The S&P/ASX 200 Index (ASX: XJO) has taken a dive in the last several weeks, falling by more than 7% since the start of March. Some investors may want to invest in ASX shares but are cautious about the market falling even further.
It is possible the ASX share market could decline further. The Strait of Hormuz remains shut to most vessels, inflation is bubbling and certain costs are going up. I'm not about to make any predictions of when things will start improving.
But, I'm also optimistic about the long-term and I'm seeing plenty of opportunities around for Aussies to take advantage of. So, how are we supposed to invest during these worrying times?
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Dollar cost averaging
The idea behind dollar cost averaging (DCA) is that you don't put all your available investing dollars into the market at once.
Investors steadily put their money into buying (ASX) shares regularly. During a bear market, this means they are able to keep investing even as the market goes lower.
It's up to each individual investor to decide how much they invest and how regularly they do it. Someone who has been waiting for a period like this with a pile of cash may decide to invest an amount (such as around $1,000) each week (or even each day if the market is plunging).
Other investors may be utilising a DCA strategy for all of their investing month after month, year after year.
I regularly invest each month with money my household has saved, but, in addition, I also have a separate amount that I've been regularly putting bit by bit into the market as it falls.
That separate amount could be parked in an offset account or high interest savings account until it's needed. Not every single dollar of cash needs to be invested at all times for it to be useful for our finances (and portfolio).
Be brave
Part of a winning strategy during this period is staying calm and thinking about the long-term potential of one's portfolio.
Share prices don't fall for no reason, there's usually something that's affecting market confidence such as a pandemic, high inflation or jumping oil prices. These impacts don't last forever.
It's not easy to invest at times like this, but that's why share prices have fallen to such an attractive level.
ASX growth shares like Temple & Webster Group Ltd (ASX: TPW), Breville Group Ltd (ASX: BRG), Pro Medicus Ltd (ASX: PME), Tuas Ltd (ASX: TUA) and Pinnacle Investment Management Group Ltd (ASX: PNI) are just a few of the names that have great long-term prospects, in my view.
As Warren Buffett once said:
Be fearful when others are greedy and greedy when others are fearful.
The lower the ASX share market goes, the more I'm motivated to invest. Historically, the share market has recovered from negative times, even if it takes a while to do so.
