Worried about the Stock Market? Try Warren Buffett’s Investment Strategy | personal finance

(Katee Brockman)

Investing in the stock market can be daunting regardless of its performance, but it’s especially disconcerting when prices are tanking. The Nasdaq recently entered a bear market after falling more than 20%, and the S&P 500 it is also approaching bear territory. No one knows how long this recession will last, which can make investing right now even more intimidating.

If you’re nervous about the future of the market, you’re not alone. But there is a strategy that can keep your money safer, and it’s also the approach famed investor Warren Buffett takes with his own portfolio: investing in the right businesses.

Image source: The Motley Fool.

The power of investing in companies

In Berkshire HathawayIn his most recent letter to shareholders, Warren Buffett emphasized that he and his business partner Charlie Munger are not stock pickers. Rather, focus on choosing the right business for your wallets.

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“[W]We own shares based on our expectations of their long-term value. deal performance and not because we see them as vehicles for timely market moves,” he writes. “That point is crucial: Charlie and I are not value collectors; we’re business pickers.”

Choosing the right investments is key to surviving any degree of market volatility. Even unstable stocks can do well when the market is up, but those stocks can struggle when the market takes a turn for the worse. On the other hand, stocks of healthy organizations are much more likely to rebound after downturns.

When your portfolio is made up of stocks from the strongest companies, there is a much better chance that your investments will survive even the worst market downturn.

Invest for the long term

Warren Buffett has also stressed the importance of keeping a long-term perspective when investing, and this strategy is crucial during periods of market volatility. Even strong stocks of solid companies can see their prices drop when the market is in a downturn. But when the market inevitably recovers, these companies should also see their share prices rebound.

Instead of trying to time the market and withdraw your money when the market drops, it’s often better to stick with your investments and weather the storm. If you are investing in high-quality stocks, your portfolio will recover over time and you will not have lost any money. As Warren Buffett said, “If you’re not willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

It can be difficult to maintain a long-term perspective when the market is unstable, but remember that the stock market has been around for many decades. During that time, it faced dozens of fixes and bugs, some of them quite serious. However, it has a 100% success rate when it comes to recovering from recessions.

No one can say for sure what will happen to the stock market in the coming weeks and months. But if share prices continue to fall, the market is likely to rally. By investing in solid businesses and sticking with your investments for the long term, you’ll be in great shape no matter what the immediate future holds.

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Katie Brockman has no position in any of the listed stocks. The Motley Fool holds positions and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: Long $200 January 2023 Call Options on Berkshire Hathaway (B-Shares), Short $200 January 2023 Put Options on Berkshire Hathaway (B-Shares), and Short $265 Call Options in January 2023 in Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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