I think one of the world's greatest investors is Warren Buffett who has led Berkshire Hathaway to become one of the largest global businesses. He certainly has delivered great advice over the years that can be very applicable to today's situation with ASX shares.
A number of the ASX's leading names have seen their share prices take a bath in recent times. For example, the Xero Limited (ASX: XRO) share price has dropped more than 50% in the year to date.
Whether the sell-off is justified for Xero and many other ASX growth shares is debatable. But the question now is whether these declines represent an opportunity, or whether higher interest rates mean these lower prices are about right.
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Warren Buffett's wise advice
I don't think every business is worth buying just because its share price has dropped, but when almost the entire market is sold down, such as during the COVID crash, I think indiscriminate selling presents a great hunting ground.
One of the most quoted Warren Buffett sayings is this:
Be fearful when others are greedy and greedy when others are fearful.
In other words, the best time to buy ASX shares may be when there is widespread uncertainty because this is when share prices are lower.
But, there are also likely to be times when investors are euphoric. I think 2021 was an example of this when almost everything displaying growth was loved by investors. We should be cautious around those times.
Buffett also has this gem of advice from 2001:
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.
In his 1997 annual letter, Buffett said:
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
Foolish takeaway
Warren Buffett doesn't try to predict where share prices are going to go in the short term. If he sees a wonderful business at a fair price, then he's willing to invest. For example, Taiwan Semiconductor Manufacturing recently entered the Berkshire Hathaway portfolio after Warren Buffett's business invested US$4 billion. He's still investing during this period and I think we can find some good ASX shares at the current prices.
If we waited until things seemed completely 'safe', share prices would probably have gone much higher. Plus, there always seems to something going on in the news, so it may be wise to ignore that noise.
