Everyone wants to beat the ASX200 over the long-term, but I think you have to ignore the short-term noise to do it.
Over the ultra-long-term, the average return of the ASX and US shares has been around 10% per annum. But year to year the returns can really bounce around. One year the market might be up 15% and another year it might be down 5%.
There are always reasons that suggest share markets might fall in any particular year. Greece’s debt was a problem. China’s ‘shadow banking’ was a problem. Australia’s falling house problems are a problem. The US-China trade war is a problem. There’s always something going on.
But, if you hide all your cash under a mattress you would miss out on an enormous amount of dividend cashflow and compound growth over the long-term. Sure, the Australian and global economies occasionally hit a speedbump, and it is wise to avoid investing in certain areas, but things keep going upwards over time.
The best time to invest is when people are feeling fearful and they’re selling shares below the intrinsic value of the business. This is when great opportunities arise.
As regular investors the only things we can affect with our investments are the prices we buy our shares at and the price we sell at. Buying high and selling low isn’t a good strategy.
For example, I’m very happy with the entry prices I paid for my Altium Limited (ASX: ALU) and Duxton Water Ltd (ASX: D2O) shares, but it would be silly to expect the same level of return over the next 12 months, which is why I’m being patient before considering buying more.
I would much rather own shares of something like MFF Capital Investments Ltd (ASX: MFF) or Rural Funds Group (ASX: RFF) over the long-term rather than try to second-guess what the market is going to do next.