Is XEQT Overvalued? How to Think About Valuations for All-in-One ETFs in Canada

A few months ago, I was scrolling through r/PersonalFinanceCanada and saw a post titled “Is XEQT overvalued at $30?” The person had been saving up for months, was ready to start investing, and then looked at the share price and panicked. They saw that the price had climbed from $20-something a few years ago and wondered if they had “missed the boat.” The comment section was a mess – half the people were saying “just buy it,” the other half were throwing around P/E ratios and CAPE numbers like they were seasoned hedge fund analysts.

I realized that most people do not actually understand how valuations work for an all-in-one ETF like XEQT. And I do not blame them. Valuation is one of those topics that sounds like it should be simple – “is this thing expensive or cheap?” – but gets complicated fast when you are dealing with a fund that holds over 9,000 stocks across 49 countries.

So let me break this down. I am going to explain what “overvalued” actually means (and does not mean) for an ETF, walk you through the key valuation metrics, and then explain why – for the vast majority of long-term Canadian investors – worrying about whether XEQT is overvalued is the wrong question to be asking in the first place.

1. What “Overvalued” Even Means for an ETF vs. a Stock

This is the first thing most people get wrong, and it is an important distinction.

When someone says a stock is overvalued, they mean the share price has gotten ahead of the company’s actual earnings, assets, or growth potential. Think of a company trading at 100x earnings with slowing revenue growth – the market is pricing in a future that may never arrive. You could make a reasonable argument that the stock is “too expensive” relative to its fundamentals.

But an ETF like XEQT is not a company. It is a basket of thousands of companies. And there are two completely different ways it could be “overvalued”:

1. The ETF price vs. its Net Asset Value (NAV): This is where the ETF’s market price drifts away from the actual value of the underlying holdings. For a popular, highly liquid ETF like XEQT, this essentially never happens in any meaningful way. Market makers keep the price tightly aligned with NAV. If XEQT is trading at $30 and the underlying holdings are worth $30 per unit, the ETF is not overvalued – it is priced correctly. So no, you are not paying a “premium” to buy XEQT.

2. The underlying holdings are trading at high valuations: This is what people actually mean (or should mean) when they ask if XEQT is overvalued. They are really asking: “Are the 9,000+ stocks inside XEQT collectively expensive relative to their earnings?” This is a much more interesting question, but the answer is more nuanced than most people expect.

The bottom line: XEQT itself cannot be overvalued relative to what it holds. The real question is whether the global stock market – which XEQT represents – is trading at historically high valuations. Let us dig into that.

2. Key Valuation Metrics Explained Simply

If you want to evaluate whether the stocks inside XEQT are “expensive,” you need to understand a few basic metrics. I am going to keep this as plain-language as possible.

Price-to-Earnings Ratio (P/E)

The P/E ratio is the most common valuation metric. It tells you how much investors are paying for each dollar of earnings.

• Formula: Stock Price / Earnings Per Share
• What it means in plain English: If a company has a P/E of 20, investors are paying $20 for every $1 of annual profit the company generates.
• Higher P/E = more “expensive” (investors are paying a premium, usually because they expect strong future growth)
• Lower P/E = more “cheap” (but sometimes cheap for a reason – like declining earnings)

For XEQT, you can think of the weighted average P/E across all its holdings. As of mid-2026, XEQT’s approximate weighted average P/E sits in the range of 17-20x, depending on the data source and methodology. That is roughly in line with the long-term global average of about 16-18x, though the US portion tends to pull it higher.

Price-to-Book Ratio (P/B)

The P/B ratio compares a company’s market price to the book value of its assets (essentially, what would be left if the company sold everything and paid off all its debts).

• Formula: Stock Price / Book Value Per Share
• P/B above 1 means investors value the company at more than its net assets (common for profitable, growing companies)
• P/B below 1 could signal a bargain – or a company in serious trouble

XEQT’s weighted average P/B ratio is approximately 2.2-2.6x, which is moderate by historical standards. This varies significantly by region – US stocks tend to have much higher P/B ratios than emerging market stocks because US companies generate higher returns on equity.

CAPE Ratio (Cyclically Adjusted Price-to-Earnings / Shiller P/E)

This is the metric that serious valuation nerds love. Created by Nobel laureate Robert Shiller, the CAPE ratio uses 10 years of inflation-adjusted earnings instead of just one year. This smooths out business cycle effects and gives a better picture of long-term valuation.

• Formula: Stock Price / Average of 10 Years of Inflation-Adjusted Earnings
• Why it matters: A single year of earnings can be distorted by recessions, booms, or one-time events. The CAPE ratio filters out that noise.
• Historical US average CAPE: About 17x
• Current US CAPE (mid-2026): Roughly 30-34x – well above the historical average

The US CAPE ratio is the one that gets the most attention, and it has been elevated for over a decade. But here is the thing that many people miss: XEQT is not a US-only fund. Its global diversification means the overall CAPE is lower than the US alone.

3. XEQT’s Valuations by Region: A Closer Look

One of the most useful exercises is to break down valuations by the regions inside XEQT. This is where the global diversification story becomes really clear.

XEQT holds four underlying iShares ETFs that cover different regions. Here are the approximate valuation metrics for each:

Note: These are approximate mid-2026 figures based on publicly available data from iShares and independent sources. Exact numbers shift daily.

A few things jump out from this table:

• The US is the “expensive” part. With a CAPE ratio of 30-34x, US stocks are trading well above their historical average. This is what drives most “overvalued” concerns.
• Canada, international developed, and emerging markets are much more reasonably valued. Their P/E ratios of 12-16x are right around or below historical averages.
• XEQT’s global diversification naturally blends these valuations. The expensive US allocation is diluted by the cheaper Canadian, international, and emerging market holdings. The overall weighted CAPE of roughly 22-26x is elevated but far less extreme than the US alone.

This is exactly why geographic diversification matters. You are not making a concentrated bet on the most expensive market in the world. You are buying all the markets – some expensive, some cheap, most somewhere in between.

4. Why Valuations Are Less Useful Than People Think for Index Investors

Here is where I am going to push back on the entire premise of the question. Even if you accept that parts of the market are “expensive” by historical standards, valuation metrics are far less useful for all-in-one index investors than most people assume. Here is why.

Market-Cap Weighted Indexes Naturally Adjust

XEQT tracks market-cap weighted indexes. That means if US stocks become truly overvalued and eventually correct, their weight in the index automatically decreases as their prices fall. Meanwhile, cheaper regions gain relative weight. You do not need to do anything – the index rebalances for you. This is one of the underappreciated benefits of how XEQT’s automatic rebalancing works.

Global Diversification Smooths Out Regional Overvaluation

As the table above shows, while US stocks might be “expensive,” emerging markets and international developed markets are trading at much more moderate valuations. When you own everything through XEQT, regional overvaluation in one area is offset by reasonable or cheap valuations in another. You are not making a single bet – you are buying the entire global economy.

You Are Buying the Entire Market, Not Picking Stocks

Valuation analysis is most useful when you are choosing which stocks to buy. If Company A trades at 50x earnings and Company B trades at 15x earnings, that comparison helps you decide between them. But with XEQT, you are buying both companies – plus 9,000 others. You are not trying to pick winners. You are owning everything and letting the market sort it out over time.

Time in the Market Beats Timing the Market

This is the big one. For investors with a 10+ year time horizon, entry valuation matters far less than simply being invested. Missing even a few of the best trading days while waiting for valuations to “come down” can cost you dearly.

Consider this: someone who refused to buy XEQT in 2020 because they thought valuations were too high after the post-COVID rally would have missed years of gains waiting for a “better” entry point. The market felt expensive at every price level going up – and it kept going up.

Research from Vanguard and others consistently shows that lump-sum investing beats waiting on the sidelines approximately two-thirds of the time, regardless of starting valuations.

5. What the Research Actually Says About Valuations and Future Returns

I do not want to pretend that valuations are completely meaningless. They are not. But the research tells a more nuanced story than the “overvalued means sell” crowd would have you believe.

The Vanguard CAPE Study

Vanguard has published extensive research on using the CAPE ratio to predict future stock returns. Their key finding: the CAPE ratio explains roughly 40% of the variation in subsequent 10-year real returns for the US market. That sounds like a lot, but consider what it actually means:

• 60% of future returns are explained by factors other than starting valuation. That is a huge amount of unexplained variation.
• Even when the CAPE is high, there is a wide range of possible outcomes. A CAPE of 30x has historically been followed by 10-year real returns ranging from roughly -2% to +8% annually. That is an enormous spread.
• The predictive power gets weaker as you extend the time horizon beyond 10 years and much weaker for globally diversified portfolios (as opposed to US-only).

What “High Valuations” Actually Predict

The research consensus is:

• High starting valuations tend to predict lower average future returns – not negative returns, just lower than historical averages.
• A US CAPE of 30+ suggests that US stocks specifically might return 4-6% real (after inflation) over the next decade instead of the historical 7-8%. That is lower, but still positive and still far better than cash or bonds.
• For a globally diversified portfolio like XEQT, the picture is even less concerning because cheaper international and emerging market allocations provide a valuation cushion.

The Critical Point Most People Miss

Even if future returns are slightly lower due to elevated valuations, the cost of not investing is almost always worse. If XEQT returns 5% real over the next decade instead of 7%, your money still doubles in about 14 years. If you leave that money in a savings account earning 2-3% while waiting for valuations to drop, you are virtually guaranteed to fall behind.

You do not need the market to be cheap to build wealth. You just need to be in it.

6. What to Do Instead of Worrying About Valuations

If trying to figure out whether XEQT is “overvalued” is not a productive use of your time, what should you actually focus on? Here is the playbook that works for the vast majority of Canadian investors.

Keep Buying Regularly, Regardless of Valuations

Dollar-cost averaging – investing a fixed amount at regular intervals – is the simplest way to neutralize valuation anxiety. When prices are high, your fixed dollar amount buys fewer units. When prices are low, it buys more. Over time, you end up with a reasonable average cost without ever needing to form an opinion on valuations.

Set up automatic recurring purchases of XEQT on Wealthsimple and stop checking the price. Seriously. Stop checking your portfolio.

Focus on Your Contribution Rate, Not the Entry Price

The variable that matters most for long-term wealth building is how much you invest, not what price you buy at. Increasing your monthly XEQT contribution from $300 to $500 will have a far larger impact on your final portfolio value than buying at a P/E of 17 instead of 20.

Here is a simple comparison to prove the point:

Even with a lower return due to higher starting valuations, the person who invests more money per month comes out ahead by nearly $100,000. Your savings rate is your biggest lever – not market timing.

Maximize Your Tax-Advantaged Accounts First

Instead of worrying about valuations, make sure you are investing in the right accounts. Are you maximizing your TFSA? Have you considered your RRSP contribution room? What about the FHSA if you are a first-time homebuyer? The tax savings from using the right account will have a far bigger impact than any valuation-based timing decision.

Rebalance Through Contributions

If you genuinely believe US stocks are overvalued and want to do something about it, the simplest approach is to let XEQT handle it for you. XEQT rebalances automatically to maintain its target regional weights. If US stocks drop significantly, XEQT’s rebalancing process will buy more US stocks at lower prices and sell some of the winners. You do not need to make any decisions.

7. When Valuations DO Matter (And Who Should Care)

I want to be fair here. There are some situations where paying attention to valuations is genuinely useful. But they probably do not apply to most people reading this.

Closer to Retirement (5-10 Years Out)

If you are within a decade of retirement, starting valuations matter more because you have less time to recover from a prolonged downturn. This is one reason many investors begin shifting from 100% equity (XEQT) to a balanced portfolio like XBAL or a glide path strategy as they approach retirement. High valuations at the start of retirement combined with large withdrawals can create sequence-of-returns risk that threatens long-term portfolio survival.

Very Large Lump Sums

If you have received a large windfall – an inheritance, a home sale, or a business exit – and valuations are elevated, you might feel more comfortable dollar-cost averaging into XEQT over 6-12 months rather than investing everything at once. The math says lump sum wins about two-thirds of the time, but the psychological comfort of spreading it out can prevent panic selling if the market drops right after you invest.

Tactical Tilters (Probably Not You)

Some sophisticated investors adjust their regional allocations based on valuations – overweighting cheaper markets and underweighting expensive ones. This is called value tilting or tactical allocation. In theory, it makes sense. In practice, most individual investors who try this end up underperforming a simple buy-and-hold strategy because:

• Cheap markets can stay cheap (or get cheaper) for years
• Expensive markets can keep getting more expensive for far longer than you expect
• The transaction costs and tax consequences of frequent rebalancing eat into any potential gains
• It requires genuine expertise and discipline that most part-time investors do not have

For the vast majority of Canadians, owning XEQT and doing nothing is the optimal strategy. The fund handles diversification and rebalancing for you. Do not overthink it.

8. The Market Is Always “Fairly Valued” – And That Is the Point

I want to leave you with a concept that might shift how you think about this entire question.

In efficient markets, the current price already reflects all available information. Every professional analyst, every algorithm, every institutional investor in the world is looking at the same valuation data you are. The current price of every stock inside XEQT is the consensus estimate of its fair value, given everything that is currently known.

Does this mean markets are perfectly efficient? No. There are bubbles, there are crashes, and prices overshoot in both directions. But here is the key insight: you cannot systematically identify mispricings better than the collective wisdom of millions of market participants. If you could, you would be running a hedge fund, not reading a blog about XEQT.

When someone asks “is XEQT overvalued?”, they are essentially asking “do I know something the entire global financial market does not?” The honest answer, for almost everyone, is no.

XEQT is designed to be the market. It holds the market. It tracks the market. And the market, by definition, is always priced at exactly what buyers and sellers collectively agree it is worth today. That is not overvalued or undervalued – it is simply the price.

Your job is not to judge whether the price is right. Your job is to keep buying consistently, keep your costs low, keep your investments in tax-advantaged accounts, and let compounding do its work over decades.

The person on Reddit asking “is XEQT overvalued at $30?” was asking the wrong question. The right question is: “Am I investing enough, consistently enough, with a long enough time horizon?” If the answer to that is yes, the current valuation of the market is noise.

Just keep buying.