Warren Buffett, the legendary investor and chairman of Berkshire Hathaway, once suggested reading a 19th century poem when stocks fall. He emphasized the importance of staying calm during market downturns. There is simply no telling how far stocks can fall in a short period,” Buffett wrote.
He advised investors to heed the lines of a poem from around 1895 if a major decline occurs:
“If you can keep your head when all about you are losing theirs … If you can wait and not be tired by waiting … If you can think — and not make thoughts your aim …
If you can trust yourself when all men doubt you … Yours is the Earth and everything that’s in it.”
Buffett’s advice is especially valuable during significant stock market declines, like the 2007 to 2009 bear market when the S&P 500 lost over 50% of its value. He notes that corrections are normal and should be expected.
Buffett’s advice on staying calm
Since 1980, the S&P 500 has experienced 21 declines of 10% or more, with an average intra-year drawdown of 14%. Investors often don’t know if conditions will worsen, but Buffett stresses that no one can predict these events.
The light can at any time go from green to red without pausing at yellow,” he wrote in 2017. No matter the size of the decline, Buffett’s message remains the same: Stick to your long-term plans and keep investing. Buffett sees downturns as “extraordinary opportunities.” Historically, the market bounces back after a decline.
Since 1928, the average bear market has lasted less than 10 months. By consistently investing during downturns, investors effectively buy stocks at a discount. As Kipling’s poem suggests, keeping a level head and ignoring sensational headlines can help boost long-term wealth.
Buffett echoes this, encouraging investors to seize opportunities during market drops: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”
By following Buffett’s advice and maintaining a long-term perspective, investors can navigate market volatility and work towards their financial goals.
Image Credits: Photo by m. on Unsplash
