The ASX tech share space has been a painful place to be invested over the last few months. Some investors have decided to hit the sell button. But, that's not the strategy I'd choose to go with right now.
I think it's important not to be too influenced by the share price movements. I wouldn't buy something just because it has gone up in value and I wouldn't sell something just because it has gone down.
The cliché phrase to make money with the share market is 'buy low, sell high' not 'buy high, sell low'.
So, there are a few strategies I'd think about in this situation.
Image source: Getty Images
Stick with it
It's not ideal to see our portfolio values fall, particularly when the decline is around 50% (or more).
However, the huge drops we're seeing don't necessarily mean there has been a deterioration of business profitability. Yes, AI may affect some businesses and industries. But, don't forget that AI could also assist profitability at certain companies that have been sold off.
Either way, Warren Buffett – one of the world's greatest investors – once made this very astute observation:
The stock market is a device to transfer money from the impatient to the patient.
It's at times like this that I think investors need to be patient with good businesses/investments, even when share prices fall.
There are certain times when share prices look expensive and there are times when share prices become dramatically cheaper.
For me, ASX tech share volatility is not a bad thing, instead I think it's a great opportunity to buy shares at a much cheaper price.
Look for (ASX) share opportunities
Bear markets can be stressful times, but for patient investors they seem like the best time to invest.
As Warren Buffett once said:
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
Buying at lower prices can help unlock bigger long-term returns and create better margins of safety for investors. I'm looking at ASX tech share names like TechnologyOne Ltd (ASX: TNE) and Xero Ltd (ASX: XRO).
I also try to only buy investments that I'd be excited to buy more at cheaper prices. That way, declines can be seen as an opportunity (and hopefully fairly short-term) for investors.
Look at ASX defensive shares
I believe investors should regularly put money towards building their portfolio. If investing in heavily sold-off ASX tech share seems too risky, then investing in defensive areas of the Australian economy could be more reassuring.
Names like Telstra Group Ltd (ASX: TLS), Coles Group Ltd (ASX: COL), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Wesfarmers Ltd (ASX: WES), APA Group (ASX: APA) and so on could be smart buys, in my view.
If they can deliver resilient profits then the share prices could hold up better than other areas of the market, as we've already seen over the last few months.
