Originally published on June 30, 2010

By Michael Rawson, CFA

With the S&P 500 down about 7% in the second quarter, those investors who sold during the market crash and were hesitant to reinvest as the market rallied in 2009 might want to use the recent sell-off as a buying opportunity. What segments of the market are currently attractive? In this article, we discuss a valuation measure called the price/fair value ratio and highlight several ETFs that look attractive.

Every cloud has a silver lining, and market corrections are no exception. While we all like to see rising markets, these dips provide investors who’ve been on the sidelines an opportunity to take ETF positions on the bargain level.

In aggregating the price/fair value estimates of components within an ETF, an investor may determine the attractiveness of the ETF as determined by the size of the discount to fair value, remarks Michael Rawson for Yahoo! Finance.

The latest Vanguard announcement on offering all the company's 46 ETF trades commission free marks a new era for ETFs. In our opinion, with trading costs removed, ETFs are now a viable alternative to index and actively managed mutual funds in portfolio building and asset allocation.

Three brokerage firms, Vanguard, Fidelity and Schwab, have announced commission-free ETFs. Let's first compare them in the following table: