Knowing when, and how much, to invest in ASX shares can be a tricky process. On one hand, we're told to invest in cheap ASX shares by 'buying low' and 'selling high'. But on the other, we're told not to 'time the markets' and that 'time in the market beats timing the market'.
So how does one reconcile these two seemingly opposed pieces of advice?
Well, to hopefully shed some light on this question, let's discuss how I'm planning on investing in 2024.
I'm an investor who loves getting quality ASX shares for cheap, bargain basement prices. It was Warren Buffett who told us that price and value aren't the same thing on the stock market. His exact quote was "price is what you pay, value is what you get". So if you do manage to snag a cheap ASX share below what it's actually worth, you're doing something right.
His late, great business partner, Charlie Munger, expanded on this by stating that, "No matter how wonderful a business is, it's not worth an infinite price". So these two great men are clearly telling us that successful investing involves looking out for quality businesses that are also cheap shares.
However, there are periods when the market is booming and cheap ASX shares become harder and harder to find. Investors like Buffett typically stop buying shares altogether during these periods.
How to build wealth by buying cheap ASX shares
Saying that, I think that most of us mere mortals shouldn't do this because it is a form of market timing. Buffett is an investing master, so he can afford to do as he sees fit. But market timing doesn't work well for the vast majority of other investors.
So here's what I do. I have a list of quality ASX shares that I'd be happy to load up on at the right price. Often, at least one of these ASX shares is cheap, or at least going for a reasonable value, at any given moment. So if I have funds to spare for my investing portfolio, that's where I'll put them.
Some of my favourite names include Washington H. Soul Pattinson and Co Ltd (ASX: SOL), National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES) and CSL Limited (ASX: CSL). I might also consider some US shares too, such as Apple Inc (NASDAQ: AAPL), Adobe Inc (NASDAQ: ADBE) or Airbnb Inc (NASDAQ: ABNB). Perhaps even Buffett's own Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B)
However, if there are no cheap ASX shares that take my fancy, I invest the money in index funds instead. I think putting extra cash in an index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) or the Vanguard MSCI Australian Small Companies ETF (ASX: VSO) is a better long-term bet than leaving it in the bank.
This is how I'll continue to invest in 2024. I'll look for cheap ASX shares, and if that fails, I'll turn to some trusty index funds. In my view, this investing strategy is a good bet for building long-term wealth.
