Reasonable placement of limited monitors is beneficial to reduce the cost of monitoring for voltage sags assessment. However, existing methods only consider the observability of voltage sags, leading to information loss. To capture all the voltage sags and the corresponding fault positions in distribution network, a multistage optimal placement approach of power quality monitors considering voltage sag and fault position observability is proposed. The initial requirement of voltage sag monitoring, that is, voltage sag observability is ensured by monitoring reach area method. Then, based on a simple fault location method, the fault location observability index is proposed for describing monitoring effects for fault position observability. A series of placement schemes with different costs and monitoring effects are given, which is convenient for engineers to choose the proper placement scheme according to the budget and demand. The simulation results carried on the IEEE 69-bus system show that the proposed approach can is correct and available.