If a Stock Market Crash Is Coming, Warren Buffett Says You Should Do This 1 Thing Right Now
Just last week, the Nasdaq Composite posted an all-time high of 27,244. The S&P 500 (SNPINDEX: ^GSPC) and the Dow Jones Industrial Average aren’t far behind, both just a few percent off their own recent records. Despite some dramatic downswings, it’s been a good year for investors.
A good year that’s followed four great years. The S&P 500 is now up nearly 115% since the fall of 2022, while the tech-heavy Nasdaq Composite is up a whopping 160%. Investors can (mostly) thank Artificial Intelligence (AI) for that result.
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But as nice as the highs are, they’re making some investors nervous. With a new and transformative technology fueling a massive run-up in the stock market, they’d be forgiven for seeing echoes of the dot-com boom of the late ’90s that eventually went bust.
If a stock market crash is coming, investors would do well to heed the advice of maybe the most legendary investor of all time: Warren Buffett.
Keep investing through market turbulence
So what should you do? Warren Buffett’s advice is simple: Keep investing. Investors should “ignore the chatter,” and “accumulate shares over a long period.” And if things turn south, do not panic, hold on, do not “sell when the news is bad.”
The cardinal sin for an investor is attempting to time the market — even for Buffett and his late business partner, Charlie Munger. With trademark humility in 2019, Buffett told Berkshire shareholders, “Charlie and I have no idea as to how stocks will behave next week or next year.”
Now, I will say that this advice assumes that you are invested in a diverse set of quality businesses. You don’t want to be chasing speculative names; you want to be invested in companies with durable competitive advantages, strong balance sheets, and competent leadership. If you are, then following Buffett’s advice is sure to pay off in the long run.
What happened to investors who bought at the dot-com peak
Of course, it’s not always easy advice to follow, but consider this: From March 24, 2000 — the peak of the dot-com bubble — through today, the S&P 500 increased more than 400%.
In other words, $1,000 invested at the worst possible moment would have grown to more than $5,000 before accounting for dividends — and that’s without adding another dime. Of course, it wasn’t a smooth ride, and it took years for the investment to recover, but those who remained patient were eventually rewarded.
History’s most important lesson is exactly what Buffett preaches: patient, steady investing has always been the winning formula.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
If a Stock Market Crash Is Coming, Warren Buffett Says You Should Do This 1 Thing Right Now was originally published by The Motley Fool