A common refrain I often hear from ASX investors when asked what ASX shares they are buying next is this: 'I'm waiting for the next stock market crash to buy'.
One of the first things we are all told about successful investing is 'buy low, sell high'. So a natural instinct for the budding investor is to attempt to pay this out. The idea seems beautifully simple: buy shares when they are cheap, and sell them when the markets are overvalued – repeat and make money.
When I first started my own investing journey, I too tried this approach and was woefully unsuccessful.
So since then, my approach has evolved. I'm not waiting for a stock market crash to buy shares. That's not the same as saying that there won't be a stock market crash in 2023. For all I know, there could be.
But I'm not basing my decisions on what the markets may or may not do going forward. Mostly because the markets are impossible to predict.
Let's turn to the advice of the legendary investor Warren Buffett for some clarification.
Buffett isn't waiting for the next stock market crash
Warren Buffett doesn't buy shares with the intention of selling them. He once said this:
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
Another great Buffett quote to keep in mind is this one:
All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.
As Buffett implies, it is a dangerous idea to base your investment decisions on what the markets may or may not do next. It is far more important to find a top-quality investment and identify a good price to buy it at. Sure, if a company is overvalued, perhaps you should wait and look somewhere else for your next investment in the meantime.
But if you wish to stockpile your money for that next market crash, you might be waiting years. Those missed years will have you missing out on compounding earnings and dividend income. And buying at the right point of a market crash is difficult anyway.
So I'm not waiting for the next stock market crash to invest. I'm looking for bargains on the share market today that I can take advantage of. I would humbly suggest that all investors look to Buffett's teachings for investing wisdom, and not for the next market crash to invest.
