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ETF Specialist

Valuations Across the Sectors of the S&P 500

It can be helpful to evaluate both fundamental and relative equity valuations, with a few caveats.

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Evaluating equity exchange-traded funds for tactical investments is not unlike the process of selecting individual stocks. Equity ETFs are, after all, baskets of stocks. So naturally, we can apply many of the same valuation techniques we use when evaluating individual stocks.

A valuation-based view of the world is helpful when making all of your investment decisions. Even the most avid proponents of passive investing estimate expected returns for various asset classes when establishing their strategic asset allocation. Active investors with more of a tactical bent are likely to rely on valuation metrics to a greater extent. Investors in this more active camp assume that over a given period of time the market gets asset prices wrong but eventually corrects itself as new information becomes available.

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John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.