Much has been written about the merits of passive index investing using Exchange Traded Funds (ETFs). Even for active value investors, I believe there is sometimes a place for ETF investing for people wishing to move into a new market, possibly just outside their circle of competence, in a low-risk fashion.
One of the simplest and safest investment strategy today is a long position in a diversified basket of low-CAPE emerging market ETFs — Russia, South Korea, Singapore all look attractive at the moment — from which one can expect high single digit to low-teen annual returns for the next 5-10 years, a satisfactory outcome in our ultra-low interest “new normal” world. The main issue with this strategy is that its successful execution will likely require an unusual measure of patience.
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