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Anonymous

26 Aug 2021

General Investing

How do we determine the buy price of an ETF?

For stocks we can look at P/E, compare with industry etc. , but how do we determine a "good" price for ETF?

Discussion (2)

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When buying ETF, specifically S&P, You are aiming for market average return.

Inorder to get an average return, you need to continously buy in regardless of market condition, DCA, else you wont get that avg return.

But you may make use of sector rotation strategy, using sector ETFs to increase your gain.

However, S&P should still be your core. Because you will outperform and underperform the market over the years. With S&P as your major holding, even when you underperform, u would deviate too much from the average.

Humble contrarian view: by not trying to determine a good price at all. My view is that ETFs should not be bought dependent on any price limits or value parameters.

The safest bet (f ex for stock etfs) seems a globally diversified ETF, like ISAC or SWRD, price is unimportant. When the ETF is selected it should be DCA'ed in.

The important parameters for selecting etfs howevee are: well considered allocation (countries, sectors), large AUM, lowest TER, physical replication, if possible no securities lending, UCITS types where possible.

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