Waiting to start investing in ASX shares? Today could be a brilliant time to do it

This current volatile period might be a good time to start investing.

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Key points

  • Some prospective investors may be wondering whether the current volatility means it’s not a good time to invest
  • Share prices can be like supermarket prices – lower could be more attractive
  • Over the long term, the average return per year has been around 10%

There is a lot of volatility on the ASX share market right now. But that doesn’t need to be a negative for those that are waiting to start investing.

At the moment, there seem to be weekly headlines about the latest declines on the stock market. It’s a bit painful for investors with a lot of money already in the market. They may be comforted by looking back at other crashes in history like the GFC and COVID-19 and seeing that, eventually, the share market stopped falling and started a recovery.

But what about investors that don’t have any money in the ASX share market? It could be a really good time to consider starting.

Why now could be an opportune time to invest

Share prices move all the time. Every day, one share goes up and another one goes down. Over a relatively short amount of time, businesses can move significantly up and down.

For example, this week, the Commonwealth Bank of Australia (ASX: CBA) share price has fallen by around 10%.

In the last month, the Zip Co Ltd (ASX: ZIP) share price has fallen by around 40%, and in 2022 it has dropped 85%. I’m not saying those two ASX shares are buys today, just pointing out the big moves.

Ultimately, investing is about making returns. We can’t control what share prices do each week or each month. But, we can control when we invest and the price we buy shares at.

If I’m in a supermarket, I want to buy items for a good price. I wouldn’t enjoy paying $11 for a lettuce. I have similar thoughts when it comes to ASX shares. I’d rather buy ASX shares when they’re cheaper than at a high price. Yet some investors become less interested, or more fearful, to invest when prices drop.

How much cheaper are ASX shares?

The S&P/ASX 200 Index (ASX: XJO) is down close to 10% in 2022. However, the ASX 200 is dominated by miners and banks, which have cushioned the index from the decline.

There are plenty of other ASX shares that have suffered much heavier declines.

For example, the Xero Limited (ASX: XRO) share price has dropped by 44% this year. If Xero shares were to go back to where they were at the start of the year, that would be a rise of 80%. But, it’s impossible to say how long it will take investor sentiment to return for many ASX growth shares.

Another example is the Temple & Webster Group Ltd (ASX: TPW) share price, which has fallen by 65% in 2022. A third example is the Adore Beauty Group Ltd (ASX: ABY) share price, which has dropped more than 70% in 2022.

A lower price doesn’t mean that they’ll automatically jump back up. For some stocks that have declined, it could take months or years to recover. A number of them may never get back to the former level. It’s possible that some may recover quickly.

Some investors may like to consider investing in exchange-traded funds (ETFs), which allow people to invest in a big group of shares at the same time. That way, investors don’t need to identify particular businesses to do well; they can benefit over the long term from a diversified portfolio. Diversification can reduce investment risks.

Two of the more popular ETFs are Vanguard Msci Index International Shares ETF (ASX: VGS) and iShares S&P 500 ETF (ASX: IVV).

Foolish takeaway

It’s possible that share prices could go lower from here.

But, investing should be about the long term, not just trying to pick when the ASX share market is going to hit the bottom.

If ASX 200 shares were to deliver the historical average return of around 10% per year over the next five or 10 years, then investing at today’s prices could be a good call, but my crystal ball isn’t working right now to tell me if today is the best price.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group Ltd, Vanguard MSCI Index International Shares ETF, Xero, and ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Adore Beauty Group Limited, Temple & Webster Group Ltd, Vanguard MSCI Index International Shares ETF, and iShares Trust - iShares Core S&P 500 ETF. 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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