As stock markets dive, here’s Warren Buffett’s advice

It’s been a tough week for UK shareholders, as panic swept London markets following the collapse of two mid-sized US banks. But when the FTSE 100 index dropped 5.3% in the week, the S&P 500 actually added 2.1%. With all the fear, uncertainty and doubt in the financial markets, I wonder what Warren Buffett will do about this latest crisis?

Buffett’s advice on market woes

Famous investor Warren Buffett is a mega-billionaire philanthropist. He has a personal fortune of $101.6bn built through investments (and has also given away almost $50bn to good causes). So when the Oracle of Omaha speaks, the market listens.

Here’s what Uncle Warren had to say during the previous stock market crash:

1. “Fear that people are greedy, and greed when others are afraid.”

During the global financial crisis of 2007-09, Buffett wrote these wise words in New York Times article dated October 16, 2008.

In the same piece, Buffett explained that he invests 100% of his personal wealth in US stocks. Five months later, the stock market crash is over and stock prices are rising, making my hero richer.

2. “The best opportunity to deploy capital is when it happens.”

When interviewed about the share buyback on a US news channel CNBC in February 2018, Buffett gave this great advice. When stocks fall, quality businesses are often sold at low prices.

Also, when the stock market falls, sometimes entire sectors or countries sell off with falling prices. And as a contrarian, the best time to buy is when there is blood in 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 marked down price.

At New York Times In the piece mentioned above, Warren Buffett added this calming, level-headed quote. They know that stock market crashes can be the best time to buy beaten-down stocks.

In other words, when prices show slide and slump, I take a deep breath and buy big when it is higher. It helped me survive and thrive after the 2000-03, 2007-09 and spring 2020 market crashes.

4. “Buy only for less than the price.”

When asked the details of his successful investment career in 1991, Buffett gave this simple answer. Over and over again, he patiently explained how his goal was to only buy quality companies at reasonable prices.

Of course, the more the stock market slides, the more good business stocks become deeply discounted. And given the opportunity to buy into a large company at a marked down price, I could hardly contain myself.

Finally, this latest market shock may be worth doing. No one is ringing the bell to signal the bear market is over. And perhaps no one has the skills, expertise and experience to make money like Warren Buffett.

Even so, I try to listen to the maestro when buying undervalued stocks for the long term. Also, Buffett just bought a ton of stock in major US oil companies this week. So clearly he hadn’t panicked!