Should I Buy ASX Shares Now?

Best undervalued stocks ASX for 2020

Well you might have to scroll until the end to see my two cents worth in regard to the above questions.

Actually no, I don’t want to give out stock tips but perhaps I can give an answer on what areas to look at. The main reason I went for these headings is I am reading reports that beginner investors throughout the world are rushing into shares. The various search terms in google that are surging are ones such as the title above. Here are some others.

This was from some research conducted by ASIC from the end of February until early May.

They were trying to protect the “mum and dad” investors. The implication was that turnover was higher, they were speculating and likely to rack up big losses due to inexperience.

I also suspect that will be the case eventually, if it isn’t already. Although I am not sure they have all done badly yet, perhaps they are even making a killing in the market?

“Dumb” money versus “smart” money?

This report made news in the first week of May. As I write markets continue to move higher. I wonder if perhaps ironically many of these “mum and dad” investors are dramatically outperforming most professional fund managers. It seems like the trend is for them to find a stock they are familiar with (Qantas, or simply the index, or Afterpay perhaps?) that has crashed in price in March, then buy. (QUBSF)

Meanwhile many of the articles that are written by the professionals on Livewire markets in late March were boasting about the elevated cash levels they were carrying.

Maybe ASIC will soon issue a warning to fund managers to invest their own money in low cost index ETFs, and not to gamble trying to time the market as much.

My own dumb money investing

By the way this is the first blog post I have made for almost 6 months. I was going to keep quiet for the whole year. Lockdown in Melbourne right now has changed my plans a lot to how I thought this year would be, so I have some more free time now. It also seemed strange if I regularly blogged for four years and stopped the minute the markets got interesting! So here I am again.

One reason I gave the blog a rest in January was I got a bit grumpy how most of these mum and dad speculators seemed to be doing better than me! I was feeling FOMO and something didn’t feel right that the stock market could be so easy for some. I wanted to disengage a bit from twitter and stock market forums for that reason, otherwise I might go performance chasing.

Fortunately that meant my cash levels were a little higher than normal. It was largely luck that this was the case leading into COVID-19. There was a period though from mid Feb that lasted until the first week of March where markets were still quite complacent. This was after the virus was at a minimum having a major impact on China. I did some more selling then.

That was the relatively good news. On the negative side small cap stocks got hit harder than I ever imagined, and faster than I thought was possible. Was pretty amazing seeing some of my stocks in this area crash so quickly! My portfolio initially didn’t beat the overall market to the extent that I would have hoped given I luckily held more cash.

I was able to run down my elevated cash levels to closer to normal levels in late March, but in hindsight nowhere near what I should have done. When markets fall 30% I have a bit of a rule of thumb to buy some more exposure no matter what. For no other reason than historically buying such falls eventually tends to turn out ok. Just buy something, shut your eyes and hope!

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Disclaimer: These views on excessive premiums to NTA have been made before on this blog. Not much has changed so I have been wrong on this before and may well be so in the future!

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