Market panic. Be brave. Buy cheap shares

The time to buy shares is when they are on sale. What are you waiting for?

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Motley Fool says the time to buy shares is when they are on sale. What are you waiting for?

It was never meant to be like this. We've already been through GFC1. Now people are talking about GFC2!

They said the bailouts would save us. They said low interest rates would save the U.S. economy, and therefore Australia. They said we've de-coupled from America.

Stock markets may have stabilised, for now, but the financial crisis is still with us. It remains global, and the news over the past couple of weeks turned from bad to worse.

  • For the first time in history, the American government has lost its top-notch AAA rating, while euro-leaders held emergency meetings to prevent Italy and Spain from defaulting on their debts.
  • Even more than before, everyone's hurting… countries, investors and consumers alike. Banks have put the brakes on lending. House prices are falling. Stock markets are plunging. Your super is shrinking. It's a nasty, downward spiral. Yet again.
  • Unlike the GFC, this time around, analysts, economists, ministers, policy-makers, and equity commentators cannot agree on how these latest events will be resolved, or when — or indeed, if — the global economy will recover.
  • This time around, the American and European bailout funds are running dry. This time around, they can't cut interest rates. This remains unchartered territory for us all.

Worst since the Great Depression

It's difficult to predict the future at the best of times, let alone now, when by most accounts, we are in the worst financial mess since the 1930s and the Great Depression.

We could possibly be on the verge of seismic monetary crisis, which would further transfer world economic power from Britain, the States and Europe to the BRIC nations and other emerging markets.

Such resourceful, agile and productive overseas countries could easily leave the old ailing service-based economies, like ours, dead for years. Think Japan.

What conventional wisdom is saying

Given the uncertainty, and the differing views of all the so-called experts, ordinary investors could be forgiven for sitting on the sidelines and waiting to see how events unfold.

The market remains unpredictable, if nothing else.

Let's say S&P/ASX 200 index falls back below 4,000, and then heads lower to 3,500 as further worries arise.

You'd have thought that would be an ideal time to buy shares, wouldn't you? We would.

Conventional wisdom says the very best time to buy shares is when everyone else is selling.

Even high-class companies such BHP Billiton (ASX: BHP), Wesfarmers (ASX: WES), CSL (ASX: CSL), Incitec Pivot (ASX: IPL), Cochlear (ASX: COH) and ResMed (ASX: RMD) could once again trade at bargain-basement prices.

If you are waiting on the sidelines today, waiting for the S&P/ASX 200 to go below 4,000, or even 3,500, you might think you're making a smart move.

But you know what? We bet if — or when — the market does go below 3,500, you'll still be sitting on the sidelines, waiting for it to go even lower.

Still waiting to buy

And if the index then falls to 3,000, we bet you'll still be waiting to buy. That's because, if the market did fall another 30% from here, it will have done so for a very good reason.

It might be because of US government suffers another credit downgrade, or the euro-zone collapses, or a major institution goes bust.

It might be because the Chinese economy goes into reverse. It might be because Warren Buffett capitulates and starts selling. Or something else equally unexpected.

Whatever it might be, you can be sure the news is going to be negative. There will be more uncertainty than ever, and therefore more reasons not invest in the stock market.

By all means, wait for the worst to pass. Then you can buy shares safely again… after everybody else of course… when the S&P/ASX 200 is trading at 5,000 or more. Remember, it was close to 5,000, in April this year.

Take a deep breath

To be a successful stock-market investor, you need courage and bravery. You need to take leaps of faith.

The best time to buy shares is when the news is bad, the economy is struggling, and there are no lights at the end of the tunnel. That's when shares are at their cheapest.

The great investors always have belief, as doom and gloom gives them the opportunity to buy great companies at cheap prices. If you wait for the recovery, you've waited too long.

Have faith, and don't you be the person who makes the classic mistake of buying only when prices are high.

Our strategy is to continue to drip-feed money into the market.

If you are disciplined and contribute regularly to your favourite stocks, companies like Commonwealth Bank (ASX: CBA), Telstra (ASX: TLS), QR National (ASX: QRN), Monadelphous Group (ASX: MND) and Sonic Healthcare (ASX: SHL), in the medium to long term, you should be rewarded.

Be brave… and buy cheap shares. You know it makes long-term, Foolish sense.

Good luck.

More reading:

Free report: Read This Before The Next Market Crash

Motley Fool staff and freelancers may have interests in any of the stocks mentioned in this article. These interests can change at any time. The Motley Fool has a living, breathing disclosure policy.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »