VFV vs XEQT Popular ETF Debate | Why VFV will ALWAYS WIN! (VOO vs VT)

Summary

In this video, the presenter discusses the popular debate surrounding global ETFs versus the S&P 500, emphasizing why he believes the S&P 500 (specifically VFV or VO) is the superior choice for growth investors. He explains that while global ETFs like VT, XQT, and VQT provide diversification across global markets, they consistently underperform the S&P 500 due to the weaker performance of markets outside the U.S. The presenter argues that U.S. capitalism outperforms the socialist and communist economies of other nations, and thus, for total return investors, the S&P 500 should always be the top pick.

Takeaways

• 😀 The debate between global ETFs (like XQT, VQT) and US-focused ETFs (like VFV, VO) is popular but, according to the author, ultimately unnecessary for growth investors focused on total return.
• 😀 XQT, VQT, and similar ETFs provide global exposure by combining major regional index funds, including US, Canada, Europe, and emerging markets, offering broad diversification.
• 😀 Growth investors are primarily concerned with total return, not income, making S&P 500 ETFs (like VFV, VO) the superior choice due to higher long-term performance.
• 😀 The S&P 500, represented by ETFs like VFV or VO, consistently outperforms global ETFs like VT, especially over the last decade, with returns exceeding 12% annually compared to VT's 8.55%.
• 😀 Canada, Europe, and emerging markets underperform the US market, leading to the underperformance of global ETFs that include these regions.
• 😀 Over the last 10 years, the Canadian stock market (measured by XIU) has returned only about 8%, far lower than the S&P 500's 12.5%.
• 😀 The S&P 500 has historically outperformed other regions like Europe (with only 4.77% average returns) and emerging markets (around 2.26%).
• 😀 The author attributes the underperformance of regions outside the US to political and economic factors, such as socialism and higher taxes that hinder growth compared to the capitalist US economy.
• 😀 Fees for global ETFs like VT and XQT are generally higher than for S&P 500 ETFs, further diminishing their attractiveness for growth investors.
• 😀 For those still interested in global exposure, the author recommends considering ETFs like HQL, which offer global exposure with leverage, potentially boosting performance.
• 😀 The author emphasizes that if you are a growth investor, the S&P 500 should always be your top choice due to its better performance, quality stocks, and lower management fees.

Q & A

What is the main debate discussed in the video?

The debate centers around which type of ETF to invest in: a global ETF like XQT or VQT, which provides exposure to the entire world, or a more focused ETF like VFV, which tracks the S&P 500.

Why does the speaker think the debate between global ETFs and S&P 500 ETFs is 'nonsense'?

The speaker believes that as a growth investor, focusing on total return, the S&P 500 ETFs (like VFV) will always outperform global ETFs, due to the performance differences between the US stock market and other global markets.

What are some examples of global ETFs mentioned in the video?

The video mentions XQT, VQT, ZQT, HQT, and FQT, which are Canadian-listed global ETFs, as well as VT for US investors.

How do global ETFs typically provide exposure to the world?

Global ETFs like XQT or VQT typically hold multiple other ETFs that give exposure to the US market, Canada, Europe, Australia, and emerging markets, with the US making up the largest portion of the ETF.

What percentage of a global ETF like XQT is typically allocated to US stocks?

In global ETFs like XQT, around 50% of the allocation is typically dedicated to US stocks, as the US has the largest stock market in the world.

What is the performance of the S&P 500 over the last 10 years, according to the speaker?

The average annual return of the S&P 500 over the past 10 years is about 12-15%, with Canadian-listed ETFs like VFV showing higher returns due to the weaker Canadian dollar.

How does the performance of global ETFs compare to the S&P 500?

Global ETFs like VT have underperformed the S&P 500, with VT showing a 10-year average annual return of around 8.55%, which is significantly lower than the S&P 500's 12-15% return.

Why do global markets like Canada, Europe, and emerging markets underperform the US stock market?

The speaker argues that countries outside the US, particularly socialist or communist economies, have slower economic growth and higher taxes, which hinder the performance of their stock markets compared to the capitalist US economy.

What are the management fees for global ETFs compared to S&P 500 ETFs?

Global ETFs like VT typically have higher management fees (around 0.07%) compared to S&P 500 ETFs like VFV or VO, which have fees as low as 0.03%.

What is the speaker’s final recommendation for growth investors?

The speaker recommends investing in the S&P 500 ETF, such as VFV or VO, as they have better performance, lower fees, and offer exposure to the strongest economy in the world—America.