Tag: Motley Fool

I’m a big fan of exchange traded funds (ETFs) and believe they are a great way for investors to both diversify their portfolios and gain exposure to areas that are not represented on the ASX.

But which ones should you buy? Two high quality ETFs that I like are listed below:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

I think the BetaShares Asia Technology Tigers ETF could be a great option for investors. This is because it gives investors a way to invest in the biggest and brightest technology and ecommerce companies that have their main area of business in Asia. BetaShares notes that through a single trade, this ETF provides diversified exposure to a high-growth sector that is under-represented in the Australian share market.

Which shares are included in the fund? There are 50 companies included within the ETF. These include industry giants such as Alibaba, Baidu, JD.com, and Tencent Holdings. Given the very positive outlooks of these companies, I believe this ETF has the potential to generate market-beating returns for investors over the next decade and beyond.

iShares Global Healthcare ETF (ASX: IXJ)

Another ETF to consider buying is the iShares Global Healthcare ETF. This fund gives investors a slice of some of the largest players in the global healthcare industry such as Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi. It also includes locally listed healthcare stars CSL Ltd (ASX: CSL), Ramsay Health Care Limited (ASX: RHC), and Sonic Healthcare Limited (ASX: SHL).

Due to the positive outlook for the healthcare sector globally over the next couple of decades because of ageing populations and increased chronic disease, I believe it could provide strong returns for investors over the long term. Overall, I feel this could make it a top pick for investors right now.

More reading

• 3 of the best ASX tech shares to buy in September
• 2 ASX ETFs to buy for instant portfolio diversification
• These ASX ETFs will give you exposure to China’s growing middle class
• ETF provider VanEck to launch 4 new ASX ETFs
• 3 ASX growth shares to buy in September

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. 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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The Praemium Ltd (ASX: PPS) share price is falling today despite news out of Powerwrap Ltd (ASX: PWL) that it will accept Praemium’s latest takeover offer. The Praemium share price is currently trading 4.67% lower to 51 cents.

The decrease in share price is likely to be as a result of the heavily falling All Ordinaries Index (ASX: XAO) more broadly.

A closer look at Praemium and Powerwrap

Praemium is global provider of technology platforms for managed accounts, investment administration and financial planning. Its fully integrated account management platform is suitable for both small and large account holders, enabling clients to see all their portfolios in one place.

Powerwrap, simply put, is a smaller version of Praemium and in the past has acted as a smaller rival. Powerwrap is also involved in development and execution of investment portfolio administration services.

What happened

The takeover bid of Powerwrap first came to light in early July as Praemium placed an offer for their longstanding partner and competitor. The companies initially entered into a bid implementation agreement, under which Praemium would make an off-market conditional takeover bid for all of the Powerwrap shares it does not presently hold.

However despite the Powerwrap board of directors unanimously deciding that its shareholders should accept the offer, powerful players stood against the offer. A pair of ‘Rich Listers’ and other Melbourne players teamed up to try to get Praemium to increase its bid for their smaller wealth platform play, Powerwrap. They were ultimately unsuccessful, which meant that the offer stood at 7.5 cents per Powerwrap share in cash and 1 Praemium share for every 2 Powerwrap shares. 

Two days ago, the offer went unconditional.

What now?

With the offer to be concluded on 21 September, Powerwrap’s directors are urging shareholders to accept the offer as quickly as possible.

Praemium already controls 56.01% of the company and thus has the majority of votes at any general meeting of Powerwrap shareholders. However, it must be noted that it needs 75% if it is to continue with its plans to delist Powerwrap.

The Powerwrap share price is currently trading 4.67% lower, with it having made no gain or loss overall this year.

More reading

• Praemium share price edges higher after Powerwrap offer goes unconditional

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Praemium Limited. The Motley Fool Australia has recommended Praemium 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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There’s blood on the street but one ASX stock that’s holding up better than most today is the Transurban Group (ASX: TCL) share price.

Shares in the toll road operator is holding steady at $14.31 during lunch time trade when the S&P/ASX 200 Index (Index:^AXJO) crashed by around 3%.

The big sell-off on Wall Street that was led by high-flying tech stocks are to blame for the carnage on the ASX. This is why our tech darlings like the Afterpay Ltd (ASX: APT) share price and Appen Ltd (ASX: APX) share price are among the worst performers.

Transurban share price upgraded to “buy”

It looks like investors are rotating out of these expensive growth stocks and into relatively more stable businesses that have suffered a big de-rating during COVID-19.

This partially explains the outperformance of Transurban, although a broker upgrade is also helping.

UBS lifted its recommendation on the stock to “buy” from “neutral” as it thinks too much bad news is factored into the stock.

Boring stocks suddenly looking exciting

It also believes that Transurban will rebound strongly as Melbourne emerges from its stage four lockdown.

Most of Transurban’s toll roads are in that state, which explains why the stock was hit particularly hard by the second wave of COVID-19 infections in that state.

“We see the stock as highly leveraged to recovery in that network given Melbourne accounts for one-third of group EBITDA [earnings before interest, tax, depreciation and amortisation],” said UBS.

“Further the market continues to seek out quality growth names in a structurally lower growth environment.”

Big dividend growth ahead

But this these aren’t the only reasons to be excited. The broker reckons Transurban’s annual dividend yield could double to around 13% from FY22 to FY25.

The big dividend increase will be funded by the completion of a number of big development projects in its pipeline.

“Our strong 13% pa growth from FY22-25E relies on completion of WestConnex Stage 3 in Sydney, WestGate Tunnel in Melbourne, and a number of Washington projects,” explained UBS.

“These are all expected to complete in 2023 and 2024. The largest risk remains the contractual dispute over the WestGate Tunnel project.”

What Transurban shares are worth

Other risks to the lofty dividend assumption are a slower than expected easing of the lockdown in Melbourne and the underperformance of its Washington asset.

The broker lifted its 12-month price target on the stock to $15.50 from $14.70 a share.

More reading

• Top brokers are urging you to buy these ASX stocks in this market meltdown
• I love volatile ASX share market days like today
• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• Why ASX investors shouldn’t fear a market crash
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Transurban 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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Finding a savings account or term deposit offering a yield of more than 5% is impossible these days. The best you could do would be around 1.8% per annum, by my reckoning. Thank record low interest rates. But the same cannot be said for ASX dividend shares.

Whilst a dividend-paying share does not offer the same kind of certainty as a term deposit, savings account or bond (far from it), you can be compensated by yields of 3, 4 or 5%. Never a settler, I’ve found 2 ASX dividend shares that indeed offer yields of more than 5% today, and will (in my view) well into the future.

2 ASX dividend shares offering yields over 5%

Telstra Corporation Ltd (ASX: TLS)

Telstra is our first dividend share offering a yield of more than 5%. The Telstra share price has not had a good month. Investors were spooked by the company’s pessimistic FY2020 earnings report released last month. Although Telstra did report an earnings slump of 9.7% and a 14.4% hit to profits, it also reaffirmed it’s 16 cents per share dividend. On current share prices, that would give Telstra a trailing dividend yield of 5.63% (or 8.04% grossed up with Telstra’s full franking).

Some commentators are assuming that Telstra will have to trim this dividend next financial year due to falling earnings. But looking at Telstra’s free cash flow, which should be more than enough to cover a 16 cents per share payout in FY21, I don’t agree with this thesis. Thus, I think Telstra remains a top dividend share to buy for income today. Especially at current 52-week low prices.

2) SPDR S&P Global Dividend Fund (ASX: WDIV)

Turning to an exchange-traded fund (ETF) now, here we have this globally focused income fund from SPDR. WDIV holds a basket of 75 dividend-paying shares from around the world, with only companies delivering steady or increasing dividends over the past decade selected. Canada and the United States are heavily weighted in this ETF, as well as Hong Kong and the United Kingdom. Some of WDIV’s holdings include Enagas, Nokian Tyres and Japan Tobacco, as well as our own AGL Energy Limited (ASX: AGL) and Commonwealth Bank of Australia (ASX: CBA).

I think getting exposure to dividend-paying shares outside the ASX bubble is a great way to bulk up and diversify an ASX income-focused portfolio. Remember, you’re not too diversified if all you hold is four ASX bank shares and a couple of miners. WDIV currently offers a healthy trailing dividend yield of 5.62% and charges a management fee of 0.5% per annum.

More reading

• 2 fantastic ASX 50 shares I would buy today
• 3 top ASX shares I would love to buy this September
• UBS picks the best and worst ASX stocks from the reporting season
• Should you buy Telstra and these beaten down ASX shares?
• The Telstra share price just hit a 52-week low: Is it time to buy?

Motley Fool contributor Sebastian Bowen owns shares of SPDR S&P Global Dividend Fund and Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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The Galaxy Resources Limited (ASX: GXY) share price has been creating tailwinds over the past 3 months. Although down 5.42% today due to the market sell-off, the Galaxy share price has jumped from 84 cents in May to $1.36 per share at the time of writing.

However, the recent Galaxy share price rise does not paint the full picture. Shareholders have been taken on a wild rollercoaster ride since the fall in lithium prices, which started in 2017 after supply outstripped demand for the key battery component.

Today, it is forecasted that the lithium market will move towards a balance in 2021–22. Will this restore Galaxy Resources to its former glory?

Lithium oversupply

Almost all everyday technology such as mobile phones, laptops, cameras, toys and clocks include lithium.

However, one of the biggest markets for the battery-making ingredient is electric vehicles. The reason for this is the huge difference in battery sizes. As an example, a Tesla car is fuelled by up to 90 kWh of lithium-ion, compared to 5–6 kWh for an iPhone 11 that would last an entire year.

As the world continues to be slow to adopt the electric vehicle revolution, lithium miners have finally started to decrease their supply to the market, namely ASX companies like Galaxy and Orocobre Limited (ASX: ORE).

Lithium is mainly sourced from either spodumene or brine. Australia is home to the majority of the hard rock (spodumene) mines, while brine production is concentrated mainly in South America, particularly Chile and Argentina.

It takes about 3–5 years for spodumene mines to go into production, whereas brine can take up to 7 years. The shorter project lead times and previous reluctance to slow down expansion plans by Australian miners led to a deepening oversupply in the market. This in turn has led to extended pressure on the lithium price.

Financial snapshot of Galaxy

Galaxy released its full-year results to the market last week for the period ending 30 June 2020. Revenue had fallen 17% to $23.3 million, and statutory net profit after tax came in at a loss of US$22.2 million. This was a significant improvement from the shortfall of US$171.9 million in FY19.

The company recorded a cash balance of $106 million and nil debt.

Galaxy burned over $60 million in cash over a trailing 12 months. At the current rate, without capital raising through debt or equity, this means that Galaxy will only have enough cash for 21 months from June. That does not leave a lot of breathing room for a company to continue maintaining current operations, despite its reduced cash burn of 38% from the prior year.

While I don’t think Galaxy will have any trouble raising cash, the fall in revenue is the most concerning. The impact from subdued realised selling price and lower sales volumes from weak market conditions is expected to remain in the short-term, thus affecting future earnings.

Should you invest?

In the long run, the Galaxy share price could surge a lot high from where it is today. However, this is dependent on the price fetched by lithium, which is controlled by market forces.

Personally, I think that the lithium price will remain volatile for the next few years, and thus would not be a buyer of Galaxy shares today.

More reading

• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• Why the Orocobre share price is the worst performer on the ASX 200 today
• ASX 200 edges higher: Fortescue sinks, NAB sells MLC Wealth, Costa jumps
• These are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Aaron Teboneras 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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The WAM Capital Limited (ASX: WAM) share price is today rising after announcing it has placed a bid for Concentrated Leaders Fund Ltd (ASX: CLF). The WAM Capital share price has risen 0.48% on the news despite it being a tough day for the All Ordinaries Index (ASX: XAO).

About WAM Capital

WAM Capital is a listed investment company (LIC) managed by Wilson Asset Management. It listed on the ASX in 1999 and provides investors with exposure to an actively managed, diversified portfolio of undervalued companies listed on the ASX. WAM Capital aims to deliver a stream of fully franked dividends and provide capital growth with its focus on small to medium sized businesses.

What’s moving the WAM Capital share price?

WAM Capital announced a conditional off-market takeover bid for Concentrated Leaders Fund (CLF). The offer consideration is two WAM Capital shares for every 3.7 CLF shares, representing a 15.2% premium to the CLF share price.

WAM Capital has sited the takeover as an “exit opportunity” for Concentrated Leaders shareholders. WAM Capital’s board have cited the appointment of the new CLF manager occurring without shareholder approval as reason to accept the offer. Furthermore, the LIC believes that CLF shareholders have been unfairly treated as the size of the company was reduced through a 12.8% special dividend payment.

Concentrated Leaders’ response

Concentrated Leaders’ management team is currently reviewing the offer and has stated that it is not in a position to make a recommendation to shareholders yet.

Accordingly, CLF shareholders have been advised to take no action in relation to the offer until the board has had a chance to further consider the offer and bidder’s statement.

Concentrated Leaders is also a listed investment company. It invests primarily in Australian companies within the S&P/ASX 200 Index (ASX: XJO) with the objective of delivering regular income and long-term capital growth to its shareholders.

Foolish takeaway

It remains to be seen what the response will be from Concentrated Leaders’ management. Nonetheless, the market has responded positively with the Concentrated Leaders share price moving 4.9% higher to $1.07. According to reporting in The Australian Financial Review, the move represents the potential beginning of a round of consolidation in the sector.

Including today’s modest rise, the WAM Capital share price is currently trading 7.93% lower in 2020. 

More reading

• 2 ASX dividend shares with yields over 10%
• 3 top ASX200 dividend shares to buy right now

Motley Fool contributor Daniel Ewing 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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Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Aristocrat Leisure Limited (ASX: ALL)

According to a note out of UBS, its analysts have retained their buy rating and lifted the price target on this gaming technology company’s shares to $34.25. The broker notes that the vast majority of casinos in the United States are now open. It feels this bodes well for Aristocrat’s overall growth in the near term. Especially given its growing digital business, which has been doing a lot of the heavy lifting lately. I agree with UBS and would be a buyer of its shares right now.

Cochlear Limited (ASX: COH)

Analysts at Morgan Stanley have retained their overweight rating and $229.00 price target on this hearing solutions company’s shares. According to the note, the broker believes the company is winning market share and will continue to do so thanks to its new Kanso 2 product. In addition to this, it is a fan of Cochlear’s Remote Check offering, which was approved by the FDA a few months ago. I think Morgan Stanley is spot on and feel Cochlear would be a great long term option for investors.

Sonic Healthcare Limited (ASX: SHL)

Another note out of Morgan Stanley reveals that its analysts have retained their overweight rating and $35.00 price target on this healthcare company’s shares. The broker notes that Sonic has just won another major COVID-19 testing contract in the United States. It estimates that this could be worth upwards of US$3 billion to the company over 12 months. I agree with Morgan Stanley and feel Sonic could be worth a closer look.

More reading

• 4 ASX shares I’m looking to buy today
• 2 quality ASX shares to buy now to get rich later
• Where I would invest my BHP dividends in September
• Why a recession shouldn’t matter for the ASX share market
• 3 ASX blue-chip shares I would buy at today’s prices

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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. and Sonic Healthcare 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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Today is the kind of day that will put short-term investors on edge. You know, the kind of investors who were greedily eyeing the huge share price gains of leading tech and healthcare shares and decided to pile in for a quick buck.

Short-term gains are broadly going backwards today, with the S&P/ASX 200 Index (ASX: XJO) down 2.7% in early afternoon trading.

Tech share prices are among the hardest hit. The S&P ASX All Technology Index (ASX: XTX), which tracks 50 of Australia’s leading and emerging technology shares, is down 4.4% intraday trading.

ASX shares are broadly following the lead of US share markets, which all lost ground yesterday (overnight Aussie time).

The S&P 500 Index fell 3.5% while the tech-heavy Nasdaq Composite Index lost 5.0%.

All the fabled FAANG shares lost ground, with behemoth Apple Inc. (NASDAQ: AAPL) leading the way down. Apple’s share price fell 8.0% by the closing bell. A bit of back of the napkin maths tells me that works out to more than a US$160 billion (A$216 billion) daily loss.

Some of today’s share price losers… and winners

Here in Australia, online retailer Kogan.com Ltd‘s (ASX: KGN) share price is among the biggest fallers today, down 11.2% at time of writing.

Buy now, pay later (BNPL) giant, Afterpay Ltd (ASX: APT)‘s share price dropped more than 7% at the open, but has regained some of those losses and is currently down 4.6%.

Of course, as the old saying goes, it’s a market of shares, not a share market. And while the overall indexes are falling, there are some big winners on the ASX today too.

Like the Metro Mining Ltd (ASX: MMI) share price, up 5.3%. Or Ainsworth Game Technology Limited (ASX: AGI), which is up 4.0%.

There are always opportunities, if you know where to look for them.

Why you should keep these short-term share price falls in perspective

After detailing some of the daily moves for you, I’ll now recommend you largely ignore it.

You see, the rapid share price gains enjoyed by many companies over the past months, particular technology shares, was never going to continue apace. At some point retracements are inevitable. And at some point the rate of growth will slow.

Let’s take the ASX All Tech index as an example.

From 23 March through to yesterday’s close, the index of 50 leading ASX tech shares had gained 110%. That blistering recent growth doesn’t mean these shares don’t have further growth ahead of them. I believe many of them do. But they won’t keep doubling in price every 5–6 months.

And that’s okay. At least, if you have a long-term investment horizon, rather than looking to double your money in short order. That way you can ride out the share price dips and let the power of time and compounding grow your wealth.

Kogan’s share price, for example, is still up 157% in 2020. And Afterpay’s share price is up 159% this year. As for the Nasdaq, it’s still 27% higher than it was on 2 January.

Now there may well be some more short-term falls to come. But long-term, the well managed companies with solid balance sheets and good growth outlooks should continue to deliver patient investors healthy share price gains.

What the experts are saying about the share price retracement

If you’re feeling anxious watching the share prices of some of your favourite companies head lower today, don’t be. In fact, turn off your finance screens and tune into something else.

The current retracement was broadly expected. And as Alec Young, chief investment officer at Tactical Alpha says, healthy even for the broader market (as quoted by the Australian Financial Review):

Frankly, the deeper the pullback in tech, the healthier it is for the overall market. The market was overbought, there were too many people chasing the tech names. It’s all healthy. The valuations have been stretched.

Randy Frederick, the vice-president of trading and derivatives for Charles Schwab in Austin Texas, agrees:

Some of the stocks have gotten a little pricey, and what the actual cause is to spark this selloff is difficult to say. The leading sector for quite a long time has been the Nasdaq, which is very heavily weighted in technology stocks so people just saw this as an opportunity to take the profits off the table.

There’s nothing wrong with taking profits off the table if your investment horizon is months and not years. But unless you need the money for other purposes, history shows that staying invested in quality shares is among the best ways to growth your wealth over time.

More reading

• Why ASX investors shouldn’t fear a market crash
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower
• After the crash, is it time to buy this Nasdaq ETF?
• ASX 200 down 2.75%: Afterpay & Appen sink lower, SKYCITY pushes higher
• 4 ASX shares I’m looking to buy today

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Apple and Kogan.com 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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The corporate regulator has taken a wholly owned subsidiary of Evans Dixon Ltd (ASX: ED1) to the Federal Court.

Dixon Advisory and Superannuation Services Limited faces allegations of not acting in its clients’ best interests and providing inappropriate advice.

The Australian Securities and Investments Commission (ASIC) also accuses Dixon Advisory of not dealing with a conflict of interest between its clients’ and businesses within Evans Dixon.

The specific allegations refer to 51 instances of advice provided to 8 clients relating to investment in US Masters Residential Property Fund Unit (ASX: URF).

According to ASIC, URF was created by Dixon Advisory back in 2011 and paid “substantial fees” to companies within Evans Dixon – including Dixon Advisory itself.

A total of 126 contraventions are alleged to have occurred between 2 September 2015 and 31 May 2019.

The maximum civil penalty is $1 million for each breach before 13 March 2019, and $10.5 million per contravention after that point.

Evans Dixon, in a statement to the ASX on Friday, indicated it would mount a defence. 

“[Dixon Advisory] will be defending the proceedings and in due course will file a comprehensive defence after it has received and had a reasonable opportunity to review ASIC’s detailed statement of claim,” announced the company.

ASIC is also seeking a court order that Dixon Advisory put systems in place to meet clients’ best interests in the future.

URF is an ASX-listed real estate investment trust (REIT) that allows shareholders exposure to the New York City residential property market.

Evans Dixon is a financial services conglomerate that provides personal wealth advice to 9,200 clients, representing $20.1 billion in investments. The company also advises institutional customers.

Evans Dixon shares were down more than 15% at 12.14 pm AEST to 45 cents. The Evans Dixon share price was $1.60 in May last year.  

More reading

• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• Why ASX investors shouldn’t fear a market crash
• Why the Mesoblast share price jumped higher this morning
• Why Appen, Kogan, OZ Minerals, & ResMed shares are dropping lower
• After the crash, is it time to buy this Nasdaq ETF?

Motley Fool contributor Tony Yoo 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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After the big falls we have seen overnight on United States share markets, the tone of ASX investors has tangibly shifted today. The S&P/ASX 200 Index (ASX: XJO) is down a nasty 2.83% today at the time of writing, a stark reminder that we aren’t as independent from the US as we’d like to think. That follows the flagship US Index, the S&P 500, falling 3.51% overnight, and the tech-heavy Nasdaq Composite falling 4.96%.

Just like that, the bulls are gone and the bears are back. Apparently.

Yes, we could be seeing the start of a second 2020 market crash. But we could also just be witnessing a healthy correction.

Either way, I’m not worried and I don’t think ASX investors should be either.

Why investors shouldn’t fear a market crash

Yes, I know this won’t be a popular statement. No one really likes a market crash, even if they say they do. It’s never fun watching the value of your precious shares falls by double-digits. Although it seems like a lifetime ago, the market crash we saw in March was a scary time.

But think about how the markets have rebounded since then (the ASX 200 alone is up around 30% since 23 March). Think of all the shares you could have bought that rebounded so strongly. Think of Afterpay Ltd (ASX: APT), up nearly 800% since 23 March. Or Sezzle Inc (ASX: SZL). Or Zip Co Ltd (ASX: Z1P).

That’s the kind of opportunity a crash can bring.

So don’t be scared. Crashes are confronting. But they don’t last forever.

And the investors who were patient in March, didn’t sell at a loss and used the opportunity of a ‘store-wide sale’ on the share markets to buy shares of their favourite companies for rock-bottom prices, did very well indeed. As Warren Buffett once said:

Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

I know we’ve already had one lot of ‘dark clouds’ this decade, but with the current coronavirus crisis, I think it’s entirely possible we’ll have another lot. Whether this will occur next week, next month, next year or in 10 years, I have no idea (and nor does anyone else). But I am setting aside some cash in my portfolio in case it does. I think it would be prudent for many ASX investors to do the same. Remember, you can only make hay and fill your washtub whilst the sun is shining, and before the ‘dark clouds’ gather.

More reading

• Every bull run has pullbacks. Why today’s share price falls are ‘healthy’
• After the crash, is it time to buy this Nasdaq ETF?
• ASX 200 down 2.75%: Afterpay & Appen sink lower, SKYCITY pushes higher
• 4 ASX shares I’m looking to buy today
• Why the Afterpay share price crashed 9% lower today

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle 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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