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Originally Posted by Slava
That’s definitely the case. ETFs can trade over/above “what they should” based on the value of those underlying holdings. If they trade frequently and there is enough volume it becomes less of a concern. To be clear, there are a lot of factors though. Depending on the ETF structure you don’t actually own those underlying securities and instead own a derivative product based on them, and that adds another layer as well.
It really depends on what you’re buying and it’s not easy enough to create a simple rule. If you’re buying a massive index you’re taking a different approach compared to buying a small, sector specific, or levered product. Literally everything from the rational to the holding period will different here.
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Certainly buying a massive index (an S&P 500 etf) is different than a specialized sector. If I buy XIC and XAW for my RRSP which I won't touch for at least twenty years, I don't see the point in timing, given the rationale that I believe stock markets will be higher then, than they are today.
There is always an exception, like the long term stagnation the Japanese stock market faced, but that's why you diversify between Canada, U.S and the rest of the world.