VXC ETF Review (2023): VXC vs XAW Compared

Since the VXC ETF is by far the largest holding in my Questrade portfolio, I thought I should do a VXC ETF review. In this post, I’ll go over what the VXC ETF is, what the top 10 holdings in the VXC ETF are, and the most recent VXC returns. I’ll also compare the VXC vs XAW ETF (XAW is probably more popular that VXC but I like to support Vanguard and I have other reasons to stick with VXC that you’ll read about below- maybe one day I’ll get one of those Vanguard mugs, haha).

Last updated: February 2023

Now, this is important to note, VXC is not one of the ‘one ticket ETFs’ where it automatically rebalances for you (for example, the one ticket ETF you might be thinking of is VGRO ETF).

I added VXC to my portfolio because my portfolio was heavily weighted in Canada (and not performing very well with growth) and I needed an easy way to invest outside Canada without having to be at the mercy of currency conversion.

This was before the ‘one ticket portfolios’ as they were not available back then, and because I feel comfortable doing my own asset allocation and rebalancing, I continue to add to my VXC holdings in addition to my VTI ETF holdings.

What is VXC?

The VXC ETF stands for Vanguard FTSE Global All Cap ex Canada Index ETF, it tries to track the broad global equity index with focus on developed and emerging markets, outside of Canada.

The inception date for VXC is June 30, 2014.

VXC Has over $1 billion in assets under management.

The distribution is quarterly, and are paid in January, April, July, and October of each year. The current distribution yield is about 1.71% as of February 2023.

VXC is traded on the Toronto Stock Exchange and the currency is in CAD (Canadian dollars).

Therefore you don’t have to worry about using Norberts Gambit to buy more ex-Canada with VXC or transferring money to your brokerage from your US dollar accounts in Canada.

VXC Top 10 Holdings

As of writing, the number of stocks included within VXC are 10,095. Talk about diversification.

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The top 10 holdings of VXC are mainly big US corporations. Most of VXC (22%) is comprised of technology stocks. Here are the top 10 holdings in the VXC ETF:

  • Apple
  • Microsoft
  • Amazon
  • Alphabet Class A
  • Alphabet Class C
  • Berkshire Hathaway Class B
  • Exxon Mobil Corp
  • United Health Group Inc.
  • Tesla
  • NVIDIA

VXC Market Allocation

What’s the market allocation for VXC ETF?

It’s not a straight 50/50 US and international. In fact, it is about 60.4% US and the rest is ex-US.

  • 60.4% USA (North America, excluding Canada)
  • Japan 6.3 %
  • China 3.8 % (emerging markets)
  • Europe (UK, France, Germany, Switzerland) about 11.8%
  • Australia 2.4%
  • Taiwan 1.8% (considered emerging market)
  • India 1.7%

In total, the allocation for VXC with regards to emerging markets is 10.6%, Europe is 17%, and Pacific is 11.6%.

If you wanted to add more emerging markets, you could also add VEE (this is what I do).

VXC Returns

The 12 month return on VXC is pretty good. Here’s what it compares to for the S&P500 and VEQT (a one ticket all equity ETF from Vanguard).

This image is from my Wealthica Performance Power Up tab where you can easily keep track of how your portfolio is performing compared to a specific ETF, index, or stock. Wealthica is free to use, you can see my Wealthica review here.

Let’s compare VXC vs VEQT (not an apples to apples comparison though).

As you can see the 12 month returns as of writing are -3.10% for VXC.

The 12 months return as of writing for VEQT are -2.84% (Canada has been outperforming the S&P500 as of late).

If you had invested $10,000 on the date of inception in 2014, you would have doubled your money by now.

VXC Fees

The management fee of VXC is 0.20% and the MER (management expense ratio) is 0.21%. They recently reduced it in spring 2021 from 0.26% to 0.21%.

When you buy this ETF you don’t pay both the management fee and the MER. What you pay in fees is the MER and the management fee is embedded into that. Therefore the fees for VXC is 0.22%.

As of November 2019, Vanguard reduced the management fee from 0.25% to 0.20% to match Blackrock’s XAW (another ex-Canada ETF). VXC’s MER was higher than XAW still.

However, in spring 2021, Vanguard quietly lowered the MER to 0.21%, which makes VXC cheaper than XAW (0.22%) now in terms of fees!

VXC Foreign Withholding Tax

Because VXC is an “ETF of ETFs” like a Russian nesting doll, and it has US-listed ETFs, distributions from VXC will be subject to foreign withholding tax.

The ETF structure of VXC is comprised of these Vanguard ETFs VV, VIU.TO, VWO, and VB.

  • Vanguard Large Cap ETF (VV), this is US listed
  • Vanguard FTSE Developed All Cap ex North America Idx ETF (VIU.TO), this is Canadian listed
  • Vanguard FTSE Emerging Market ETF (VWO), this is US listed
  • Vanguard Small Cap ETF (VB), this is Canadian listed

Because of the switch to VIU within VXC, it is similarly tax efficient when compared to XAW.

Here’s a more detailed comparison between VXC vs XAW.

VXC vs XAW ETF (XAW ETF Review)

Seems like more people in the Canadian dividend investing community prefer Blackrock’s XAW ETF to Vanguard’s VXC ETF (case in point, assets under management for XAW is $1.86 billion and VXC is $1.41 billion). Probably XAW vs VXC is more popular because of the reddit effect too.

For a long time, this was because iShares XAW ETF was more tax efficient compared to VXC and it had a lower MER than Vanguard.

XAW stands for iShares Core MSCI All Country ex Canada Index ETF.

I initially bought VXC because XAW wasn’t available yet. The Inception Year for XAW is 2015 and VXC launched in 2014.

However, as of November 2019, Vanguard reduced their management fee to 0.20% from 0.25%, which is the same as Blackrock’s XAW. However, the MER is still 0.26% compared to 0.22% for XAW.

VXC vs XAW Market Allocation Exposure

Here is the exposure for XAW:

Here is the market allocation for VXC as of February 2023.

As you can see they are similar but slightly different. XAW has more United States exposure than VXC.

VXC vs XAW Sector Weighting

Here’s a comparison of the sector weighting (as of February 2023) as a percentage of market value between the VXC ETF and the XAW ETF. As you can see there’s a bit of a difference, VXC has more tech.

SectorVXCXAW
Technology19.9%20.3%
Financials14.5%14.48%
Consumer Discretionary14.2%11.55%
Industrials14.1%11.11%
Health Care12.1%12.2%
Consumer Staples6.4%7.12%
Energy5.0%4.67%
Basic Materials4.4%5.15%

VXC Vs XAW Top 10 HOldings

There’s a bit of a difference between the two for the top 10 holdings too (as of February 2032)

VXC Top 10 HoldingsXAW Top 10 Holdings
AppleApple
MicrosoftMicrosoft
AmazonAmazon
Alphabet Class AAlphabet Class A
Alphabet Class CTesla
Berkshire Hathaway Class BBerkshire Hathaway B Shares
Exxon Mobil CorpNVIDIA
United Health GroupAlphabet Class C
TeslaUnited Health Group
NVIDIAExxon Mobil Corp

VXC vs XAW Foreign Withholding Tax

At the same time in late 2019 when Vanguard lowered the management fee, Vanguard also changed structure of VXC composition by switching to VIU.TO to remove a second layer of taxation (so that the foreign withholding tax is reduced), making it similarly tax efficient to Blackrock’s XAW.

As you can see from Justin Bender’s Canadian Portfolio Manager Foreign Withholding Tax Calculator, when you hold VXC or XAW in your TFSA or RRSP, you will have a foreign withholding tax rate of 0.31% for both.

And a rate of 0.04%/0.03% for XAW and VXC respectively if you hold it in a taxable account. I don’t think that the MER of 0.23% for VXC is accurate though on his calculator spreadsheet.

As you can see it is better to hold VXC or XAW in a taxable account, as part of tax efficient investing.

vXC vs XAW Fees

As of Spring 2021, VXC is cheaper than XAW for the MER. VXC’s MER is now 0.21% compared to XAW’s MER of 0.22%.

Even though the MER for VXC was more expensive, VXC is 0.26% compared to XAW’s 0.22%, this difference is 0.04% which isn’t very much in the grand scheme of things. On $250,000 value of XAW or VXC, this difference of 0.04% is $80. On $500,000 invested with XAW or VXC this is $200.

VXC vs XAW Distribution Frequency

VXC pays their distributions quarterly (four times a year in January, April, July, and October).

XAW pays their distributions twice a year on a semi- annual basis in January and June of each year.

Personally I prefer to get paid quarterly (you can more frequently look forward to a payment) but obviously you’ll get paid just less frequently with XAW but the same amount annually.

I love my VXC distribution income.

VXC Vs XAW Performance

However, VXC has outperformed XAW consistently since January 2016 (I picked an arbitrary year to compared back to). Total return on investment of 70.18% for VXC and 54.72% for XAW.

Of course, the tax efficient changes and Management fee reduction from Vanguard didn’t happen until recently, but still, the numbers are pretty impressive and outweigh the MER difference and tax inefficiency, in my opinion.

Here’s a comparison between returns from Vanguard Canada’s fund comparison tool. You can input any fund and compare the two.

The first column is VXC and second column is XAW, the returns are average annual returns since inception.

From his comment in January 2021, even Justin Bender from Canadian Portfolio Manager would recommend VXC now instead of XAW in light of the recent changes to the structure and recent reduction in management fees.

Justin Bender from PWL Capital has created a Youtube video in September 2021 explaining the similarities and differences between VXC vs XAW and why he would pick VXC over XAW today.

I use a dollar cost averaging approach when adding VXC to my portfolio because buying ETFs is free in Questrade (there are a few pennies charged here and there). This is great for me in my accumulation phase of investing.

Selling an ETF would be regular commission charge in Questrade. Selling for capital gains is going to be a big pain in the butt tax time though with all my ETF purchases outside of my TFSA/ RRSP.

How to Buy VXC in Questrade

I use Questrade as my discount online brokerage and have been using it since 2009. In recent years, Questrade reduced the commissions to buy ETFs and made them essentially free to buy (minus some ECN fees).

When you log in to Questrade:

  1. Click “Trade”
  2. Under “Order Entry” put in your Ticker Symbol (e.g. VXC.TO)
  3. Under quantity put in how many you want to buy
    • This is dependent on how much you have to invest or how much you want to buy at that time
    • How much each share of ETF costs
    • For example, VXC.TO is $45.85 (as of March 8 2021), and you have $500 you want to buy
    • $500/45.85= 11 shares
    • Under “Quantity” put in 11
  4. You can choose to do a limit order if you want to make sure you don’t spend more than $45.85 per share.  Put this (or whatever amount you want) in the limit order box
  5. GTD (Good To Date) and put in the date (or stick it to Day if you have time to put in an order when the market is open)
  6. Then press “Buy” (and review the fees charged on your order)
  7. Et Voila, you are done!

Review of VXC ETF

In summary, I think that if you are comfortable doing some rebalancing of your portfolio and are comfortable with some element of DIY investing (as compared to going the robo advisor route), holding VXC would be a great addition to your portfolio in order to easily stray away from having too much invested in Canada.

If you are on the fence between investing in XAW or VXC and you want some ex-Canada exposure in your portfolio (and don’t want to go a one ticket route) VXC looks like it is a better choice returns wise even though there is a higher MER.

If you need a bit of a reminder on how to rebalance your portfolio (including calculations of exact number of shares you need to purchase to rebalance), using Passiv for ETF rebalancing is a free for the first year for Questrade users. Here’s my Passiv review.

Since Canada makes up around 2% of the world’s GDP global economy, holding less Canada in your portfolio is a good idea. Many Canadians have too much Canada in their portfolio. That being said, many things like favourable tax treatment towards Canadian dividends and higher yield dividends make investing in Canadian companies quite tempting, and I’m not ready myself to reduce my allocation of Canadian companies in my portfolio to 2%!

Related: Tangerine Global ETFs Review

(Much respect for those who have the discipline to do though!)

Do you own VXC or XAW for your ex-Canada?

If not, how to you invest outside of Canada?

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17 thoughts on “VXC ETF Review (2023): VXC vs XAW Compared”

  1. It is funny after you told me some changes in VXC, I did some digging yesterday and found out about VXC’s changes. I wrote a similar blog to yours with the same final conclusion. I declared VXC as the winner even versus holding 3 ETF solutions (XUU – VIU – ZEM) directly.

    Reply
  2. Great analysis ! ???? I have both VXC into my TFSA + XAW into my RRSP and into my taxable account. Agree with you, I prefer to get paid 4 times a year than 2 times! Maybe the time to switch from XAW to VXC into my taxable account with my Wealthsimple Trade.

    Reply
    • @Michelle- Do you mean from trough to peak? March 23 2020 to March 23 2021= VXC returns were 50.05% and XAW returns were 48.25%. Not much difference if you have a smaller amount invested in either, but if you’re taking $500,000 invested, that’s $9000 or 1.8% difference.

      Reply
  3. Thanks for all your work. I’ve owned VXC since Jan 2015 and have been very happy with it’s performance. It is around 10% of my total portfolio.

    Reply
  4. You might want to update the information as I notice the MER for VXC on the Vanguard web site is now shown as 0.21%. XAW is still at 0.22%.

    Reply
  5. A quick update on VXC (I love this ETF). Morningstar currently rates it as “GOLD”. Think it’s time to buy a little more as 2022 was a poor year so highly likely that 2023 will be better.

    Reply

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