ASX shares are my favourite way to invest and build wealth for the long term.
But, there is a lot of uncertainty right now in the world. The Russian invasion of Ukraine. Inflation. Rising interest rates. The US elections. Until this year, the COVID-19 pandemic was heavily on investors' minds in Western countries as well.
But, despite everything that's going on, and could happen, there are a number of reasons why I think that right now is a great time to invest for the long term.
Lower prices
One of the main goals of investing is to buy attractive assets for less than we think they're worth or will be worth in the future.
It's impossible to say what share prices will do next week, next month or next year.
But, what we can see is that the share prices of many great businesses have fallen heavily this year. For example, the Xero Limited (ASX: XRO) share price has declined by around 50% this year. The Microsoft share price is down by more than 33% in 2022. And so on.
It's a cheesy phrase, but 'buy low, sell high' is worthwhile paying attention to. Share prices are lower this year, substantially so, largely thanks to inflation and higher interest rates.
If I could choose to invest at any point in time, I'd obviously choose when the price is low. Now seems like as good a time as any to put money to work into the ASX share market.
There is always uncertainty
Share prices don't fall for no reason. For the market to fall more than 10% or even 20%, there has to be a serious event that's causing investors to panic. A global pandemic and the GFC are two of the most recent examples.
But, if we look back over the past two decades, there have always been things for the market to be uncertain about. Higher interest rates and inflation are the latest things. But Brexit, the debt issues in Europe about a decade ago, wars and so on all caused fear for investors in the past. History is full of examples of things that were going wrong. But, the share market is currently higher than nearly all times in history. My point is that life goes on.
For me, it's times of uncertainty that can open up the best buying opportunities with ASX shares, as we're seeing now.
While I'm sure there will be things in the future to worry about, I think history has shown it's useful to be optimistic for the long term.
Long-term returns
I think investing for the long-term, essentially forever, is the best way to invest. We can't know for sure what's going to happen. But, I believe that ASX shares are a great way to deliver attractive compounding over time.
According to Vanguard, over the last 30 years, ASX shares have delivered an average return per annum of 11.1% per annum.
If ASX shares managed to produce an average return per annum of 10% over the next two decades, this would be very helpful for wealth building. For example, using the Moneysmart calculated, investing $1,000 a month into ASX shares would grow into $687,000 in two decades.
I think that the prices we're being presented with can generate attractive returns in the long term. Investing for the long-term also means we can avoid unnecessary capital gains tax events as well as reduce brokerage.
