If you've been following the ASX share market news recently, you'll know that the S&P/ASX 200 Index (ASX: XJO) has been hitting all-time highs, as we can see on the chart below.
Within the ASX 200, plenty of ASX shares recently hit all-time highs, too, such as Commonwealth Bank of Australia (ASX: CBA), JB Hi-Fi Ltd (ASX: JBH), WiseTech Global Ltd (ASX: WTC), Pro Medicus Ltd (ASX: PME), REA Group Ltd (ASX: REA) and more.
One of the most famous pieces of investment advice is "buy low, sell high".
With plenty of ASX shares hitting highs, some investors may be wondering whether now is the time to sell.
Let the winners run
The overall share market return comprises the return from all the different businesses. However, only a certain number of them deliver strong market outperformance over the long term.
Those big winners don't usually turn into rubbish businesses overnight. Names like WiseTech Global, Pro Medicus, and REA Group have kept generating bigger profits over the years, enabling them to regularly hit new all-time highs.
It would have been a mistake to sell those great ASX growth shares five years ago, considering the gains they have delivered since. We don't need to interrupt the great power of compounding – if they have a great future, then I think continuing to own them makes sense.
Plus, there's no need to activate a capital gains tax event unnecessarily. If I were thinking about selling, I'd want to know if there is a better opportunity to switch to (whilst taking into account the friction of paying tax and brokerage). Are there actually better ideas than what we currently own?
Cyclical and low-growth ASX shares
ASX mining shares are notoriously volatile because commodity prices go up and down due to changes in supply and demand.
We don't need to wait for all-time highs to sell or all-time lows to buy the miners, but I think it's quite possible to make good returns by being brave and investing when there is widespread pessimism.
For example, since this article I wrote on 10 September 2024, the Rio Tinto Ltd (ASX: RIO) share price has risen more than 17%, the BHP Group Ltd (ASX: BHP) share price has gone up over 16%, and the Fortescue Ltd (ASX: FMG) share price has climbed more than 26%.
I'd also consider selling businesses that have reached all-time highs if their earnings growth looks slow and challenged for the foreseeable future. CBA shares were/are a contender for selling, in my view, because their valuation has risen a lot, yet profit is actually going backwards, and competition remains strong.
The CBA share price run-up appears to have happened due to indiscriminate buying by institutional funds rather than positive calls on its future prospects. I believe there are numerous ASX shares that have the potential to deliver higher profits over the next five years at more attractive valuations.
The bigger a business becomes, the more mature it is and the less growth it may achieve in the future.
