Investing in ASX shares can be a stressful thing if volatility sends the value of one's portfolio down hundreds or even thousands of dollars over the space of a day or a week.
First of all, remember that the market is simply giving investors a price for an investment on any given day. We don't have to do anything (buy or sell) with the price on that day, whether it's a bit higher or a bit lower than yesterday.
Sometimes price visibility isn't helpful – share prices can move a lot, as there are different buyers and sellers each day, and different events occurring. Think of it this way – we don't see the actual price someone is offering for our house each day, but if we did it could show big changes.
I think it's great how we can buy and sell ASX shares, any weekday that we want to.
However, there are a couple of elements that make me sleep easy at night.
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Opportunity rather than stress
Share prices regularly fall, but they regularly go up as well. Hopefully, our ASX shares will go up over time.
It's not ideal for our ASX shares to go down in value, so that's why I only invest in businesses that I would want to buy more of if they went down in value. If I know a business well and believe in its future then it's an easy decision to buy more shares.
I know there are going to be market bumps along the way, so widespread falls don't worry me about my individual companies.
Market declines are a great opportunity to buy our favourites at discounted prices. That's why I get excited about market falls rather than feeling worried.
Warren Buffett, the legendary investor, once said:
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.
Durable ASX shares
The confidence in my portfolio doesn't just come from blind hope. I've chosen businesses I think that can deliver strong performance in good times and resilient performance in difficult times.
We can't control what share prices do, but if the profit is resilient then that gives good justification for potential outperformance during difficult times.
Some of the biggest positions in my portfolio have strong asset bases that provide consistent cash flow, with businesses like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Duxton Water Ltd (ASX: D2O) and Rural Funds Group (ASX: RFF).
Technology businesses can provide big returns, but they can suffer sell-offs during market volatility. So, businesses with recurring revenue can provide stability, which is partly why I have the ASX tech shares Altium Limited (ASX: ALU) and Bailador Technology Investments Ltd (ASX: BTI) in my portfolio.
I also like an ASX mining share name like Fortescue Metals Group Ltd (ASX: FMG) because it can provide returns that are differentiated to the general Australian economy (like banks and retailers).
When putting these sorts of names together in a portfolio, I'm happy with the long-term prospects of them and it helps me sleep really easily at night.
