ETF Bargain Hunting
December 13th at 6:46am by Tom Lydon
Morningstar does a great job valuating stocks. Fortunately they periodically apply the same valuation model to exchange traded funds. Yes, energy stocks still look pricey and consumer good and financial stocks look like a bargain.
Price valuation isn’t always the best way to evaluate stocks and market sectors, but it gives you a better idea of what you’re buying. Sure energy stocks (and ETFs) could continue to rise going into 2006, but conventional wisdom says you’d be paying a premium if you buy now.
Sometimes it’s difficult to fight the trend. Momentum can be powerful at times and make valuation watching seem insignificant. Good rule of thumb – If you own an ETF that is overvalued, be sure you have established a stop loss point.
