The ASX share market has been through plenty of volatility in 2022. But I've been using the lower prices as an opportunity to invest for my portfolio.
No one can know what share prices are going to do next month or next year. But I can see when valuations have dropped from where they were.
It's common, and expected, for share prices to go through declines every so often. However, it's rare for the entire market to drop at the same time.
The last time inflation and interest rates went up this quickly was a number of decades ago. It is a rare opportunity to be able to invest in businesses after such a large, rapid fall across the market.
While this is a different economic climate to the COVID-19 crash and the GFC, some businesses have — or had — experienced a similar level of decline.
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Why I've been buying ASX shares
One of the benefits of a lower share price is that it boosts the prospective dividend yield of ASX dividend shares.
For example, if a business had a 6% dividend yield but the share price drops by 10%, that dividend yield turns into 6.6%.
All of the shares in my portfolio pay dividends. I like the real cash flow that dividends can add to my annual financial picture.
In the current market, I've seen plenty of opportunities to add to existing positions as well as invest in new ASX shares. Earlier in the year, I saw an opportunity to buy some more Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and Rural Funds Group (ASX: RFF) shares.
I also invested in new positions like Brickworks Limited (ASX: BKW) and Bailador Technology Investments Ltd (ASX: BTI).
But, this article isn't about trying to advocate for those particular ASX shares.
Share prices don't typically drop by themselves. There has to be a significant worry for something to drop more than 10% in a relatively short amount of time.
When there's even a sniff that things might be getting better, or even not getting worse, the share market often likes to push valuations higher.
Which ones could be good value?
I think the names that could be opportunities are the ones that have fallen significantly but still have sound long-term plans.
Names in the tech space and retail space could be good value in my opinion, such as Xero Limited (ASX: XRO), Adairs Ltd (ASX: ADH), Accent Group Ltd (ASX: AX1), Airtasker Ltd (ASX: ART), Wesfarmers Ltd (ASX: WES), Temple & Webster Group Ltd (ASX: TPW), Universal Store Holdings Limited (ASX: UNI), and Volpara Health Technologies Ltd (ASX: VHT).
The strong growth businesses can hopefully recover investor sentiment, while the outlook for retail conditions won't always be this uncertain.
I think that buying businesses at a lower price can help the long-term compounding of the returns, resulting in stronger long-term wealth building. This could help me retire earlier, generate more dividend income, and perhaps see me finish with a bigger nest egg.
