…she needs to know in which securities (ETFs, in this case) she needs to invest.
Whenever the shares of a company trade on a stock exchange, there is always one winner and one loser. The winner is the seller if the share price drops after the sale, or the buyer if the share price climbs after the purchase. The loser, you guessed it, is the buyer if the share price drops after the purchase, or the seller if the share price climbs after the sale. In the short-term at least, its a zero-sum, win-lose, lose-win, game. There are no win-win scenarios.
So, how is a person, with no better information than the next person, to decide whether a given price for a security is too high or too low? One answer could be, assume that the market is efficient, and accept the current price of the security as the best estimate of the value of that security. This is not unreasonable, because the current price is based on the buying and selling decisions of hundreds, thousands, or even millions of investors. And one must indeed have some superior information to go against such a large crowd.
In the very long run, it generally pays to be a buyer. See, for example, the U.S. stock market returns over the past 130+ years, for various holding periods. The average return over 20 years is 6.7% (the average his higher for shorter periods of time, but the range of possible returns is also broader, and include losses).
Okay, so what to buy for the investment portfolio. Given the scenario created in the previous posts, one suggestion would be to invest in a simple portfolio of 3 ETFs. Yes, just 3 investments. Details in Part 5.