Image Source: The Motley Fool
It’s been a tough week for UK shareholders as panic gripped the London market following the collapse of two mid-sized US banks. But while the FTSE 100 index fell 5.3% in the week, the S&P 500 actually added 2.1%. With fear, uncertainty and doubt plaguing the financial markets, I wonder what Warren Buffett would make of this latest crash.
Buffett’s advice on the misery of the market
The famous investor Warren Buffett is a billionaire philanthropist. He has a personal fortune of $101.6 billion accumulated through investing (and has also donated nearly $50 billion to good causes). So when he speaks the Oracle of Omaha, the markets listen.
This is what Uncle Warren has said during previous stock market crashes:
1. “Be fearful when others are greedy, and be greedy when others are fearful.”
During the depths of the 2007-09 global financial crisis, Buffett penned these words of wisdom in a New York Times article dated October 16, 2008.
In the same article, Buffett explained that he was putting 100% of his personal wealth into US stocks. Five months later, the stock market crash was over and stock prices soared, making my hero even richer.
2. “The best opportunity to deploy capital is when things go wrong.”
While being interviewed about the share buyback on a US news channel. CNBC In February 2018, Buffett delivered this great piece of advice. When stocks fall, quality companies often come up for sale at bargain prices.
Also, when stock markets crash, sometimes entire sectors or countries sell at crashing prices. Conversely, my favorite time to buy is when there is blood on the streets as other investors rush to sell.
3. “Bad news is an investor’s best friend. It allows you to buy a slice of America’s future at a discounted price.”
In it New York Times piece mentioned above, Warren Buffett added this calming and no-nonsense quote. He knows that stock market crashes may be the best time to buy battered stocks.
In other words, when stock prices go down and crash, I take a deep breath and buy big while it lasts. This helped me survive and thrive after the market crashes of 2000-03, 2007-09, and spring 2020.
4. “Just buy something for less than it’s worth.”
When asked about the details of his incredibly successful investing career in 1991, Buffett gave this simple answer. Time and time again, he has patiently explained that his only goal is to buy quality companies at reasonable prices.
Of course, the lower stock markets go, the more shares of good companies are heavily discounted. And given the chance to buy big companies at cut prices, I can hardly contain myself.
Lastly, this latest market shock may have more time to work. No one rings a bell to signal the end of bear markets. And perhaps no one has the skill, knowledge and experience to make money like Warren Buffett.
Still, I try to listen to the teacher when buying undervalued stocks for the long haul. Also, Buffett just bought a ton of shares in a major American oil company this week. So he clearly isn’t panicking yet!
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