The ASX 200 (INDEXASX: XJO) is currently down 5.25%. Investors are panicking, but I don’t think you should.
Sure, the market is down in its worse day since the GFC. This could be the start of a painful recession. We just don’t know.
The thing is, share prices have already fallen. You won’t be ‘saving’ your portfolio from the almost-20% fall that’s happened if you sell today. You’d be predicting that share prices will drop even further. Maybe there will be even more falls, maybe not.
The share market is impossible to predict. It’s quite surprising that it took the market the amount of time it did to react to the negative possibilities. The infection was spreading in China over two months ago. Share prices are changed intensely by short-term investor sentiment.
Is it time to sell?
There are so many pitfalls with trying to time the market if you were to sell this week. Would you sell everything? When would you buy back in? What will you do with your cash in the meantime, earn a tiny amount of interest from the bank?
Gold has already rocketed higher. Changing to gold could be a case of selling low, buying high.
If you’re thinking of staying out of shares until there’s an economic recovery, it’s quite possible that you’d miss out on a fair amount of the share price recovery before you felt brave enough to go back in.
There sure is a lot of pain out there. The Woodside Petroleum Limited (ASX: WPL) share price is down 16.5%, the Santos Ltd (ASX: STO) share price is down 25%, the Oil Search Limited (ASX: OSH) share price is down 28% and the Worley Ltd (ASX: WOR) share price is down 19.5%.
The thing is, I was never interested in those types of businesses to begin with. Cyclical shares don’t seem like the types of businesses that can produce long-term market-beating returns nor provide reliable dividends. That’s why you need to own high-quality shares throughout the entire economic cycle.
I think it’s actually turning into a great buying opportunity
To me, it seems silly to think that you would buy when prices are high and sell when prices are going lower.
It should be the opposite. You should be more cautious when valuations are higher and buy when prices are lower (and more attractive).
The operations and earnings of businesses will have moved on from this in 2025 and in 2030. That’s how far ahead you should really be thinking when making an investment.
Would you rather buy Altium Limited (ASX: ALU) shares at a share price above $35 or below $28?
Would you rather buy REA Group Limited (ASX: REA) shares at a share price above $110 or below $95?
Would you rather buy shares of Magellan Financial Group Ltd (ASX: MFG) shares at a share price above $70 or below $50?
You can buy shares of these high quality businesses at much cheaper prices now.
Share prices may fall more this week and in this month. I plan to steadily put more money to work in-case there are even better opportunities, but these prices are very attractive with interest rates now at such low levels.
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Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.