The market volatility caused by coronavirus could produce some of the best buying opportunities in many years for long-term investors in shares.

Certainly, there are potential risks ahead. The world economy faces one of its biggest-ever challenges, and may experience a prolonged period of disappointing growth.

However, many high-quality businesses are likely to survive such a period. Buying them now while they offer wide margins of safety and holding them for the long run could yield high returns.

Market volatility

The past performance of the stock market suggests that the best buying opportunities occur when market volatility is at its highest. During such periods, many investors become increasingly fearful about the prospects for their portfolios. This can mean that demand across the investment community for equities declines, thereby causing stock prices to fall.

Although in some cases investor caution towards the stock market is warranted, since some stocks may not survive an economic shock, the wider market has a strong track record of recovering from its downturns. Therefore, investors who can live with the potential for disappointing performance from their portfolios in the short run, while sentiment among their peers is weak, could benefit from long-term recoveries that boosts the performance of their portfolios.

High-quality stocks

As mentioned, not all companies survive recessions. Therefore, it is imperative that investors focus their capital on those businesses that have a high chance of survival. They are likely to include established businesses with long track records of delivering improving profitability in a wide range of operating conditions. They may also include companies with low debt levels, strong cash flow and wide economic moats that protect them from the potential for lower sales and profitability in the coming months.

Although such companies may trade at higher prices than their weaker peers, paying a premium for a high-quality stock could be a prudent move. It may substantially lower your overall risks, and still leave a large amount of capital growth potential over the long run.

Buy-and-hold

Buying ASX shares during the current period of high market volatility is just one part of successfully capitalising on lower valuations. To maximise your returns, holding stocks for a long time period may be necessary. It could take many years for the world economy to overcome its current challenges, and for the strongest businesses within a specific industry to extend their dominance over weaker peers.

Therefore, a buy-and-hold strategy could be a sound means of capitalising on current market volatility and the likely recovery potential of the stock market. It has historically been a successful strategy that has helped many investors to take advantage of uncertain market conditions. Although the world economy may be facing an unprecedented crisis, it could do likewise over the coming years and may lead to a significant improvement in your financial situation.

More reading

• What ASX shares should you invest in during a bull market?
• 3 simple investment rules I follow
• EML Payments and these ASX mid cap shares could be destined for big things
• What the 10 largest companies in the world have in common
• Why is it so hard to outperform the ASX 200 index?

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Coronavirus: why I’d buy shares during this market volatility appeared first on Motley Fool Australia.

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What ASX shares should you invest in during a bull market?

It’s a tough question because many shares have performed so strongly. The S&P/ASX 200 Index (ASX: XJO) has risen by 31.8% since 23 March 2020. That’s an amazing performance.

But where are we supposed to invest now with many shares now trading close to, or above, their pre-coronavirus highs?

The recovery of some shares has been incredible. The Afterpay Ltd (ASX: APT) share price is above $50. The ASX Ltd (ASX: ASX) share price almost reached $90. The Xero Limited (ASX: XRO) share price briefly went above $90 this week. The Kogan.com Ltd (ASX: KGN) share price is flying high.

The Australian economy continues to recover and we are in a much better position than Europe or the US. The ASX is justifiably on an upward trend. I’d be more concerned with the US share market than ours.

What ASX shares should we invest in?

I think we should take the same approach as we always do with shares. Is it good value today considering its prospects and the potential that things won’t work out perfectly?

Vanguard Australian Shares Index ETF (ASX: VAS) could be a decent option considering it’s still noticeably lower than before the coronavirus sell off.

There are some shares that I think still look good value considering the global uncertainty regarding the pandemic and the economic effects. I think stocks like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Brickworks Limited (ASX: BKW) could be great value. Businesses such as Bubs Australia Ltd (ASX: BUB) and Pushpay Holdings Ltd (ASX: PPH) could grow into big businesses.

I also like the idea of some top performing fund managers who are playing it more cautiously like MFF Capital Investments Ltd (ASX: MFF) and Magellan Global Trust (ASX: MGG).

More reading

• What the 10 largest companies in the world have in common
• ASX 200 closes higher, banks keep rising
• Ready to invest your first $2,000 in ASX shares? Do these 3 things first
• 2 ASX growth shares I’d buy before Afterpay shares
• 3 of the best ASX 200 tech shares for your watchlist

Tristan Harrison owns shares of Magellan Flagship Fund Ltd, MAGLOBTRST UNITS, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO, PUSHPAY FPO NZX, and Xero. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, Kogan.com ltd, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post What ASX shares should you invest in during a bull market? appeared first on Motley Fool Australia.

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