ASX shares and the Australian share market have rebounded dramatically following the turmoil in early April that we saw following the haphazard tariff announcements out of the United States. Since 9 April, the S&P/ASX 200 Index (ASX: XJO) has surged by almost 16%, despite a small drop so far this Wednesday.
Additionally, last week, we saw the markets finally break the all-time record high that was set in February, with the ASX 200 topping out at 8.639.1 points on 11 June.
This galloping recovery has resulted in many ASX shares hitting new heights of their own. Most famously, of course, was Commonwealth Bank of Australia (ASX: CBA), which smashed through $183 a share on 11 June as well.
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ASX shares have a record June
This red-hot share market has been great for investors with a lot of capital in the markets already. However, it's been less exciting for investors who are looking to buy more ASX shares and build long-term wealth.
I speak from personal experience here. There are many quality ASX shares that I would love to buy or add more of to my portfolio. However, I cannot do so at the current price, given how high valuations have become.
For example, I would relish the chance to buy more Wesfarmers Ltd (ASX: WES) shares. But, at a price over $84 and at an earnings multiple of 36.66, that won't be happening anytime soon.
It's a similar story with Washington H. Soul Pattinson and Co Ltd (ASX: SOL), National Australia Bank Ltd (ASX: NAB), and Coles Group Ltd (ASX: COL).
And it's even worse if you want to add some of the ASX's market darlings. I've long wanted to own TechnologyOne Ltd (ASX: TNE) and REA Group Ltd (ASX: REA) shares. However, at current pricing, these ASX high flyers are on earnings multiples of 100 and 50, respectively. That's a little rich for my taste.
So, what to do?
Well, investors have three options.
How to invest in an excited market
Firstly, they can wait in cash for a better buying opportunity, Warren Buffett-style. This might seem sensible in theory. However, no one knows how long the markets and these ASX shares will stay at elevated levels. The longer you have money outside the markets, the more you might miss out on potential returns.
Secondly, you can look for undervalued shares. The problem with this approach in a market like the one we are in is that the cheap shares are cheap for a reason. For example, Woolworths Group Ltd (ASX: WOW) is currently in a bit of an existential crisis, with management working on a turnaround plan to recover lost market share to Coles.
Buying a company like Woolworths at the current time means you are taking a bet that you know something the market doesn't. Always a tricky (although not impossible) tightrope to walk.
Thirdly, one can always invest in index funds. Index funds rise and fall alongside the broader market. But if you employ a dollar-cost averaging strategy or similar over long periods of time, you can still come out ahead. For this to work though, you need to make sure you are consistently buying through all market conditions, not just when the markets are hot. Otherwise, you are just picking up shares when they are at their most expensive points in the cycle.
Foolish Takeaway
Investing at a time like this can be fantastic if you've already deployed substantial amounts of capital in the markets. But navigating new buys at this time is a tricky process. I would advise all investors to keep their eyes on the horizon without deviating from the emotionally detached investing strategies that have been proven to work in the past.
