Is it ok to buy your favourite ASX 200 shares at a 52-week high? Here are some pros and cons of an ASX investor doing just that
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The Australian share market and the S&P/ASX 200 Index (ASX: XJO) have had a rather wild ride in 2021 so far.
As it stands today (at the time of writing anyway), the ASX 200 is up a rather paltry 0.4% for the year to date. However, at various points over the past 3 and a bit months, the ASX 200 has been both up 3.5% year to date and down 1.1%. That stands in contrast to the back three-quarters of 2020 when it seemed the only way was up for the ASX 200.
However, amidst the relative volatility that 2021 has brought, we have also seen more than a few ASX 200 shares make new 52-week (and sometimes all-time) highs. Last month, it was ASX growth shares like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Pro Medicus Ltd (ASX: PME).
In March so far, we have seen ASX blue chips like BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) have their turn at the top of the mountain.
So with a smorgasbord of ASX shares reaching new all-time highs, it begs the question: Is it ok to buy your favourite ASX shares when they are reaching new all-time highs?
That’s a harder question to answer than it might initially seem. You might point to the adage of ‘buy low, sell high’ to find your answer. And there is certainly truth in that. If you have the chance to buy your favourite ASX companies when they are unloved, it can be a very lucrative move indeed. Those investors who bought up big in the March 2020 share market crash have probably done very well for themselves. All of the shares mentioned above have certainly done so. In fact, if you picked up some Afterpay on 23 March 2020, you would be sitting happily on a gain of almost 1,200% today.
ASX shares: Buy low, sell high? Or just buy?
But crashes like these don’t tend to come around all that often if history is a guide. So do you just sit around in the meantime, amassing cash and praying for a crash?
Well, that’s probably not a great strategy. March last year saw the largest share market crash since at least the global financial crisis of 2008-2009. If you missed your chance in the GFC and decided to wait for the next crash, you would have waited more than a decade. And missed out on the hefty gains that came with it.
Additionally, we humans aren’t very good at biting the bullet when everything is turning to custard. You might think, ‘I’ll just wait until tomorrow when everything’s even lower’, and before you know it, markets are shooting up again.
Another point to make is this: the best ASX shares tend to spend most of their time going up. Today’s 52-week high might be next year’s 52-week low. We have seen this time and time again with companies like Afterpay.
If you love a company, it might just be better to bit the bullet and buy. You can always keep some cash on the sidelines in case there is a dip as well.
And so another adage might also ring true: time in the market beats timing the market. Sorry to end on a cliche, but they are there for a reason!
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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 and recommends Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.