in a world that demands simplicity.