The ASX share market has been a great place for investors to grow their wealth over the long term. But is right now a good time to invest? The Motley Fool's Scott Phillips has the answer.
But before we get to that, let's take a quick look at what's been happening for ASX stocks in recent times.
You will have seen a lot of negative headlines over the last 12 months about inflation and interest rate rises. There has also been significant share market volatility since the start of 2022.
Going a little further back, we also saw considerable turmoil on global stock markets during 2020 as the world faced shutdowns due to the pandemic. When we look back around 15 years ago, share markets worldwide suffered through the GFC in one of the worst crashes ever. The S&P/ASX 200 Index (ASX: XJO) dropped more than 50% between November 2007 and March 2009.
But over the past century, notwithstanding all the crashes, all the recessions, all the political unrest, and other periods of uncertainty, the ASX share market has achieved an average return per year of between 9% and 10%.
Of course, past performance is not a reliable indicator of future performance but a century's worth of healthy average returns is pretty compelling!
When is the best time to invest in ASX shares?
No one knows what the share market will do next year, next month, or even next week.
If I had a crystal ball that could tell me when the share market would take a dive, then buying at the lowest point would be easy.
But investing never comes with that level of certainty. If we only ever waited to 'buy the dip' in stocks, we might never invest at all. And whilst this may mean paying a little more for stocks than you would have if you'd bought at the bottom, isn't this preferable to missing out on years of compounding while waiting and watching from the sidelines?
So while we can't control the daily movements of stock markets, we can take control of our financial futures. We can do this by saving and realising the magical benefits of compounding by actually taking the plunge and investing.
As Scott Phillips recently wrote to Motley Fool Share Advisor members, the reason many investors don't achieve their financial goals is that they never actually start investing. Instead, they are constantly waiting for an opportunity to buy at a better price (which incidentally may never come!). Or, perhaps they'll buy one or two stocks that fall in value, and then they'll give up altogether.
Scott is passionate about helping all sorts of people grow their wealth, but investors need to actually buy stocks. Writing to Share Advisor members, Scott said:
I can only take you so far.
I can beg. I can plead. I can prostrate myself on the ground in desperation.
But I can't buy the stocks for you.
Only you can do that.
So my only message to you today is simple.
Please – PLEASE – start buying.
So yes, ASX shares could go down over the next month or year, but they could also go up. The point is that unless the Aussie share market has reached its absolute peak for the first time EVER, by investing in a diversified range of shares now (or any other time!), you stand to grow your wealth over the long term.
And don't forget, there's no need to jump in with all your investment funds in one go. Maybe consider dollar-cost averaging to spread your risk but, as Scott says, the key is to start investing.
Which ASX shares to invest in?
Obviously, all investing comes with risks. And not everyone has the appetite for picking stocks. But if you are keen to invest in individual companies, remember to do your research and appreciate the fact that not even the world's smartest and most successful investors get it right all of the time.
In his recent communication to new members, Scott Phillips conveyed some reassuring advice from Peter Lynch, one of the world's greatest fund managers who has amassed a $500 million fortune through investing:
Remember Peter Lynch's line that if you're good in this game, you're only going to be right six times out of ten. If you only buy one stock, you're essentially tossing a coin…and that's no way to invest!
Diversification is crucial to reducing risk in an investment portfolio. Investors can diversify their portfolios by buying an array of individual stocks across different sectors and/or markets. Index-based exchange-traded funds (ETFs) are also a great way to spread investment risk without the need to buy individual shares.
Foolish takeaway
There will most likely be many trading days later this year when ASX shares are cheaper than today. But there may also be plenty more days in the future when share prices have risen compared to today. Therefore, today could well be the perfect time to buy. Scott finished his message to Share Advisor members with this rallying call:
Please, help me – and you – out.
Buy. Shares. Today.
