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3 Ways to Handle a Bear Market Like Warren Buffett

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3 Ways to Handle a Bear Market Like Warren Buffett


Warren Buffett is considered by many to be the greatest investor of all time. It’s hard to argue with that when you see his continued success throughout his career.

One of the greatest benefits of Buffett’s investing success is the simple principles he follows that can be adopted by even the newest investors. As the stock market enters bear market territory, here are three ways to handle it like the Oracle of Omaha.

Image credit: Getty Images.

1. Use it as an opportunity to find value in chaos

Ironically, uncertainty is one of the few sureties in the stock market. There are daily swings, bull markets, bear markets, and seemingly everything in between. With stock prices falling during a bear market, it’s easy to find yourself anxious about portfolio declines, but remember one key thing: Bear markets are almost inevitable. Historically, they’ve happened every four years or so, and there’s no reason to believe they’ll stop happening in the future.

Buffett is the poster child for value investing; he always intends to buy when an investment is priced below its true value. Instead of worrying about a bear market, you can think of it as an opportunity to grab some quality stocks at lower prices. If you like a stock at $200 a share, you should like a stock at $150.

As Buffett said, “Opportunities don’t come easily. When it rains, take out the bucket, not the thimble.” In other words, if a bear market happens and your favorite investment becomes very cheap, use it to your advantage Advantage.

2. Don’t go with the flow

Buffett said that investors should “be fearful when others are greedy and greedy when others are fearful.” Generally speaking, a bear market is a sign of fear among investors, as an increase in stock selling is what drives the stock price lower. You want to avoid a panic-selling situation as people panic-sell and push the stock down further. Not only will it trigger a capital gains tax bill, you may also find yourself buying back the same stock at a higher price later on.

While a bear market may frighten others, it can be an opportunity for you to become greedy with your favorite investments.

3. Take a long-term view

When investing, you should always prioritize your long-term interests. Unfortunately, it’s easy to let your emotions lead you to make short-term decisions that go the opposite way — especially when you’re witnessing your money appear to be falling. If you truly believe in investing, you shouldn’t let short-term price declines discourage you, especially if the business hasn’t fundamentally changed.

Buffett’s thoughts on long-term investing can be summed up in one of his words: “If you don’t want to own a stock for 10 years, don’t even think about owning it for 10 minutes.” That doesn’t mean holding them just for the sake of holding them There are failed investments, but it does mean that if you are investing, you should be doing it for long-term potential and prospects.

From a macro perspective, bear markets are short-term events. Don’t let them take you out of your long-term plans.

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