Buying and investing in ASX shares can arguably be called both a science and an art. Sifting through companies' financial statements, establishing revenue or earnings projections and working out what price to pay are all very scientific.
But learning to master the rollercoaster of emotions, whilst ignoring the instinct to follow the herd when investing, now that's an art form.
Many investors have mastered the 'science' of investing, only to come undone when the emotional strains of a bearish stock market (or worse, a stock market crash) get the better of them. Few things will ruin your wealth faster than selling out of your shares at the bottom of a market slump.
It can be excruciating to watch your hard-earned money evaporate during a market crash. That lack of control, plus seeing your investments fall to the value that they last had several years ago, is an enormous burden for almost any investor to shoulder.
And yet, it's during these times that many investors make the majority of their investing fortunes.
Mastering the art of acting as a contrarian, and buying when others are selling can be one of the biggest gifts you can give to your personal wealth.
After all, the legendary investor Warren Buffett probably wouldn't be nearly as rich as he is today if he hadn't spent almost every stock market crash of the past six decades buying up companies like a drunken sailor.
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Buying ASX shares with Buffett's wisdom
It's Buffett we can turn to for some of the most prescient wisdom when discussing this art.
Chances are you've heard the Buffett quote "Be greedy when others are fearful, and be fearful when others are greedy".
It refers to this very topic. But here's a quote that I like better:
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.
Here's another one to put on your wall:
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.
Whenever a bearish market rolls around (which it always eventually does), I feel uncomfortable, just like everyone else. However, I tell myself every day when I see that sea of red ink that I'm witnessing a stock market sale.
Thus, I try and buy as many marked-down quality shares as I can afford. I've been through a couple of these events now. And every time I have done this, it's been vindicated by a market recovery soon afterwards.
So next time the bears come knocking at the market's door, make sure you keep Buffett's wisdom in mind. Buying cheap ASX shares is not an art because it's easy.
