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How to try and beat the market with ASX shares

If the recent bear market taught us one thing it’s that investors love to try and beat the market with ASX shares.

Increased market volatility in February and March enticed many first-time investors to try their hand at investing. Of course, there was always going to be some winners and losers with so many people trading in the market.

But there’s a reason why Warren Buffett is as good as he is. He wouldn’t just bet on whether ASX shares will go higher or lower. Instead, he’s looking for long-term gains and undervalued companies.

If you want to try and beat the market like the Oracle of Omaha himself, here are a couple of things to keep in mind.

How to try and beat the market with ASX shares

The easiest way to invest is passively by aiming to track a broad-market index like the S&P/ASX 200 Index (ASX: XJO).

But not everyone likes to choose the passive route. While passive investing requires less work and has some solid advantages, there are some big downsides.

For instance, the benchmark ASX 200 index is down 11.1% in 2020. On the other hand, a top-performer like Afterpay Ltd (ASX: APT) has rocketed 97.9% higher.

If you want to try and beat the market, the key is to find undervalued ASX shares in the current market.

That’s much easier said than done. It’s important to change your mindset from what’s valuable today to what will be valuable in the next 20 years.

For instance, you might be a big believer in the role technology can play in the future. If that’s in the data security or storage space, that might mean buying NextDC Ltd (ASX: NXT) shares.

The NextDC share price has jumped 49.4% higher in 2020. The secret is to find ‘the next NextDC’ before it surges higher so you can maximise your potential gains.

Whatever your chosen themes, try and think further into the future and find companies that are being under-bought by investors.

If you can successfully pick what’s valuable and what’s not, and with a touch of luck, you could really accelerate your retirement plans in 2020.

For a few investment ideas to kickstart your plans, here are 5 ASX shares trading for under $5 today!

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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