Motley Fool Australia

How to invest in ASX shares after a share market crash

graph of paper plane trending down
Image Source: Getty Images

It can be hard to know how to invest after an ASX share market crash like the one we’ve just experienced. From the start of January to 23 March, the S&P/ASX 200 Index (ASX: XJO) fell 32.05% to 4,546 points.

And it wasn’t like the crash was confined to just a couple of sectors. Sure, coronavirus restrictions hammered ASX travel shares while an OPEC+ oil price war smashed the oil and gas sector. But there were very few Aussie shares that managed to climb higher at the start of the year.

So you might be wondering how to invest after an ASX share market crash. No doubt there will be good value buys, but it’s hard to know when to buy, hold or sell.

Here are 3 top tips I like to remember when I’m investing in a volatile share market.

Snap up some ASX share price bargains

There’s no doubt there are some bargain shares after the share market crash. No one has a crystal ball (unfortunately!) but there are still some great opportunities.

You could look at buying ASX bank shares like National Australia Bank Ltd (ASX: NAB) after the ASX share market crash. There are certainly some headwinds for the Aussie banks, but they still generate billions in profit each year and could be a long-term buy for dividends.

Naturally, not everyone is bullish on the banks. If you’re willing to take some risks, ASX energy shares like AGL Energy Limited (ASX: AGL) could be undervalued after the recent share market crash. I also like the look of CSL Limited (ASX: CSL) as a solid large-cap healthcare share with a 0.96% dividend yield.

Consider your cash flow after a share market crash

In good news for investors, there are some positive signs for the economy right now. While there are no guarantees, there is light at the end of the tunnel for many Aussie companies.

Having said that, investing after a share market crash can be different. That’s partly because the economic environment has changed and partly because your mindset has probably changed as well. It’s easy to panic and think that you need to go to cash to stop your wealth from dropping further. But that’s not usually a good strategy as you ‘crystalise’ your losses rather than letting your wealth build over time despite the ups and downs. Make sure you’re comfortable with the amount of money you’re investing after a share market crash and let your wealth grow over time.

If you need that hard-earned cash in the next few years, it may not be a great time to buy. However, I think some strong ASX dividend shares like BHP Group Ltd (ASX: BHP) or Fortescue Metals Group Limited (ASX: FMG) can help to boost your cash flow in the medium to long-term.

Work out how you want to invest

If you’re a Foolish investor, buying and holding is the oldest strategy in the book. Diversifying your ASX share portfolio across high-quality shares and holding for the long-term is a great strategy.

Buying and selling ASX shares regularly, however, may not be so good. Brokerage and taxes alone can crush your after-tax returns, let alone the price fluctuations after a share market crash. Just stay calm, stick to your strategy and let your money work for you over time.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Related Articles…