After the big falls we have seen overnight on United States share markets, the tone of ASX investors has tangibly shifted today. The S&P/ASX 200 Index (ASX: XJO) is down a nasty 2.83% today at the time of writing, a stark reminder that we aren't as independent from the US as we'd like to think. That follows the flagship US Index, the S&P 500, falling 3.51% overnight, and the tech-heavy Nasdaq Composite falling 4.96%.
Just like that, the bulls are gone and the bears are back. Apparently.
Yes, we could be seeing the start of a second 2020 market crash. But we could also just be witnessing a healthy correction.
Either way, I'm not worried and I don't think ASX investors should be either.
Why investors shouldn't fear a market crash
Yes, I know this won't be a popular statement. No one really likes a market crash, even if they say they do. It's never fun watching the value of your precious shares falls by double-digits. Although it seems like a lifetime ago, the market crash we saw in March was a scary time.
But think about how the markets have rebounded since then (the ASX 200 alone is up around 30% since 23 March). Think of all the shares you could have bought that rebounded so strongly. Think of Afterpay Ltd (ASX: APT), up nearly 800% since 23 March. Or Sezzle Inc (ASX: SZL). Or Zip Co Ltd (ASX: Z1P).
That's the kind of opportunity a crash can bring.
So don't be scared. Crashes are confronting. But they don't last forever.
And the investors who were patient in March, didn't sell at a loss and used the opportunity of a 'store-wide sale' on the share markets to buy shares of their favourite companies for rock-bottom prices, did very well indeed. As Warren Buffett once said:
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.
I know we've already had one lot of 'dark clouds' this decade, but with the current coronavirus crisis, I think it's entirely possible we'll have another lot. Whether this will occur next week, next month, next year or in 10 years, I have no idea – and nor does anyone else. But I am setting aside some cash in my portfolio (getting that washtub ready) in case it does. I think it would be prudent for many ASX investors to do the same.
