Warren Buffett, the legendary investor and chairman of Berkshire Hathaway, has some advice for investors during the current stock market downturn. In a recent interview, he suggested reading a 19th-century poem when stocks are falling. The poem, written by Rudyard Kipling in 1895, includes lines such as “If you can keep your head when all about you are losing theirs” and “If you can wait and not be tired by waiting.” Buffett believes these words are particularly relevant during major market declines.
The S&P 500 has dropped more than 9% from its record high on Feb. 19, putting stocks close to a correction, which is defined as a decline of 10% or more from previous highs. Investors could push stock prices down even further if a recession appears more likely.
Buffett’s advice for market downturns
Buffett notes that “there is simply no telling how far stocks can fall in a short period.” However, he also sees downturns as “extraordinary opportunities.” The average bear market, or decline of 20% or more from recent highs, has lasted less than 10 months since 1928. While experiencing a market decline can be frightening, Buffett advises investors to focus on their long-term goals and continue investing.
Investors can essentially purchase stocks at a discount by buying them as the market declines. As long as a well-diversified approach to investing is maintained, better deals can be found as stock prices fall. Buffett encapsulates this attitude with another of his quotes: “Big opportunities come infrequently.
When it’s raining gold, reach for a bucket, not a thimble.”
In times of market volatility, remembering Buffett’s wisdom and the century-old poem can be helpful. Keeping a level head and continuing to invest can significantly affect long-term financial health.
Image Credits: Photo by Dimitris Chapsoulas on Unsplash
