Is the current investment environment a good time to start investing in ASX shares?
I believe that investing in shares is one of the best things that people can do for their wealth over the long-term. Beginners don’t need $50,000 to start investing in ASX shares. People can invest with as little as $500. But when should investors start?
Readers may have seen a lot of news in recent months about how share markets are seeing volatility. That’s in response to strong inflation and central banks around the world, like the Reserve Bank of Australia (RBA), deciding to raise interest rates to reduce inflation.
Interest rates act like gravity on asset prices. When interest rates go higher, it theoretically ‘pulls’ down the asset price.
So that explains why share prices are lower – investors are ‘pricing in’ the interest rates that are expected this year.
Is now a good time to start investing?
A key part of investing is buying opportunities at a good price. If nearly everything is cheaper, I think it makes sense to look at ASX shares.
Warren Buffett, one of the best and wisest investors in the world, once explained whether he sees lower prices as an opportunity:
To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.
If you already own shares, then it can be tough seeing your shares drop. But hopefully, if you’ve chosen well, they can recover and reach new heights over time. Global share markets have seen some tough times during the GFC and COVID-19, but they eventually have recovered.
That’s why I’m looking at ASX shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Airtasker Ltd (ASX: ART), Volpara Health Technologies Ltd (ASX: VHT) and Temple & Webster Group Ltd (ASX: TPW)
Should investors wait for an even lower price?
No one knows what is going to happen next with ASX shares, or any asset price.
It’s impossible to know whether the current share market decline is the bottom. Shares could drop another 10% in June. Or rise 10%. Or shares could end the month at the same price as the start.
Unless you have a crystal ball, which I certainly don’t, it’s impossible to be certain. That’s one of the reasons why share markets are so volatile – everything is uncertain.
But over the long-term, I think the share market has shown it’s worth investing (and staying invested) through the difficult times. Over the decades, the share market has returned an average of 10% per annum. That’s an average – some years are much better. Some years are like the GFC (really bad!).
Those returns have happened despite the financial crashes, wars, politicians, policies, COVID-19 and so on.
So, while I think it’s a good time to start investing right now, I wouldn’t say it’s a good idea to wait in case we’ve already seen the worst of the fall.
And then keep investing regularly in good ASX shares for the long-term.