It has certainly been a bit of a wild ride on the S&P/ASX 200 Index (ASX: XJO) and the ASX share market over the past six weeks or so.
Between the start of June 2023 and today, the ASX 200 has appreciated by 0.6%.
But that hides the fact that the ASX 200 has fluctuated between as low as 7,000 points and as high as 7,360 points during this period. That's a difference worth close to 5% – indicating some rather severe volatility infected the ASX share market:
Few investors enjoy volatility. We don't like to have our capital changing value outside of our control, especially over such a short space of time. Volatility like that is enough to make any investor nervous, to say the least.
In light of this recent volatility, many investors might be wondering whether to wait and ride out the current share market storm in cash, and start investing again when this bout of volatility eventually passes.
This might be a very tempting proposition for many ASX 200 investors out there.
However, it would be a calamitous mistake, in my view.
Don't wait to start investing
Shares appear volatile because of the unique nature of the share market. Few other assets are traded as frequently as shares. It is because of the liquidity of the share market, and the ease of investing, that shares change value so often.
It doesn't mean that shares are more risky than other asset classes like property. It's only because we can see the day-to-day fluctuations in pricing that different investors are buying and selling shares at that give the market the volatility it is famous for.
But volatility is simply the price we pay for investing in one of the best-performing asset classes there is.
It is in almost every investor's best interest to do their best to rise above the emotional rollercoaster that volatility makes us ride.
The important thing to remember is that the share market goes up far more often than it goes down and that it has never failed to exceed a previous all-time high. So if you ignore the volatility, the short-term noise, and focus on these two very simple facts, chances are you will compound your wealth over time at a very lucrative pace. And that begins as soon as you start investing.
Trading in and out of your shares depending on what you think the markets are doing or will do, is a surefire way to lose money. No one knows what the markets will give us day to day, or month to month. So logically, trying to get lucky and dipping in and out of the markets is folly. The rational thing to do is to start investing as soon as you can.
Warren Buffett sums it up best:
Time is your friend; impulse is your enemy. Take advantage of compound interest and don't be captivated by the siren song of the market.
