The chart illustrates the effect of current valuation on expected return over the next five years. Buying undervalued ETFs results in positive valuation returns. Buying overvalued ETFs results in negative valuation returns.
How to read this chart. On the left and middle side of the chart above are the undervalued ETFs. The green “Valuation Return” is the additional return expected above the blue “Long Term Return” for that ETF – in the next 5 years. It is positive and ADDS to the long-term returns. To the right side of the chart are negative green returns of overvalued ETFs. They are expected to reduce or SUBTRACT from the blue returns of those ETFs in the next 5 years.