The ASX share market is an incredible vehicle for growing wealth. But, it's also one of the most volatile types of assets we could invest in.
But, I don't view volatility as a problematic risk, it's just something to watch with curiosity. We don't have to act when the market is going through extraordinary gyrations.
I think there are a few factors that investors should keep in mind with ASX shares, or any type of shares, particularly in this period of uncertainty with higher inflation, interest rate uncertainty, conflict, energy costs and so on.
Image source: Getty Images
Unknown events regularly happen
The Iran war took the global investment community by surprise, leading to a sizeable market drop.
The US tariffs last year were a big surprise, leading to a big drop.
Inflation in 2022 and 2023 was surprising for the market, significantly hitting share prices.
COVID-19 led to a major decline of the ASX share market, with a huge fall of valuations during 2020.
Each of those events were a one-off. But, something happens so regularly that I've just become accustomed to the volatility and I view those times as buying opportunities because of my confidence that normality will resume sooner or later.
It's not just my positive mindset that gives me confidence to invest and hold during uncertain periods. History has shown how the world typically bounces back. Additionally, many leaders and institutions are trying to help the country navigate negative periods, as we saw during COVID-19 (and the GFC).
There are always opportunities
Sometimes the market is priced very negatively and other times very highly – occasionally hitting a new all-time high – and it can feel hard to invest at those times.
During market highs, not everything is trading at an all-time high, there are usually pleasing opportunities hidden underneath the surface, even if the blue-chips are trading attractively.
Smaller names and certain sectors can be mis-priced by the market if investors aren't taking into account where an investment could be in three years from now.
For example, right now, I think several real estate investment trusts (REITs) like Rural Funds Group (ASX: RFF) and Centuria Industrial REIT (ASX: CIP) are attractively priced because of fears about higher interest rates.
Also, certain ASX tech shares look significantly oversold because of AI worries, such as Siteminder Ltd (ASX: SDR), Pro Medicus Ltd (ASX: PME) and TechnologyOne Ltd (ASX: TNE).
When markets fall, I get particularly excited when the market suffers a widespread sell-off because there are opportunities galore.
Long-term investing filters out the noise
One of the main reasons why I'm not at all bothered by significant volatility is because I'm investing for many years to come.
If we're investing with 2030 or 2040 in mind, does it really matter what happens in 2026 or 2027? I don't think it should.
I try to only invest in ASX shares that I'm holding for the long-term and that I'd be excited to buy more of if the share price fell. That way, market declines seem like significant opportunities rather than something to worry about.
If the market rises or falls from here, I won't let it affect my strategy – invest in good investments with compelling futures, at valuations that aren't too expensive.
