Judging whether the fund value is overvalued or undervalued depends on the situation. Active funds cannot be judged simply, because positions can change at any time: for active funds with obvious characteristics of industry sectors, you can refer to the valuation of corresponding sectors; Active funds with obscure industry sector characteristics cannot be valued. Passive funds (also known as index funds) can be judged according to the price-earnings ratio and price-to-book ratio of the industry. Let's give you a detailed explanation of how these data indicators look!
P/E, the price-earnings ratio, is the ratio of market value to profit. Market value can be understood as the value of the funds you hold in the current market, and the further explanation of P/E ratio is the value of the funds that investors need to invest in order to obtain unit income. Therefore, the lower the P/E ratio, the more money you earn by investing in the same fund, and the greater the degree to which the fund is undervalued.
P/B ratio, also known as P/B ratio, is the ratio of market value to net assets. Like the P/E ratio, the lower the P/B ratio, the more undervalued the fund is.
Because the algorithm of fund valuation is complicated, ordinary investors can go directly to the egg roll valuation or wait for the index fund valuation seen on the valuation website. Some index rankings of these two websites can intuitively see the PE, PB, ROE and other data of index funds, which is of reference value to fund whites and professionals.
In addition to the website will provide which index funds have lower valuations and which index funds have higher valuations as a reference. If you want to know whether a fund is overvalued or undervalued, there is also the simplest way to judge: you can see where the fund valuation compares with the historical valuation. If the current fund valuation is lower than most of the historical valuation, the fund is undervalued. If it is higher than the valuation for most of history, the fund is overvalued. The historical percentile of valuation is generally 30%, and the lower the better. For example, the current valuation of CSI 300 is lower than the past 10.6%, so its value is overestimated. The current valuation of CSI dividend is lower than 73.32% in the past, and its value is underestimated.
The data provided by different platforms may be slightly different, but they tend to be consistent on the whole. In addition, you can also go to CSI or SSE official website to find the most authoritative first-hand information. If the PE, PB and historical percentile valuations of index funds are low and the ROE data is high, they are low-valued funds and can be considered for buying.