Last year likely proved torturous for some ASX investors as shares on the index plummeted.
The S&P/ASX 200 Index (ASX: XJO) fell more than 5% in 2022 while major indices in the United States fell into bear territory.
But I believe there's a silver lining to the downturn. It's likely left many ASX shares trading at bargain prices, and they might well be ripe for the picking for long-term investors.
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Making the most of a downturn
Like many investments, ASX shares experience volatility from time to time. When such volatility results in upwards movements, investors rejoice as their wealth compounds.
However, when the market moves lower, many investors are tempted to pull their money out.
But I think withstanding the discomfort – and even leaning into it – could ultimately help my financial position.
As legendary investor Warren Buffett once wrote:
[B]e fearful when others are greedy and be greedy only when others are fearful.
The billionaire also noted he doesn't track "fear and greed" (the pair assumably manifest as bull and bear markets). Instead, Buffett simply invests in companies he believes are high quality when they're trading at a good price – a technique known as value investing.
And when he finds such a company, he buys to hold. As Buffett famously says, if you wouldn't want to own a share for 10 years, you shouldn't own it for 10 minutes.
Cheap ASX shares and where to find them
Fortunately, downturns tend to leave plenty of quality share trading at bargain prices. Interestingly, however, some ASX sectors were worse hit by 2022's slump than others.
For instance, soaring oil, gas, and coal prices helped the S&P/ASX 200 Energy Index (ASX: XEJ) gain nearly 40% over the 12 months ended 31 December 2022.
Meanwhile, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) and the S&P/ASX 200 Real Estate Index (ASX: XRE) each dumped 23%, while the S&P/ASX 200 Information Technology Index (ASX: XIJ) plummeted 34%.
Tumbles of such magnitude are typically few and far between. And while they've likely been devastating for some, I think they've provided a rare wealth-building opportunity.
Because the market has historically recovered from downturns to post future gains, such embattled sectors are where I'd start hunting for cheap ASX shares I believe could help me get rich.
