Is right now a good time to buy ASX shares or should I wait?

With the All Ords up 12% in six months, should I buy ASX shares right now?

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Sitting on some extra cash and wondering if now is the right time to buy ASX shares.

You're not alone.

The All Ordinaries Index (ASX: XAO) has underperformed the stellar run we've witnessed on the S&P 500 Index (SP: .INX). But investors buying a diversified basket of stocks a year ago should have handily outpaced inflation as well as the returns they might have earned from a cash term deposit.

Over the past year, the All Ords has gained 8.0%. So far in 2024, the index is up 2.6%.

That compares to a 25.4% 12-month gain posted by the S&P 500, which is up 9.4% in 2024.

With those gains in mind, is right now a good time to buy ASX shares? Or should investors bear in mind the old adage to 'sell in May and go away'?

Here's what the experts are saying.

The case to wait

Making the case not to rush out and buy ASX shares just yet is Will Hamilton, managing partner of Hamilton Wealth Partners.

Hamilton points out that the strong run enjoyed by the markets has been driven by expectations of multiple interest rate cuts from the US Federal Reserve.

Now, he notes, "The odds of no easing in 2024 [are] rising, but also the once-unthinkable prospect of the Fed having to raise rates again is possible."

According to Hamilton:

I feel we are entering a classic 'sell in May and go away' as traders square their books for the northern summer and market expectations drift lower. After the extreme optimism this is not a bad thing and can set the remainder of 2024 up for a reason to remain optimistic.

If Hamilton has it right, you may wish to hold onto your investment cash and buy ASX shares a little later in the year.

The case to buy ASX shares now

Nucleus Wealth's Damien Klassen quotes legendary investor Warren Buffett in his case that now is a great time to buy ASX shares.

"In the short run, the market is a voting machine, but in the long run, it is a weighing machine," Warren Buffett famously said.

"So in the short term, anything can happen but over the long term, the returns that tend to show up are very likely to be positive and reflective of business growth," Klassen says.

And investors buying ASX shares now who have longer investment horizons should enjoy lower risks than short-term investors.

According to Klassen:

The longer your time horizons are and the longer you hold your investment for, the lower your true risk of capital loss is because you have time to ride out any short-term corrections. There is also more chance that your investment will increase over time with the natural appreciation of markets and therefore your risk will reduce.

And he cautions on the dangers of trying to time the market and waiting to buy stocks at their lows.

"Many people are waiting for the market to fall and then they will invest," he said.

He continued:

However, this can be a risky strategy that leaves many investors on the sidelines for years not knowing when to get into the market (or back into the market). With capital sitting in cash in the current climate you are receiving a negative real return after inflation is taken into account which is not a great strategy.

And he believes investors shouldn't let uncertainty over what may happen over the weeks ahead hold them back from buying ASX shares.

"Uncertainty is nothing new and it needs to be expected and embraced," he said.

Klassen concluded:

My bet is that history will likely repeat itself, and we will look back at this time in the future and wonder what everyone was worrying about and were very glad we invested for the long-term when we did.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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