Stock market crashes can cause significant distress when they occasionally occur, leading to widespread and indiscriminate selling by fearful investors. While enduring a bear market is undoubtedly unsettling, it often presents the opportunity for some of the cheapest share prices. Therefore, investors face a critical decision: should they buy today or wait for a market crash? Let's explore both strategies in detail.

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Waiting for a Stock Market Crash

Historically, bear markets like the Global Financial Crisis (GFC), the 2020 COVID-19 crash, and the inflation worries of 2022 resulted in substantial declines for many ASX shares—often around 30%, with some dropping more than 50%. The Wesfarmers Ltd (ASX: WES) share price chart illustrates the volatility that share markets can experience. Wesfarmers, the owner of Kmart, Bunnings, and several other Australian businesses, showcases these fluctuations.


When shares are purchased at a lower price, it means buying them at a lower price/earnings (P/E) ratio and with a higher dividend yield. The lower the price, the greater the margin of safety for investors. Buying during a crash can also unlock significant returns if the ASX share recovers.


For instance, if a business had a $10 share price that dropped 50%, it would fall to $5. If an investor bought at $5 and the share price recovered to $10, that would yield a return of 100%.


Sitting on cash, earning interest, and investing during a market crash sounds ideal on paper. However, timing the bottom of a market crash is fraught with execution risk. Investors may hesitate and miss the bottom, or invest too early and miss the best prices. There is also the danger of investing in a severely beaten-up business that could go bust, resulting in a 100% loss.

Investing Today

For investors with a consistent investment plan, regularly deploying money into an exchange-traded fund (ETF), such as the Vanguard MSCI Index International Shares ETF (ASX: VGS), can be highly effective. This approach advocates for regular investments, regardless of market conditions.


The ASX share market and global stock markets have historically delivered an average annual return of around 10% over the long term. This return has been achieved despite numerous crashes, recessions, political upheavals, wars, pandemics, and other negative events.


Businesses strive to grow profits, which drives their underlying value higher, even amidst volatility. Therefore, regularly investing in quality shares can yield substantial long-term benefits. 


It's essential not to buy any share at any price indiscriminately. Instead, notable events over months and years alter the valuations of different companies and industries, sometimes revealing bargains. If a stock market crash occurs, it's wise to invest as much as possible to capitalize on lower prices. However, waiting for a bear market is not necessary; regular investments in the best ASX share opportunities are a sound strategy.

Benefits of Investing During a Market Crash

Investing during a market crash can provide significant advantages. One of the main benefits is the opportunity to buy shares at a lower price. This strategy can enhance the potential for higher returns when the market eventually recovers. Additionally, investing during a downturn allows investors to take advantage of higher dividend yields and lower P/E ratios, contributing to a stronger margin of safety.


Buying shares at a lower price during a crash can result in substantial returns when the market recovers. This approach can be particularly beneficial for long-term investors who can hold onto their investments through market fluctuations. The potential for higher returns is a compelling reason to consider investing during market downturns.


Investing during a market crash often means acquiring shares with higher dividend yields. Dividends can provide a steady income stream, even during market volatility. Higher dividend yields can enhance overall returns and provide a cushion against market downturns.


Lower P/E ratios during a market crash indicate that shares are being traded at a discount relative to their earnings. This scenario can present attractive investment opportunities, allowing investors to buy quality companies at reduced prices. Lower P/E ratios can contribute to higher potential returns and a stronger margin of safety.

Risks of Waiting for a Market Crash

While investing during a market crash has its advantages, waiting for the perfect moment carries significant risks. Timing the market accurately is extremely challenging, and investors may miss opportunities by hesitating or acting too early. Additionally, there's a risk of investing in companies that may not recover, resulting in significant losses.


The primary risk of waiting for a market crash is execution risk. Predicting the bottom of the market is notoriously difficult, and even experienced investors can make mistakes. Missing the optimal investment window can result in lost opportunities and lower overall returns.


Investing in severely beaten-up businesses during a market crash carries the risk that some companies may not recover. These companies may go bankrupt, leading to total investment losses. Therefore, thorough research and careful selection of investment targets are crucial.

The Case for Regular Investing

For most investors, the best strategy is to invest regularly, regardless of market conditions. This approach, known as dollar-cost averaging, involves consistently investing a fixed amount of money at regular intervals. This strategy can help mitigate the risks of market timing and take advantage of market volatility.


Dollar-cost averaging allows investors to buy more shares when prices are low and fewer shares when prices are high. This approach can lower the average cost per share over time, potentially enhancing returns. Regular investing can also reduce the emotional impact of market fluctuations, encouraging a disciplined investment approach.


The long-term growth potential of the stock market is a compelling reason to invest regularly. Despite periodic downturns, the market has historically trended upward, driven by economic growth and corporate profitability. Regular investments in quality shares can capture this growth and build wealth over time.


Deciding whether to invest now or wait for a market crash depends on individual circumstances and risk tolerance. While investing during a market crash can offer significant benefits, it carries execution risks and the potential for losses. Regular investing, on the other hand, can mitigate these risks and provide consistent returns over the long term.


For most investors, a balanced approach that includes regular investments and a readiness to capitalize on market downturns may be the best strategy. This approach allows for capturing growth opportunities while maintaining the flexibility to take advantage of lower prices during market crashes.