Here’s Warren Buffett’s advice when stock markets are shaky

On February 16, England FTSE 100 reached an all-time high of 8,047.06 points. Since then, it has lost 6.1% of its value, destroyed by fears of a new banking crisis. Meanwhile, the U.S S&P 500 it has lost almost 4% since February 2nd. I wonder what my hero, Warren Buffett, has to say about this latest market weakness?

WWBD: what will Buffett do?

Warren Buffett is a mega-billionaire investor and philanthropist. Despite giving almost $50bn to good causes, his personal fortune still exceeds $106bn. Known as the Oracle of Omaha, he is perhaps the most successful investor in the world.

So, when ‘Uncle Warren’ speaks, the market listens. In light of the recent market turmoil, I looked to the maestro for advice on what to do in a shaky stock market. Here are some of his wisest words.

1. It’s time to be a patient investor

During the global financial crisis of 2007/09, Buffett wrote this as an opinion piece for New York Times: “In the 20th century, the United States experienced two world wars and other traumatic and costly military conflicts; depressions; a dozen or so recessions and financial panics; oil shocks; flu epidemics; and the resignation of a disgraced president. But the Dow rose from 66 to 11,497.

To me, this demonstrates more than anything the power of long-term compounding returns for investors. The 20th century was troubled at times and experienced several market crises, but investors made extraordinary profits.

2. Don’t bet on America

Warren Buffett has repeatedly warned investors against his country’s track record. For example, he once said: “We certainly live in an uncertain world. What is certain is that the United States will advance over time.

The biggest gains from my family’s portfolio came from decades of investing in US stocks. However, we have also done well from buying undervalued FTSE 100 stocks over the years.

3. Opportunity to knock

In the introduction to the 2003 edition of the Smart Investorwritten by Benjamin Graham (Buffett’s mentor), Warren wrote: “Sillier the behavior of the market, the greater the opportunity for investors like businesses.”

In other words, when other investors panic and sell stocks, I aim for a snap to boost long-term returns. After all, who is more likely to win in the long game: a scared seller or a business-like buyer?

4. It doesn’t always equal opportunity

In an interview with Forbes magazine in August 1979 (when I was 11½!), Buffett stated, “Uncertainty is the true friend of the long-term value buyer.”

In other words, during periods of anxiety and volatility, bargains often appear. Having survived and thrived after the October 1987, 2000/03, 2007/09, and March 2020 market crashes, I 100% agree.

5. Buy business, do not show prices

Ben Graham has called the stock market a short-term voting machine, but a long-term weighing machine. Over shorter periods of time, market oscillations drag stock prices up and down. But for decades, corporate earnings and cash flow have been the drivers of corporate valuations.

To this, Warren Buffett adds the following corollary, “If business is good, stocks eventually follow.” I like this quote, because it reminds me that only by buying a quality business, I can accumulate the investment possibilities that I like.

So I’ll be happy to keep ‘buying dips’!