What Warren Buffett Would Most Likely Recommend Investors Do Right Now

Down, up, then back down again. It wouldn’t be surprising if investors have gotten dizzy from the stock market’s gyrations.

All of the volatility makes it difficult for many to know what to do. Should they buy stocks? Should they hold off?

In times like these, it would be nice to receive advice from one of the world’s greatest investors ever — Warren Buffett. Of course, the multibillionaire isn’t a personal financial advisor. However, we don’t have to look hard to find out what he’d probably say. Here’s what Buffett would most likely recommend investors do right now.

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What to do

We really don’t know for sure how Buffett himself is investing right now. Our best picture is what Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the conglomerate he runs, did in the second quarter of 2022. In Q2, Berkshire bought nine stocks and sold six stocks.

But Buffett probably wouldn’t tell you to mimic what he’s doing anyway. As far as I know, he’s never encouraged other investors to copy his moves. However, he has given very specific advice in the past.

In Buffett’s 2013 letter to Berkshire Hathaway’s shareholders, he wrote about how he and his longtime business partner Charlie Munger evaluate stocks. After this discussion, though, he noted that most investors don’t need to do what he and Munger do.

Buffett rightly pointed out, “In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts).” He stated that non-professionals should simply invest in a cross-section of businesses and that “a lost-cost S&P 500 index fund will achieve this goal.” An index fund, as the name implies, simply holds all of the assets in the index that it attempts to track.

How serious was Buffett about this recommendation? He even put similar instructions in his will for how his cash should be invested for the benefit of his family. Buffett revealed that his will stipulates that 90% of the money should be invested in a low-cost S&P 500 index fund with 10% in short-term government bonds. He suggested Vanguard, which operates the Vanguard 500 Index Fund ETF (NYSEMKT: VOO).

What about timing?

But would Buffett think that buying an S&P 500 index fund such as Vanguard’s would be the best thing to do right now? After all, as we discussed earlier, the market is really volatile. I think the answer to this question is a resounding “yes.”

First of all, Buffett hasn’t been shy about buying stocks for Berkshire’s portfolio during times of high market volatility — including this year. Granted, he has been selective about which stocks to buy. However, investing in an S&P 500 index fund doesn’t require the kind of analysis that Buffett and his team conducts before buying stocks.

We also can look back to what Buffett said about the timing of investments. He wrote in 2013, “The ‘when’ [of investing] is also important. The main danger is that the timid or beginning investors will enter the market at a time of extreme exuberance and then become disillusioned when paper losses occur.”

There’s certainly no reason to worry about “extreme exuberance” right now. Even if that was the case, though, Buffett has an answer. In the 2013 letter to Berkshire shareholders, he stated, “The antidote to that kind of mistiming is for an investor to accumulate shares over a long period and never to sell when the news is bad and stocks are well off their highs.”

In other words, Buffett’s recommendation would probably be to buy an S&P 500 index fund now and keep buying on a regular basis. The most important caveat is that you shouldn’t sell in an attempt to avoid a loss.

Good advice

Buffett told Berkshire’s shareholders in 2013 to “ignore the chatter” and “keep your costs minimal.” Investors who did so, he maintained, would be “virtually certain to get satisfactory results.”

He was right. Historically, Buffett’s recommended approach would have made investors a lot of money. The S&P 500 has experienced downturns in the past, but it’s risen significantly over the long term. If you’re looking for good advice on what to do in today’s volatile market, you probably won’t go wrong by listening to the Oracle of Omaha.

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Keith Speights has positions in Berkshire Hathaway (B shares) and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares) and Vanguard S&P 500 ETF. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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