Markets are nervous. Why waiting to buy these ASX 200 shares could prove expensive

Despite the recent gains of the S&P/ASX 200 Index (ASX: XJO), there's little doubt that the share market is still going through 2022 on a wary footing.

Yes, the ASX 200 has bounced back rather spectacularly over the past six weeks or so, rising around 12% since the start of October. But the ASX 200 still remains down by 4.55% year to date.

This year has also seen the ASX 200 seesaw rather violently. In April, the index was over 7,500 points. But by June, it was back under 6,500 points – a swing of 15% in just two months. Inflation, war, and rising interest rates have all played their part in denting investor confidence this year.

Although many ASX 200 shares have performed admirably this year – I'm thinking of BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Woodside Energy Group Ltd (ASX: WDS) – many have not.

Take Telstra Group Ltd (ASX: TLS). Telstra shares remain down by more than 6.5% in 2022. Woolworths Group Ltd (ASX: WOW) shares have lost close to 9% over the same period, while Macquarie Group Ltd (ASX: MQG) and Wesfarmers Ltd (ASX: WES) shares are down by 15.5% and 18.4% respectively.

And that's just the blue chips. Domino's Pizza Enterprises Ltd (ASX: DMP) sales are down more than 47% this year. The Xero Limited (ASX: XRO) share price has lost more than 54% of its value. REA Group Ltd (ASX: REA)? It's nursing a 30% loss.

There are many ASX investing favourites out there whose valuations have been bulldozed this year.

So perhaps investors should sit on the sidelines with these shares and wait for a recovery before buying in.

What would Buffett do?

Well, one could do that. But here's why I think sitting on the sidelines is a terrible idea. It might feel better to buy a share when everyone else is buying it and it is rising in value. We humans do love some positive reinforcement.

But according to the legendary investor Warren Buffett, this might just be the exact wrong time to buy in.

Buffett once told us that, "Long ago, Ben Graham taught me that 'price is what you pay; value is what you get'. Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."

Buffett also once said this: "First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy."

So Buffett is saying that the best time to buy a top company is when its shares are feared by the market for no good reason.

Companies like REA and Xero haven't seen their revenues or profits collapse by 30% or 54%. In fact, Xero grew its revenues by 19% in FY2022, and its earnings by 11%.

REA Group's annual general meeting earlier this month revealed the company is on track to record a 26% rise in revenues and a 25% surge in net profits.

Yet we have seen devastation in these companies' share prices. If REA and Xero keep growing next year and the year after that, then today's share prices could be a bargain in hindsight. And Buffett does warn that share price sales don't last forever.

So waiting until these sorts of share prices recover could be an expensive mistake for investors to make.