If ASX share prices are falling, I get more excited.
Yesterday the ASX 200 (ASX: XJO) fell by 1.9%. That is a pretty large decline. And it’s rare for so many shares to fall on the same day, like what happened yesterday. Normally there is a more even split between gains and declines on the share market.
Why I’m more excited about lower prices
In five or ten years time, a decline this week or this month will be long forgotten. And share prices will probably trade at a higher price in five or ten years. So if you’re going to buy shares, you’ll make a larger return if you buy at a lower price rather than a higher price.
A lower ASX share price can also make a difference to the dividend yield if businesses pay dividends. If a business has a dividend yield of 5% and then the share price drops 10%, the yield is boosted to 5.5%. That’s a nice bonus
If an investor knows a business is really good, such as Xero Limited (ASX: XRO), then a lower purchase price gives the investor a bigger margin of safety for the investment to turn out well.
People could have bought almost any asset during the COVID crash in March 2020 and done well over the next 12 to 18 months. Simply because of how low prices went.
The types of shares I think still look good
But prices have run very hard since March last year. It’s harder to find good value ASX shares, though I still think there are pockets of decent value. For me, businesses like Pushpay Holdings Ltd (ASX: PPH), Adairs Ltd (ASX: ADH) and Magellan Financial Group Ltd (ASX: MFG) look good value.
I also believe the listed investment companies (LICs) MFF Capital Investments Ltd (ASX: MFF) and L1 Long Short Fund Ltd (ASX: LSF) look good value. I’d be happy to buy VanEck Morningstar Wide Moat ETF (ASX: MOAT) too.
There’s always something that’s good value, but lower prices would be better for buying new shares.
