As astute investors know, success comes from buying low and selling high.
An easy way to do this using ETFs is by looking at a nation’s CAPE ratio. CAPE--which stands for cyclically adjusted price earnings--is simply a measure of the average earnings generated from a country’s benchmark stock exchange over the last decade.
Earnings over a year can be volatile. Earnings over a decade tend to be much more consistent.
This is the big advantage to using CAPE ratios.
Take a market like Russia, for example. Shares of the largest Russian companies trade for less than 10 times average earnings over the last decade, and comfortably under book value, far cheaper than North American or European stocks. Investors can easily buy a diverse basket of Russian stocks using the iShares MSCI Russia Capped ETF (NYSE:ERUS).
Another cheap market is Brazil. Sure, there are very obvious issues surrounding the country, but you can’t deny how cheap the country’s stock market is. Even after an impressive move in the country’s benchmark index over the past few months, the country has a CAPE ratio of under 9. The easiest way to get exposure to Brazil is through iShares MSCI Brazil Index (NYSE:EWZ).
Turkey is also cheap on a CAPE basis, with that country’s benchmark index trading at a CAPE ratio of just 10.6. Investors can invest in Turkish equities through the iShares MSCI Turkey Market Index Fund (NYSE:TUR).
