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The 2020 share market crash in March may have caused some investors to adopt a cautious attitude towards equities.

However, buying shares while they are undervalued could be a means of generating high returns in the long run. The share market has a strong track record of recovering from its downturns and is likely to fully recoup its losses from earlier in 2020.

Therefore, now could be the right time to buy a diverse range of shares while many of them continue to offer good value for money even after a recent rebound. They could improve your prospects of retiring early.

Undervalued shares

Even though many share prices have experienced a recovery following the March market crash, a number of shares continue to offer wide margins of safety. Although they may reflect uncertain operating conditions and could be deserved in some cases, many sound businesses appear to be undervalued at the present time.

One reason for this could be that investor sentiment towards equities is weak. Therefore, even if a company has a solid financial position and a bright long-term outlook, it may be trading at a discount to its intrinsic value due to downbeat investor sentiment towards the wider share market.

This could present a buying opportunity for long-term investors. Although shares could continue to be unpopular and undervalued for a period of time, over the coming years they are likely to deliver strong recoveries that could boost your portfolio’s returns.

Past recoveries after a market crash

The share market has a consistent track record of recovery after every market crash it has experienced in its history. For example, in the 21^st century, it has fully recovered from major bear markets such as the tech bubble and the global financial crisis. That’s despite them causing a significant decline in investor sentiment and a recovery seeming very unlikely while they were occurring.

Therefore, a full recovery from the recent share market decline seems to be highly likely over the long run. By positioning your portfolio in high-quality share now, you can maximise your capacity to benefit from a resurging share market as investor sentiment and the performance of the economy gradually improve.

Focusing on risk

Of course, managing risk after a market crash is of great importance to every investor. Not every share will survive what could be a challenging economic period. Therefore, it is crucial to spread your capital across a wide range of businesses that trade in different regions and within multiple industries. This could reduce your exposure to any single business and lower your risk of large losses should your holdings experience poor performances.

Furthermore, buying financially-sound businesses with solid track records of delivering impressive performances during a variety of operating conditions could be a sound move. They may increase your chances of benefitting from rising valuations during a share market recovery and could boost your chances of retiring early.

More reading

• 3 ASX shares to own for the next 10 years
• ASX shares vs property: which is a better investment?
• 2 dirt cheap ASX shares I would buy right now
• 10 high quality ASX shares to buy in FY 2021
• 3 ASX share price trends to watch next week

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.

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Residential property has become an increasingly popular investment over the past few decades, with some investors preferring it over ASX shares. It’s true that many investors have reaped the rewards of steady property price rises in our major cities, especially in Sydney and Melbourne. But what some people tend to forget, however, is that the majority of property investors actually borrow funds in order to purchase those properties.

While there are pros and cons to both approaches, here’s why I gravitate towards investing in ASX shares over property. 

Residential property is actually riskier than it may first appear

One could argue that property price movements have largely been less volatile than ASX shares over the past few decades. However, when you take into account the borrowing or gearing factor, the volatility of residential property as an investment class is actually higher than you might initially think.

Let’s take a typical, residential investment property purchase example to illustrate this point.

Say you purchase an investment property for $600,000 with a $120,000 deposit.

If property prices rise 7% in a year, then your property is now worth $642,000 (on paper). So, theoretically, your $120,000 deposit has increased in value to $162,000, which is a very impressive 35% gain.

However, using the same argument, if property prices go down by 7%, then the value of your initial investment has actually fallen by 35%. A similar fall across the value of ASX shares would be classified as share market crash. And share market crashes actually occur relatively infrequently.

The coronavirus pandemic is leading to a softening of the Australian housing market, driven by challenging economic conditions. Unemployment rates are higher than they’ve been for over a decade, and this could lead to further property price falls over the next 12 months.

Furthermore, residential property purchases also attract additional costs, such as stamp duty and agents’ fees, that are not incurred when buying shares. There are also the ongoing expenses of maintaining your investment property to consider. These include agent management and letting fees, upkeep costs and potential loss of income when your property is vacant.

ASX shares provide better market diversification

Most property investors tend to purchase a very small number of investment properties, often only one or two. That’s putting a large amount of your investment funds into only one or a few baskets. If there is a major correction to house prices in your property’s area due to local factors, this can have a major impact on your overall returns.

In comparison, due to relatively low entry and exit fees, you can more easily spread your risk by purchasing a broad portfolio of ASX shares. Companies like Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) are particularly attractive from a diversification point of view. That’s because they invest in companies covering a wide range of industries and sectors. Other blue chip ASX shares, such as Macquarie Group Ltd (ASX: MQG) and BHP Group Ltd (ASX: BHP), also have the advantage of exposure to a wide range of international markets. This is something that simply cannot be achieved by investing in the local property market.

Foolish takeaway

I do acknowledge that residential property is a good long-term investment. However, on balance, I definitely gravitate more towards investing in ASX shares. For me, the lower fees, easy access to diversification, minimal hassle and superior long-term performance make ASX shares a more attractive investment than property.

More reading

• ASX beware: RBA warns on bank loan deferrals
• 3 great ASX dividend shares for FY21
• The best placed ASX stocks for the August reporting season
• 4 top ASX dividend shares you should never sell
• Safe ASX 200 dividend shares to buy today

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

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While I think the likes of Appen Ltd (ASX: APX) and Xero Limited (ASX: XRO) have outstanding growth potential and deserve to trade at a premium, many investors are understandably uncomfortable buying shares with such high price to earnings multiples.

With that in mind, I have picked out two top shares which I think could be classed as cheap at current levels.

Here’s why I would buy them:

Aristocrat Leisure Limited (ASX: ALL)

I think Aristocrat Leisure is a prime example of growth at a reasonable price. The gaming technology company’s shares are currently changing hands at approximately 21x estimated FY 2021 earnings. I think this offers investors a compelling risk/reward based on its very positive long term growth outlook.

This is because as well as having a pokie machine business which manufactures many of the most sought after machines in the world, it has a growing digital business complementing its growth. The latter business has millions of daily active users playing its games and generating significant recurring revenues. Given its pipeline of releases and the increasing popularity of mobile gaming, I believe this business will underpin strong earnings growth over the next decade.

Telstra Corporation Ltd (ASX: TLS)

Another ASX share which I think is cheap is Telstra. Despite its defensive qualities and the maintaining of its guidance in FY 2020, its shares are down over 12.5% since the start of the year. This leaves them trading at an attractive 19x estimated full year earnings. As a comparison, rival TPG Telecom Ltd (ASX: TPM) is trading at approximately 29x estimated full year earnings. It also means Telstra offers a fully franked 5% dividend yield, which I think is generous in the current environment.

Another reason I think this is good value is its improving outlook. Thanks to the NBN rollout nearing completion, its sizeable cost cutting, and the simplification of its business, I believe a return to growth could be coming possibly as soon as FY 2022. This could make now an opportune time to pick up shares.

More reading

• ASX telco sector: A telecom analyst’s top share pick right now
• How I’d build a $100,000 portfolio for ASX dividend shares
• Is Telstra in for a bruising fight with merged TPG-Vodafone?
• Share price winners and losers of the pandemic
• These are the 4 cheapest ETFs on the ASX

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Appen Ltd. 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.

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With a new financial year on the horizon, now could be an opportune time to consider making some new additions to your portfolio.

To help you on your way, I’ve picked out ten ASX shares which I think would be great options for FY 2021. They are as follows:

a2 Milk Company Ltd (ASX: A2M)

A2 Milk Company is a New Zealand-based infant formula and fresh milk company with a focus on A2-only products. It has been growing at a rapid rate over the last few years thanks to the insatiable demand for its infant formula in China. I expect more of the same in the coming years, which could be supported by new product launches and acquisitions.

Altium Limited (ASX: ALU)

Altium is an industry leading printed circuit board design software provider. While FY 2020 has been impacted greatly by the pandemic, I believe it is worth overlooking its underperformance and focusing on its long term growth potential. This is thanks to its exposure to the Internet of Things boom, which is driving strong demand for its software.

Appen Ltd (ASX: APX)

I think Appen would be a great option. It has a million-plus team of crowd sourced experts preparing data that goes into the artificial intelligence and machine learning models. As these markets are expected to grow materially in the future, I believe it is well-placed for growth.

Bubs Australia Ltd (ASX: BUB)

Bubs is a goat’s milk-focused infant formula and baby food company. I believe it could grow materially in the future thanks to its growing distribution footprint online in China and offline in Australian supermarkets. Another positive is its recent expansion into cow’s milk infant formula.

CSL Limited (ASX: CSL)

I think this biotherapeutics company would be a great long term option. I’m a big fan of CSL due to the increasing demand for immunoglobulins, its world class plasma collection network, growing demand for influenza vaccines, and its lucrative research and development pipeline.

Nanosonics Ltd (ASX: NAN)

I think this infection control specialist is a top option due to its positive long term growth potential. Not only does its trophon EPR disinfection system have a massive market opportunity, the company is launching new products targeting unmet needs. These could take its growth to the next level if they are successful.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a donor management platform provider for the faith sector. It has been growing at a rapid rate thanks to its leadership in a niche but lucrative market. Management has set itself a target to win a 50% share of the medium to large church market in the future. This represents a US$1 billion revenue opportunity and is many multiples FY 2020’s revenue of US$127.5 million.

REA Group Limited (ASX: REA)

REA Group is a leading property listings company with websites in Europe, Asia, the United States, and of course Australia. While trading conditions are tricky at present, I expect them to ease once the pandemic passes. This could make it worth snapping up its shares with a long term view.

ResMed Inc. (ASX: RMD)

I think this sleep treatment-focused medical device company is well-placed for growth thanks to its industry-leading products and sizeable market opportunity. Management estimates that there could be upwards of 1 billion people impacted by sleep apnoea worldwide. The vast majority of these are undiagnosed.

Xero Limited (ASX: XRO)

Xero is a leading cloud-based business and accounting software provider. It has been growing its customer numbers and recurring revenues at a strong rate for many years. I’m confident there will more of the same over the coming years thanks to the shift to online accounting, its global market opportunity, and high quality product.

More reading

• Top brokers name 3 ASX shares to buy next week
• Where to invest $5,000 into ASX shares in July
• How I would construct a $50,000 growth portfolio
• 3 top ASX shares to buy for growth investors in July
• These exciting ASX shares could help you smash the market in the 2020s

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium, CSL Ltd., Nanosonics Limited, PUSHPAY FPO NZX, and Xero. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk and Appen Ltd. The Motley Fool Australia has recommended Nanosonics Limited, PUSHPAY FPO NZX, REA Group Limited, and ResMed Inc. 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.

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This week, the reality of our current economic situation caused a fall in many share prices. The Qantas Airways Limited (ASX: QAN) announcement of large-scale layoffs was a bit of wake up call and we also followed United States markets down as concerns over a second wave of COVID-19 started to take hold. In light of these events, here are three ASX share price trends I think are worth keeping an eye on next week, including some tactics to get the most out of them.

Oil and Gas

This week saw the oil price fall, bringing the share prices of all of our large oil and gas companies down with it. However, this is only the start of the challenges facing this sector. The LNG price has recently hit a 25-year low due to slow economic recoveries and modest industrial energy needs. There is also reduced demand for cooling with many regions being cooler than forecast.

This is likely to put more pressure on the share prices of the oil and gas majors. Companies like Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO), Origin Energy Ltd (ASX: ORG) and Oil Search Limited (ASX: OSH) have already seen share price slumps this week. I believe this is likely to continue into the coming week. 

This might, however, be a good time to pick up solid companies at a reasonable price. I believe Woodside is still trading at a premium due to many of the large-scale projects it has underway. Origin Energy, however, is worth a closer look in my view. 

Gold miners

In a normal market, companies like Evolution Mining Ltd (ASX: EVN) would be seen as overbought. The company’s price to earnings (P/E) ratio of 33 is way above its 10-year average. So too with other gold miners like Saracen Mineral Holdings Limited (ASX: SAR) and Northern Star Resources Ltd (ASX: NST). However, these are not normal times and this is not a rational market. 

The US dollar gold price is higher than it has been since October of 2012. In Australia, it is also near all-time highs. Personally, I have invested in Bellevue Gold Ltd (ASX: BGL) which is an exploration company. This is despite it too currently trading at an all-time high. 

Regis Resources Limited (ASX: RRL) is another well priced gold mining company likely to benefit from the high gold price. I like this company over the medium term regardless of what happens with the gold price. 

Real estate share prices

After several weeks of trading at very high volumes, the three A-REITs with the most exposure to retail markets have fallen this week. Vicinity Centres (ASX: VCX), Scentre Group (ASX: SCG) and GPT Group (ASX: GPT) saw their share prices edge lower over the course of the week. I do not see this trend reversing anytime soon, particularly with the uncertainty surrounding dividend payouts due to the poor trading conditions. 

I also expect the A-REITs exposed to the housing market, like Stockland Corporation Ltd (ASX: SGP), to follow the retail sector downwards. There has been a lot of commentators pumping up this sector of late. However, personally, I cannot see it reaching anywhere near the levels seen in January with all the uncertainty surrounding the job market. 

I think investors looking for real estate exposure would be better served to consider DEXUS Property Group (ASX: DXS) as it is a pure play commercial real estate company.

Foolish takeaway

I believe these trends are a continuation of issues that have been building for some time. Yet despite the apparent negativity, there are often opportunities to be found. I’m confident it’s still possible to profit from a rising gold price. In addition, commercial real estate is rising while retail is falling. When you see a downward pattern, it always pays to look a little closer to see if any other sector may benefit. 

More reading

• Invest $50 per day in ASX shares to generate a $50,000 passive income
• These were the best performing ASX 200 shares last week
• Here are 5 rebound shares to buy with $5,000
• 5 things to watch on the ASX 200 on Friday
• Why the Scentre share price could rise 88% in 2020

Motley Fool contributor Daryl Mather owns shares of Bellevue Gold Ltd. The Motley Fool Australia has recommended Scentre Group. 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.

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ASX investors beware, the RBA has warned about what may happen when the loan deferrals come to an end in a few months.

According to reporting by the Australian Financial Review, RBA boss Philip Lowe had a bank-focused meeting on Friday with Prime Minister Scott Morrison and Treasurer Josh Frydenberg as well as bank bosses.

The topic of the meeting was the $236 billion of loan deferrals that are on course to end on 30 September 2020.

One of the problems is that the loan deferrals are going to come to an end at the same time as jobkeeper ends. Most of the COVID-19 support could end at exactly the same time. 

There are specific government measures that will support some areas of the economy for longer. There was a package for the arts and entertainment sector. There’s also the ‘homebuilder’ grant which will give people $25,000 who are involved with new home builds or large renovations.

We’ve already heard that there is extended government support for the childcare sector. A business like G8 Education Ltd (ASX: GEM) will benefit from that. The government may also launch more support for airlines after Qantas Airways Limited (ASX: QAN) did a large capital raising and announced 6,000 job cuts.

Certain industries aren’t going to rebound as quickly due to no fault of their own.

RBA wants banks to keep playing their part

AFR sources revealed that whilst Dr Lowe said the economy was recovering well and liquidity was strong, a second-round effect could see demand dry up. There could be another wave of job losses in the next few months.

The RBA boss wants to make sure that banks continue to lend. APRA is thinking about whether to give banks the leniency to defer loans beyond September. That mean the banks wouldn’t be punished with capital penalties.

The AFR indicated banks are willing to extend the loan deferrals beyond September, but only on a case-by-case basis after analysing the borrower’s circumstances.

What does this mean for ASX shares?

Obviously shareholder returns is not the key focus of the RBA or the government. They want banks to remain robust and continue to lend. The economy needs lending to continue to function properly.

These issues obviously affect the big ASX banks of Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

It would also affect the other lenders like Macquarie Group Ltd (ASX: MQG), Suncorp Group Ltd (ASX: SUN), Bank of Queensland Limited (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN).

Banks can’t continue the payment holiday forever. They need to make profit for shareholders and they need cashflow from the borrowers. I’m not sure how much more leniency the banks can give borrowers. As much as the RBA wants them to be lenient.

Some banks like Westpac and ANZ have already taken the big decision of deferring the dividend. Considering many industries are now largely operational again, I think banks would be entitled to decide that payments should resume for borrowers who have the capability to pay.

However, I’m sure the federal government feels strongly about not letting house prices crash. A property decline seems unavoidable, but a housing crash wouldn’t be good for the economy at all.

Foolish takeaway

I think the RBA is right to be worried about continued bank lending and the deferred loans. No-one wants to see a big wave of forced property sales over the next 12 months.

There are some big problems for the banks to deal with. Their shareholders want them to keep making profit but the government and economy needs the banks to continue to shoulder a lot of the pain. I’m glad I’m not on a bank management team during this difficult period. I don’t think the banks are out of the woods yet, though Macquarie and CBA would be my preferred picks if I had to choose one or two banks.

More reading

• The best placed ASX stocks for the August reporting season
• These ASX dividend shares will help you beat low interest rates
• A good time to buy Commonwealth Bank shares?
• ASX 200 rebounds 1.5%, Qantas drops on capital raising
• Why Qantas and this other ASX 200 stock were just downgraded by top brokers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Accent Group Ltd (ASX: AX1)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and lifted the price target on this footwear-focused retailer’s shares to $1.90. The broker was pleasantly surprised with Accent’s trading update and notes that its sales are well ahead of its expectations. This strong performance, which has been driven by impressive online sales growth, has led to Morgan Stanley lifting its estimates through to FY 2022. I agree with the broker and believe it could be a top option in the retail sector.

Bapcor Ltd (ASX: BAP)

Analysts at Credit Suisse have retained their outperform rating and lifted the price target on this autoparts company’s shares to $7.20. This follows the release of a trading update last week. According to the note, the broker believes that Bapcor’s shares are deserving of a re-rating thanks to its strong performance and positive industry outlook. I think that Credit Suisse makes some great points and Bapcor could be worth considering.

CSL Limited (ASX: CSL)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating and $336.00 price target on this biotherapeutics company’s shares. This follows the announcement of the acquisition of AMT-061 from uniQure for US$450 million. AMT-061 is a gene therapy undergoing Phase 3 clinical trials for the treatment of patients with haemophilia B. Goldman notes that this therapy has the potential to transform the treatment paradigm. It expects this to complement and expand its existing franchise (Idelvion) and potentially extend its sustainability. I agree and would be a buyer of CSL’s shares.

More reading

• How I would construct a $50,000 growth portfolio
• 3 top ASX shares to buy for growth investors in July
• Brokers name 3 ASX 200 shares to buy today
• Here’s everything you need to know about CSL’s latest acquisition
• These are the 4 cheapest ETFs on the ASX

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia has recommended Accent Group. 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.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Citi, its analysts have retained their sell rating and $11.70 price target on this iron ore producer’s shares. The broker has concerns over the iron ore price and believes it is likely to come under pressure in the near future. This is because Citi is forecasting steel production to peak and iron ore demand to soften. It feels this could weigh on the Fortescue share price. The Fortescue share price ended the week at $14.18.

Orocobre Limited (ASX: ORE)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and $1.80 price target on this lithium miner’s shares. According to the note, Orocobre’s latest update revealed lower than expected sales and volumes. Unfortunately, Macquarie doesn’t expect things to improve quickly and suspects that high lithium carbonate inventory levels globally will continue to weigh on prices for some time to come. The Orocobre share price last traded at $2.37.

Shopping Centres Australasia Property Group Re Ltd (ASX: SCP)

Another note out of Citi reveals that its analysts have retained their sell rating and $1.87 price target on this shopping centre operator. The broker notes that Shopping Centres Australasia has reported a material shortfall in rent during the current quarter. And while rent collections are improving, the broker hasn’t seen enough to make a change to its rating. It continues to believe its shares are overvalued at the current level. The company’s shares ended the week at $2.27.

More reading

• The best placed ASX stocks for the August reporting season
• ASX 200 rebounds 1.5%, Qantas drops on capital raising
• 2 ASX dividend shares with yields over 8%
• Why Kogan, Myer, Orocobre, & Qantas shares are dropping lower
• Here are 5 rebound shares to buy with $5,000

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. 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.

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Many investors think the possibility of generating a passive income from ASX shares is just a pipe dream.

However, it’s very possible to invest just $50 per day in your favourite companies and be able to retire with a strong portfolio.

How to generate a $50,000 passive income from ASX shares

$50 per day works out to be $18,250 per year invested in ASX shares. Let’s make some basic assumptions including no taxes or transaction costs and a steady 7% per annum return.

If we assume returns are calculated at the end of each year, we would invest $18,250 in ASX shares in year 1 with a return of $1,277.50 in the first year.

By continually reinvesting these returns into the share portfolio, and also maintaining the ongoing investment of $50 per day over 40 years, the portfolio would grow from $0 to $730,000 during this period.

This means that if you’re investing from the age of 25, you could retire with a $730,000 portfolio by age 65. That 7% return would then be worth a tidy $51,100 per year. Not bad for a passive income in retirement.

Which ASX shares could generate a 7% return?

It goes without saying that investment returns are never guaranteed. 

A 7% return seems high but it is the approximate, long-run average return for global share markets. ASX income shares like Scentre Group (ASX: SCG) or Harvey Norman Holdings Limited (ASX: HVN) boast some pretty strong dividend yields.

But it’s not just income shares that could hold the the key to delivering 7% gains. ASX growth shares like Afterpay Ltd (ASX: APT) have rocketed higher in recent years and have easily exceeded 7% per annum gains.

Foolish takeaway

When it comes to investing, I still think diversification is the name of the game, especially over a 40-year time horizon. 

If this quick example shows us anything, it’s clear that patience and discipline are the key to building long-term wealth.

If you want to set yourself up for retirement, keeping a long-term view of your goals is critical to success.

More reading

• A good time to buy Commonwealth Bank shares?
• Could the Afterpay share price really be good value right now?
• Why National Storage shares are a great “set and forget” option for your portfolio
• Purchasing Openpay shares in March in would have pocketed you this return
• Why the Scentre share price could rise 88% in 2020

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Scentre Group. 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.

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Buying stocks after a market crash may sound like a risky strategy for anyone who is seeking to build a portfolio valued at over a million. It could produce paper losses in the short run due to the unpredictability still present across the stock market.

However, a market downturn provides investors with the opportunity to buy stocks at lower prices. It may also strengthen the competitive positions of dominant businesses in a range of industries, and allow them to generate high returns in the coming years.

As such, investing in the stock market today could increase your chances of making a million in the long run.

Buying after a market crash

Many investors adopt a strategy where they aim to buy stocks when they are priced at low levels. They then seek to hold them until such a time that they trade at a much higher price.

The main problem with that strategy is that the periods when stock prices are at their lowest have historically coincided with economic downturns. At such times, risks facing investors are at their highest.

For example, the most recent notable market crash prior to that experienced in 2020 occurred in 2008/09. At that time, a great number of companies traded at prices that had not been seen for many years.

Following the market crash, a large proportion of them delivered successful stock price recoveries. However, many investors did not buy stocks when they traded at low prices due to the short-term risks they faced. This meant that they were unable to access the wide margins of safety that were on offer for a limited time, with their returns in the following years likely to have suffered as a result.

Although at the present time there are significant risks facing investors over the short run, in the long term the stock market is likely to recover. Therefore, buying a diverse range of companies during the current market could allow investors to fulfil the first part of their ‘buy low/sell high’ strategy.

Industry positions

The recent market crash could also cause stronger companies within a specific industry to improve upon their competitive positions. For example, those businesses that are better equipped to survive a prolonged economic downturn may gain market share. This may allow them to generate higher returns in the coming years.

As such, investors who can not only purchase cheap stocks, but also the highest-quality companies in an industry, may improve their chances of generating high returns in the coming years.

The market crash may highlight weaknesses in companies that had previously been overlooked by investors, such as high debt levels and inefficient business models. Investors may now focus their capital on the strongest companies within a sector that offer the most appealing risk/reward ratios. This could boost their returns over the long run.

Millionaire potential

Risks may continue to be present over the coming months across the stock market. However, buying high-quality businesses with dominant market positions while they trade at lower prices could be a sound strategy. It may boost your portfolio’s returns and increase your chances of making a million over the coming years.

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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.

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