We are in the midst of quite a nasty ASX bear market right now (although we saw a great day on the ASX yesterday). A bear market is defined by a fall of 20% or greater from a recent market high. Since the S&P/ASX 200 Index (ASX: XJO) has fallen around 28% from its mid-February high, we are well and truly still in bearish territory right now.
But that, unfortunately, doesn't mean things can't get worse from here.
Remember, during the GFC, the ASX fell around 50% over a period of eighteen months. We're only six weeks into this bear market!
There's an awful lot of people 'buying the bottom' right now. But if things do get worse for our ASX shares, how would one go about investing properly for long-term wealth creation?
Keep your mind on the things that matter!
In my view, your guiding light in any market – bull or bear – should revolve around the idea of shares representing part-ownership of businesses. Businesses that generate cash for you as the owner year in, year out.
If you owned a shoe shop, would you be worried if someone offered you a ridiculously low price for it next week? Of course not, you'd tell them to hit the road in their bare feet! The same principles can be applied to the share market during this rough time.
So if you're fairly certain that your favourite ASX shares are going to be making good money five or ten years from now, why would you worry about what someone next week is willing to offer you for the company? If the price is stupidly low, more fool them (and not the good kind of Fool).
Instead, you want to ask them how much they're willing to sell their shop to you if they're so worried!
That's the kind of attitude that I think every investor should have during this time. Yes, we might not be out of the woods yet in terms of the coronavirus situation. But there are a lot of companies that will come out the other side of this disaster stronger than ever.
Find them and pay the ridiculously low price investors are going to be willing to sell them to you for if this bear market gets worse. That's how Warren Buffett and lots of other great investors play the game, and that's how you as a 'business owner' can make money in the share market during times such as these.
