I believe that buying ASX shares is one of the best things we can do to grow our wealth over the long-term. But, sometimes there are better times than others to invest.
Over the past five and a half years, there have been a number of market sell-offs where investors have been presented with attractive prices to buy, including the COVID-19 crash, inflation fears in 2022 and 2023, and the US tariff pain in April 2025.
Markets have rebounded from each of those declines. Just look at the chart below, the S&P/ASX 200 Index (ASX: XJO) is close to its all-time high after rising approximately 10% in the last 12 months.
There are points that support both being cautious and being bullish.
Caution is warranted
When share prices rise faster than their earnings in the short-term, it leads to a rise in the price/earnings (P/E) ratio. Usually, when an ASX share's P/E ratio rises, it's seen as more expensive than before.
The longer a business has traded on the ASX, the longer the history investors can look at what its historical P/E ratio has been.
There are some ASX shares that are trading at a much higher P/E ratio than they have been over the last few years, including blue-chip names such as Commonwealth Bank of Australia (ASX: CBA) and Wesfarmers Ltd (ASX: WES).
Of course, just because something has risen doesn't mean it's not a buy. But, it does suggest they're more expensive. Currently, there are fewer ASX shares I'd call a buy today than in April 2025 or two years ago.
The last six months have shown that President Trump and his administration is capable of making decisions that were both unexpected by the market and can have significant impacts (such as the tariffs). US officials are supposedly still working on numerous trade deals with countries and the the 90-day tariff deadline is approaching.
All of the above is to say, I wouldn't bet the house on share market returns over the next 12 months before as good as the last 12 months.
But, I'm not saying we shouldn't invest either.
There are still reasons to be bullish
It's important to remember that the share market has delivered long-term success. Businesses are always working on growing their profits and that earnings growth is typically what drives share prices higher.
I expect that plenty of businesses will be able to grow their earnings in the coming years, helping them deliver shareholder returns.
There are some ASX shares that still seem materially undervalued to me and could deliver outperformance such as GQG Partners Inc (ASX: GQG), Siteminder Ltd (ASX: SDR) and Bailador Technology Investments Ltd (ASX: BTI).
Regular exchange-traded fund (ETF) investing can also still be an effective investment option. Benefits of ETF investing include diversification and long-term growth. I'm very attracted to quality-focused ETFs such as VanEck MSCI International Quality ETF (ASX: QUAL), VanEck Morningstar Wide Moat ETF (ASX: MOAT) and Global X S&P World EX Australia GARP ETF (ASX: GARP). While I'm less excited than I was in April, I still think there are plenty of opportunities out there. I have bought ASX shares in June and I'm expecting to buy more in July 2025.
