Today is a historic day. The S&P/ASX 200 Index (ASX: XJO) has set a new record high of 7,969 points, pulling the wealth of Australians invested in ASX stocks higher along with it.
We have made it… except if you're investing in shares for the long term like I am, you'll know the journey doesn't end here. There are still decades of compounding to be captured.
The global economy doesn't take its foot off the gas because the stock market hit record levels. In fact, it's just another day for most of the world, with countless people blissfully unaware of the value assigned to corporations by investors and speculators alike.
Including today's rise, the ASX 200 Index is up 11.5% in the past year before dividends. That alone might make some investors apprehensive about buying ASX shares now.
Call me crazy, but it has basically zero influence on my decision to invest right now.
Is now the 'right time' to buy ASX stocks?
Is it the 'right time' to invest when the market is at an all-time high? The short answer is, "It can be". But in truth, it's probably the wrong question to be asking.
Once we begin thinking about the timing of investment, we enter the realm of stock trading, not investing. And I don't know about you, but all those squiggles on charts make about as much sense as the pattern of tea leaves in the bottom of my cup.
Here are three reasons why buying ASX stocks even now can be reasonable for an investor.
Taking advantage of dollar-cost averaging
The simple act of making regular investments, come rain or shine, is a free kick for patient shareholders. It's an action called dollar-cost averaging. I use this cost-smoothing tool every week to remove the emotion from a large portion of my portfolio.
Like clockwork, I buy more ASX shares every Wednesday. Sometimes, I buy before a fall; other times, it's before a rally. In the long run, it should average out to provide a decent return without letting my ape-like brain get in the way of compounding.
Herd mentality creates opportunity
Secondly, just because the overall Australian share market is at record highs doesn't mean there are no pockets of opportunity.
The S&P/ASX All Ordinaries Index (ASX: XAO) is up 11.7% for the past year. Yet, around 260 companies in the top 500 are down compared to a year ago. Further still, only 192 ASX stocks are up as much or more than the market. Even more important, a company's shares can be up 20% and still be 'cheap'.
A keen-eyed investor can still find good value. So much attention has been drawn to the AI hype that great companies are going unnoticed elsewhere.
Don't tempt fate
Saving the best for last. The stock market loves to make a mockery of the self-described 'geniuses'. You know, the people who have been warning of a crash every year for the last 10 years.
It turns out they were right in 2015 and 2020. The only problem is that if you had waited on the sidelines all these years, you would have missed out on a 45% increase (plus dividends), as shown below.
Basically, the past shows that if we stay in the market long enough, the crashes don't matter, but trying to dodge the falls will.
I think it's better not to try to be the 'wise guy' in the market. As the late and great Charlie Munger said, "If you want to become rich, stop trying to be 'intelligent' and aim for 'not stupid' instead."
Something tells me that buying ASX stocks consistently, no matter what, is 'not stupid'.
