The Vanguard Australian Shares Index ETF (ASX: VAS) is the biggest exchange-traded fund (ETF), but it's a bit smaller than last week after dropping 5.4% since Thursday, 1 August. Investors may be wondering if investors should buy or sell.
It's normal for there to be volatility over the year. There are usually different buyers and sellers each day deciding how much they're willing to transact at.
Investors seem to be worried about a few different things, including the prospect of a potential recession in the US when the number of jobs added in July was much lower than expected.
But lower prices may mean investors are thinking about buying during this market panic.
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Should we buy during this sell-off?
I think Warren Buffett's advice is really useful during times like this. In 1997, Warren Buffett said in his annual letter:
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
We can buy pieces of businesses for a cheaper price. In other words, we can buy more of a company with $1,000 or $5,000 – whatever the investment size is.
VAS ETF valuation
The Vanguard Australian Shares Index ETF sell off is down to the fact that its underlying holdings have also collectively declined in value during the market volatility.
Businesses like Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), ANZ Group Holdings Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), Macquarie Group Ltd (ASX: MQG), CSL Ltd (ASX: CSL), Wesfarmers Ltd (ASX: WES), Goodman Group (ASX: GMG), Woodside Energy Group Ltd (ASX: WDS) and many others have dropped around 5% or more since Thursday.
For investors who regularly buy the VAS ETF, it's better value than it was a week ago, so I'd be willing to press the better buy button today. It's not often that the market goes through a fall of this size over such a short period of time.
Of course, it's worth noting that the fund is still 1% higher than it was at the start of 2024, and investors have received the distribution payouts too. So, it's not as though we've seen a massive decline like the 2020 COVID-19 crash. It looks more like a correction to a more realistic valuation, in my opinion.
But if I had just won $1 million from the lottery, I wouldn't invest it all today because the valuation hasn't fallen that far (yet), in my opinion, to be a bargain price.
