Whenever markets get volatile or certain ASX shares fall out of favour, I find myself thinking about Warren Buffett and one of his most famous ideas: be greedy when others are fearful.
It sounds simple, but it's surprisingly hard to do in practice. When share prices are falling, confidence is usually low, headlines are negative, and it feels far more comfortable to sit on the sidelines.
Yet history shows that some of the best long-term returns are earned by buying quality businesses when sentiment is poor and prices are depressed.
That's exactly the mindset I'm trying to apply when looking at cheap ASX shares today.
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Why Buffett focuses on quality first
Buffett has never been interested in buying something just because it's cheap. The price only matters once the quality box has been ticked.
He looks for businesses with competitive advantages, strong cash generation, and management teams that allocate capital sensibly. Once he finds those traits, he waits patiently for the market to offer them at attractive prices.
That's an important distinction. Buying low-quality ASX shares at cheap prices can be a value trap. We want to avoid those at all costs. Buying high-quality shares at discounted prices is where long-term wealth is built.
Fear creates opportunity in the share market
Markets don't move on fundamentals alone. They move on emotion, expectations, and narratives.
When fear takes hold, investors often extrapolate short-term problems far into the future. Earnings disappointments, temporary margin pressure, or macro headwinds can push share prices well below the underlying business' long-run value.
I would point to WiseTech Global Ltd (ASX: WTC) and CSL Ltd (ASX: CSL) as prime examples of this.
This is where Buffett's philosophy really resonates with me. He's never tried to predict short-term market moves. Instead, he's used periods of pessimism to accumulate stakes in great businesses at prices that improve future returns.
On the ASX, these opportunities often appear when entire sectors are out of favour, not because every company is broken, but because sentiment has turned. Take a look at the tech sector to see this happening right now. Countless ASX tech shares, such as Xero Ltd (ASX: XRO) and Pro Medicus Ltd (ASX: PME), are being sold off despite continuing to grow strongly.
Cheap doesn't mean risk-free
Buying cheap ASX shares doesn't guarantee success. Some businesses deserve to trade at lower prices, and not every sell-off is an overreaction.
However, paying less for quality assets stacks the odds in your favour. A lower entry price can provide a margin of safety. It gives earnings time to recover, dividends room to grow, and sentiment the chance to normalise.
Over long periods, returns are driven by what you pay and how the business performs, not by short-term price movements after you buy.
How to apply this with cheap ASX shares
When I look at the market now, I'm not trying to call the bottom or guess what happens next quarter. I'm asking a different question.
Would I be happy owning this business for the next 5 or 10 years if the share price didn't move for a while?
If the answer is yes, and the valuation looks reasonable compared to its history and long-term potential, that's when I start paying attention. That mindset has served Buffett well for decades, and I think it translates well to ASX investing.
Foolish Takeaway
Warren Buffett's success wasn't built on clever trading or perfect timing. It was built on patience, discipline, and a willingness to buy quality businesses when others were too fearful to do so.
By focusing on strong ASX shares and waiting for attractive prices, investors give themselves a far better chance of building wealth over time.
