Investors who are able to put money into the ASX share market during this rocky tariff war period could significantly help their long-term wealth-building.
Investing during times of uncertainty can be unsettling. But, it's important to note that share prices don't just fall for no reason. More appealing prices don't appear out of thin air – something must spark that fear, like a global trade war.
Five years ago, it was a pandemic that was worrying investors. Three years ago, there was a huge spike in inflation that troubled the market. Now it's tariffs. In a couple of years, there could be another reason.
If I were about to put some money into the share market, which I am, I'd be thinking about how my net worth could be increased.
When a share price falls, it increases the dividend yield on offer for investors. The opposite is true when share prices rise, it pushes down on the dividend yield.
The share market rose after the US election in November, but those gains have now been reversed. The dividend yield of plenty of businesses has gone up this week, and in the last few weeks due to market declines.
For example, when an ASX share with a dividend yield of 5% falls 10%, the dividend yield becomes 5.5%. If it fell 20%, it'd be a 6% yield. A decline of 30% would be 6.5% yield, and so on.
Some of the ASX dividend shares that have been sold down heavily include Pinnacle Investment Management Group Ltd (ASX: PNI), Macquarie Group Ltd (ASX: MQG), GQG Partners Inc (ASX: GQG), Nick Scali Limited (ASX: NCK), Universal Store Holdings Ltd (ASX: UNI) and Lovisa Holdings Ltd (ASX: LOV).
The more a business falls, the bigger the bounce it is just to get back to the former level.
I think it's a great time to invest and unlock stronger, long-term returns.
For example, if a share price of $100 fell 20% to $80, it'd be a 25% rise if it recovered back to $100. If it fell 50% to $50, it'd be a 100% return to get back to $100.
I'd want to look at some of the businesses that have fallen the most such as Pinnacle, GQG, Lovisa, Global X Fang+ ETF (ASX: FANG), Betashares Nasdaq 100 ETF (ASX: NDQ), TechnologyOne Ltd (ASX: TNE) and REA Group Ltd (ASX: REA).
I think all of the businesses, particularly Pinnacle, GQG and Lovisa, could make excellent buys during this period. I believe Pinnacle may be my next investment.
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