The benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index yesterday soared above the 5,600 point mark, setting itself a fresh six-year high and getting some investors excited for what's to come.
However, not all investors shared that same level of enthusiasm. In fact, many are seeing the sheer strength of the market's surge as a real reason for concern.
It's no secret that as the market climbs higher, the nation's most popular stocks are becoming more expensive. Just look at Commonwealth Bank of Australia (ASX: CBA) which also skyrocketed to a new all-time high yesterday. Woolworths Limited (ASX: WOW) is in a similar boat – it is now trading on a projected P/E ratio of 19, which is well above the market's 16.6 average.
Of course, that concern leads to the belief that a crash could be in the deck of cards, just waiting to be dealt.
And the truth is, a correction or a crash of some sort will come.
That much is inevitable, and unfortunately there's nothing we can do to change that. The only thing that remains uncertain is when it will happen and to what magnitude.
So it is understandable that investors are weighing that into their financial decisions.
However, I firmly believe that those who choose to remain on the sidelines, and indeed, those who choose to exit from the market now, could regret that decision later.
Just like those investors who chose to wait for another setback when the market was recovering from the GFC in 2009.
Or those who removed themselves from the market at any stage over the last two years.
In case you're interested, the ASX 200 has surged nearly 38% in that time – and that's not even including dividends.
With the index now sitting at 5,630, it should also be noted that the 6,000 point mark is firmly on the market's radar. That's only another 6.7% from today.
In any event, I'll tell you why you might regret avoiding the market now.
Investing is a game of patience and longevity. The big money is not made overnight, but rather over several years from investing in sound corporations trading at reasonable prices.
Even though the market is trading at a multi-year high, it is important for investors to remember that we are investing in individual stocks – not the index itself. In other words, just because the market is trading at a high, doesn't mean there aren't bargains to be found.
Just to make myself absolutely clear, I'm not talking about the usual suspects like the big four banks, Woolworths or even Wesfarmers Ltd (ASX: WES). While I think they are all high-quality companies, I don't think they present as good buys right now.
I'm talking about some of Australia's less recognised stocks. As an example of some of the stocks I would consider buying right now, just click here.
