REUTERS/Rick Wilking
When stocks are falling, it's a good time to buy at a bargain.
- We may soon be entering a bear market, but it's not time to panic if you're an investor.
- As Warren Buffett wrote in his 2017 letter to shareholders, investors should do two things when stocks are falling: Stay in the market and buy at a bargain.
- President Donald Trump also said now is "a tremendous opportunity to buy" stocks.
Stocks may be teetering on the brink of a bear market, but now is not the time to panic.
While the Dow and S&P 500 are both on track for the worst losses in a decade, as Business Insider's Callum Burroughs reported, it's important to remember the oft-repeated advice of Warren Buffett, the billionaire investor and founder of Berkshire Hathaway: "Be fearful when others are greedy and greedy only when others are fearful."
As MoneyTalksNews pointed out, Buffett reiterated some of his best advice for sustaining wealth during a bear market in his 2017 letter to shareholders: Stay in the market and buy at a bargain.
Buffett wrote:
"During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed American businesses will almost certainly do well."
In other words, don't fall into widespread panic and begin selling off stocks, because wealth-generating investments are long term.
"American business - and consequently a basket of stocks - is virtually certain to be worth far more in the years ahead. Innovation, productivity gains, entrepreneurial spirit and an abundance of capital will see to that ... Many companies, of course, will fall behind, and some will fail," he wrote.
Most importantly, it's impossible to predict when economic crises will happen, Buffett said, but they're inevitable.
President Donald Trump seems to share the same sentiment as Buffett. As the US stock market experienced record losses leading up to Christmas, Trump on Christmas Eve told reporters that right now is "a tremendous opportunity to buy" stocks, according to a Reuters report.
"We have companies, the greatest in the world, and they're doing really well. They have record kinds of numbers," Trump said.
Staying in the market over the long-term is a proven way to build and sustain wealth.
John, a self-made millionaire who runs personal-finance blog ESI Money, interviewed 100 millionaires over the past few years and found that many of them employed Buffett's signature investing strategy: They invest in low-cost index funds and they tended not to give into the temptation of frequently changing their investments.