After an extremely volatile January, the Australian stock market burst out of the gates in February, climbing 8% since hitting a low of 5,052 points. The rise is thanks to an improving global economic backdrop as well as a stellar earnings season from some of Australia's largest companies.
With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) now hovering around a five-and-a-half-year high (which it achieved on Tuesday), Australian shares are clearly not trading at the heavy discounts that they were just weeks ago, and investors are wondering whether they have missed the boat – whether the opportunity to buy shares has passed and if they should now be waiting for another dip in the market.
It can certainly be tempting to wait. After all, a number of analysts have suggested that the market could be ready for a sizeable correction considering its strength in recent weeks. Indeed, the index has retreated over 50 points since hitting a high of 5,461.7 points on Tuesday. So is this a sign that it's on the way down?
It very well could be. For all we know, the market could fall below 5,000 points in the next two weeks, whereby investors would lose sizeable chunks of money if they invest today.
On the other hand, that correction may never come. While some analysts maintain a pessimistic outlook on the local market, others believe it is headed as high as 6,000 points by the year's end. If you chose to wait for a pullback, you could miss out on the 11% upside between now and that point in time (should it occur).
Many investors know exactly how that feels. While many approached 2013 with a bearish outlook, the local market rallied more than 15% – one of its best annual returns in years! They missed out on the rallies of some of Australia's largest companies and the generous dividends they paid. Take Telstra Corporation Ltd (ASX: TLS) or the big banks, namely Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) or Australia and New Zealand Banking Group (ASX: ANZ) as perfect examples.
Foolish takeaway
Time and time again, investors choose to wait for an even better price. That could mean the difference of a few cents or a few measly percentage points. Obviously we all want to get our stocks at as cheap a price as possible, but choosing to wait could be much more costly for your overall wealth.
Although the market is sitting near its highest level in years, there are still plenty of stocks investors can choose from. At today's prices, I'm particularly interested in the likes of global packaging business Amcor Limited (ASX: AMC) and out-of-favour beverage distributor Coca-Cola Amatil Ltd (ASX: CCL). There are also a number of small-cap stocks which are still trading at incredible prices.
