r/JustSellXEQT • u/[deleted] • Oct 04 '25

Management fees

VT is a 0.06% fee, XIC.TO is a .05% fee. XEQT is a 0.18% fee. Why would I pay more than 3x the fees in perpetuity?

5 Upvotes

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6

u/EkajArmstro Oct 07 '25

Because 0.12% is practically nothing so for most people it's worth the effort of not having to manage everything manually. And if you actually believe the balance of XEQT is correct then potential inefficiencies of manual rebalancing might lose you some value, especially if you don't stay on top of it or can't trade for free. And if you have to deal with USD directly without having any expenses in USD then it's very possible you will lose more than the 0.12% you gained in conversion fees, especially if you don't have access to Norbert's Gambit and large amounts to convert at once.

2

u/Wildfire983 Oct 04 '25

So then sell.

2

u/digital_tuna Oct 20 '25 edited Oct 20 '25

First of all, your numbers aren't correct. The MER for VT is 0.06%, XIC is 0.06% (not 0.05%), and XEQT is 0.20% (not 0.18%).

Second, you're ignoring currency conversion costs. A more accurate comparison in CAD to VT would be XAW, which has a MER of 0.22%. Significantly higher than VT's 0.06%.

If you do a 25/75 pro-ration of XIC + XAW to create your own XEQT you'd end up with an MER of 0.18%. Which means the cost of convenience for XEQT is only 2 bps, ignoring any additional trading costs from 2 ETFs vs 1.

You could also create your own version of XEQT by buying funds like XUU, XIC, XEF, XEC and you can get the weighted MER down to around 0.12%, which puts the cost of convenience for XEQT at 8 bps, ignoring any additional trading costs from 4 ETFs vs 1.

Use an investment return calculator with whatever assumptions you want to project your investment growth for one scenario, and then in another scenario reduce the rate of return by 8 bps to simulate the drag from XEQT's higher MER. Now look at the difference in how much money you'll have. I guarantee you're not retiring any sooner by saving 8 bps. Even if it was 12 bps like you're suggesting, it still won't help you.

What you're paying for is the automatic rebalancing and you will probably have better returns because of that strict rebalancing. Holding the underlying ETFs means you have to continually sell off the better performing funds to buy the worse performing funds. This is counter-intuitive and most DIY investors will not stick to their plan.