S&P 500 Bear Market: Warren Buffett’s 2008 Advice Still Holds True

It’s not an easy time to be an investor right now. Stock prices have plummeted over the last six months, and many Americans are worried that a recession could be looming. Nobody knows when the market will bottom out or how long it might take to recover, which only adds to many investors’ concerns.

Sometimes, though, looking back on previous downturns can make it easier to get through the current one. Back in 2008, at the height of the Great Recession, Warren Buffett wrote an opinion piece for The New York Times. His advice is just as relevant today, and it could help make this downturn more bearable.

Bear markets are buying opportunities

It may seem counterintuitive to invest when stock prices are at their lowest. But Buffett has long encouraged investors to buy during downturns to take advantage of the inevitable upswing. In the 2008 New York Times piece, he said, “In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”

Back in 2008, nobody knew what would happen with the market. The country was experiencing one of the worst economic downturns in history, and it was tough for investors to stay optimistic.

However, after stock prices hit rock bottom in March 2009, the S&P 500 saw returns of nearly 70% over just the following year. The best way to earn those types of returns is to invest when the market is at its worst and simply wait it out.

^SPX data by YCharts

Of course, every bear market is different, and there are no guarantees that the S&P 500 will see similar gains after this slump. But the market will recover eventually, and by investing now, you can take advantage of the inevitable rebound.

Keeping a long-term outlook

Investing when prices are low is only one part of the equation. It’s also critical to hold those investments for at least several years as the market recovers.

Back in 2008, Buffett emphasized that while he couldn’t say how the market would perform over the short term, he was confident stock prices would rebound. And when they did, those who stayed in the market saw the biggest payoffs. He said at the time: “[B]usinesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records five, 10 and 20 years from now.”

Again, the current bear market is different from the Great Recession in many ways, so the recovery may look different than it did a decade ago. But historically, every single bear market has eventually given way to a bull market, and long-term investors have reaped the rewards.

Patience pays off

It’s not easy to invest right now, and this downturn has shaken even experienced investors. But if previous sell-offs have taught us anything, it’s that the market can recover from just about anything. That means those with the most patience will be rewarded over time.

Every market downturn will be different, but the overall lessons are the same. If you can afford it, continuing to invest right now will pay off down the road. And by maintaining a long-term outlook and investing in strong companies, you’ll be on your way to building lifelong wealth in the stock market.

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