The S&P/ASX 200 Index (ASX: XJO) and ASX shares seem to have come back from the Easter break with a new spring in their collective step. At market close on Tuesday, the ASX 200 gained a very pleasing 1.25% at 7,309.1 points.
So is it a good time to buy ASX shares this week?
Well, I think the answer is 'absolutely'. But not because the markets are going up today. In fact, I would have even more conviction if it was a red day today. So let's discuss three reasons why I think it's a good week to buy ASX shares.
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Three reasons to buy ASX shares this week
King? Cash is still trash
You may be tempted to park any unused cash you have right now in a savings account or term deposit. To be fair, rising interest rates have made this option a lot more attractive over the past year. 12 months ago, it was difficult to find a term deposit yielding more than 1%. Today, you can nab one with an interest rate of up to around 5%.
But cash is still trash in my opinion at least compared to shares. Everyone should have a good store of liquid cash for that dreaded rainy day. But once you have enough money to fund an emergency account, history tells us that you get a bigger bang for your buck investing in shares.
Just a simple index fund like the Vanguard Australian Shares Index ETF (ASX: VAS) has averaged a return of 8% per annum over the past three years. Past returns are no guarantee of future success. But I'm willing to take my chances that history will repeat itself with this one.
Shares pay you income
Many investors like to buy assets that don't produce cash flow. Collectables, fine wine, fine art, gold and even Bitcoin (CRYPTO: BTC) all have the potential to appreciate in value over time. But these kinds of assets don't pay you passive income for the privilege of owning them like shares or property can do.
Most ASX 200 shares pay their shareholders dividends on a regular basis, many also come with additional franking credits, which can boost your income even further. Again, we'll look to the Vanguard Australian Shares ETF to illustrate.
Over the past 12 months, investors have enjoyed four dividend distributions from this index fund. These total $4.94 per unit, which, on current pricing, gives this ETF a trailing distribution yield of 5.43%.
This represents real cash flow, which you can use to pay bills, or else, reinvest into even more income-producing shares.
The best time to buy ASX shares is usually yesterday
Everyone knows the share market can be a volatile place. But you can gain some real perspective by zooming out and looking at what the market does over the long term, rather than the short term:
It's pretty obvious that shares go up far more often than they go down. And, as you can see above, the markets have never failed to exceed a previous all-time high in its long history. So mathematically, it makes sense to buy as many shares as you can today, without waiting for a better opportunity down the road.
