The Australian share market had a surprisingly strong 12 months during the last financial year.
Despite rising interest rates, geopolitical tensions, and the prospect of a recession, the S&P/ASX 200 Index (ASX: XJO) recorded a gain of almost 10%.
In light of this, it could be argued that waiting for the next share market crash before buying ASX shares would be a smart move. After all, no bull market lasts forever.
But is that really the case? Well, that's the million-dollar question.
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Should you wait for a market crash to buy ASX shares?
Timing the market is inherently difficult. Nobody knows what is around the corner. A crash could come next week, next month, or next year. It could also not come for several years.
The danger with waiting for a market crash is that the ASX 200 index could rise a further 30% before it crashes by 10%.
So, in effect, you are waiting to pay 20% more for shares than you would have paid if you had just invested today.
How do you overcome this?
Instead of trying to time the market, investors may be better off making regular investments in ASX shares using a dollar-cost averaging strategy.
Using this strategy with a diverse group of high-quality ASX shares helps to mitigate the impact of market volatility by spreading your investments over time. This reduces the risk of investing a large sum at a market peak.
In addition, it allows you to take advantage of lower prices during market downturns, potentially increasing your long-term returns.
Thirdly, dollar cost averaging provides a disciplined approach to investing, which helps you avoid emotional decision-making.
All in all, this appears to support the view that investors shouldn't wait for a market crash to buy ASX shares.
