This ASX market crash has been undoubtfully painful for anyone who has capital invested in the share market. Since mid-February, the S&P/ASX 200 Index (ASX: XJO) has lost around 27% of its pre-crash value – making this a significant market crash.
But this cloud has had a silver lining – the opportunity to invest in ASX shares at some of the cheapest prices available in years. Many investors who like to 'be greedy when others are fearful' would be licking their lips at the thought of some of these shares right now, I'd wager.
But there's that age-old problem at play here as well – unlimited wants, but limited resources.
Investors have to decide which shares to buy with their precious, limited capital.
So today, let's look at whether ASX growth shares are the best bet right now, compared to ASX dividend shares.
Growth vs income
ASX growth shares are defined by the ability of a company to outperform the broader market during bull markets. I say 'during bull markets' because growth shares have the unfortunate tendency to underperform the broader market during a crash (nothing comes free in life). One only has to look at how the former market darling WAAAX shares – with the exception of Xero Limited (ASX: XRO) – have performed during this crash to get the picture.
Conversely, ASX dividend shares are an investor's second-best friend (after cash) during bear markets. Dividend-paying companies like Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES) tend to be more established, mature businesses with stronger cash flows and lower debt. Investors know this and typically flock to dividend shares during volatile times. Receiving dividend income during a bear market also provides a portfolio cushion and some extra cash to plough into the markets as well.
However, once the dust settles and the market inevitably switches back to bull mode, dividend shares are often forgotten about as investors get excited about growth shares once again.
Saying this, our brave new world of near-zero interest rates has altered the playing field somewhat and enhanced the appeal of income-producing assets like dividend shares. This means that the traditional growth/income paradigm might look a little different once we're on the other side of this crash.
Foolish takeaway
There's no right answer in choosing growth or dividend shares during this crash – each choice will suit different investors with different goals. Just buying ASX shares during times like these is the real winning strategy – choosing growth or income shares in doing so is just splitting hairs in my opinion.
