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Updated: June 25, 2022 @ 4:23 pm
Warren Buffett began his investing career in a bear market. He bought his first stock in the early 1940s at age 11 as the S&P 500 was on its way to a 35% dip that bottomed in 1942. Since then, he’s managed through 12 more bear markets not including this one.
Despite those downturns, Buffett has managed to create billions in value for himself and the shareholders of the company he runs, Berkshire Hathaway. If any investor is qualified to share wisdom on investing in bear markets, it’s Buffett.
So it makes sense to lean on his expertise to get through this tough climate with your wealth intact, right? To get you started, here are four of Buffett’s famous rules for investing in a bear market.
Image source: Getty Images.
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
Buffett invests in high-quality businesses — companies with a proven ability to create shareholder value through all economic climates. In his view, bear markets provide opportunities to buy these quality stocks at lower prices.
As an example, Buffett’s response earlier this year to the tech stock sell-off was to buy more of his favorite technology company, Apple. Although Apple already comprised more than 40% of Berkshire Hathaway’s portfolio, Buffett bought another 3.78 million shares.
You can mimic his strategy by identifying stocks you love for their long-term prospects. If your budget allows, increase your investing activity and pad your share counts while prices remain low.
“Our favorite holding period is forever.”
When you buy stocks you’d like to hold forever, bear markets become far less stressful. Since your plan is to hold for the long run, you don’t have to do anything when the market goes sideways. No reshuffling your portfolio and no guessing when share prices will bottom out. Your only job is to wait.
“The most important quality for an investor is temperament, not intellect.”
It’s normal and useful to second-guess your “hold forever” plan when circumstances change. Certainly, there will be times when you should drop a stock you thought was a keeper.
The distinction you must make is whether circumstances have changed permanently or temporarily. And that’s easier to do when you can analyze what’s happening calmly and rationally. If you let your emotions take over, they can convince you to scrap your plan, cut your losses, or take some other dramatic action that’s sure to dampen your long-term returns.
Buffett said this when asked what advice he had for investors in tough markets: “I would tell them: Don’t watch the market too closely.”
Let’s say you’re confident that your “hold forever” stocks can withstand a temporary bear market. And for that reason, you’re not going to react to falling share prices. In that scenario, what’s the benefit of tracking every bump along the way? There isn’t one.
It’s OK to keep some distance from financial headlines when the market is going crazy. Consider it a survival strategy that helps you stay calm and stick to your investing plan.
When a bear market sets in, you’ll see Buffett mostly buy or hold. If you’re questioning whether those are the right moves for your portfolio, remember this: Buffett is worth about $95 billion, and he has invested through more bear markets than almost anyone. His tactics can help you emerge from this bear market stronger and wealthier than ever.
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Catherine Brock has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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· Surgery Center of Pottsville in Schuylkill County to close after June 28, 2022
· Terrain on the Parkway offers 160 new 1-, 2- and 3-bedroom apartments at 1625 Lehigh Parkway East in Allentown. Other amenities include a club room, fitness center, conference rooms and package lockers. Monthly rent starts at $1,575 with three-bedroom, two-bath units starting at $2,540.
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· While Wells Fargo has been the leader in closing banks lately, it will hold a ribbon-cutting for its new downtown Allentown office at 740 Hamilton St. on June 30.
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· The Allentown-based utility company PPL Corp. has a new approach after making two big transactions. It sold its U.K. operations, taking a lot of risk and currency complications out of its business, and bought a major Rhode Island utility.
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· Manta Massage at 319 Main St., Emmaus, will hold its grand opening on July 10 starting at 11 a.m. Services offered include facial cupping, and massages including targeted warm Himalayan salt stone and targeted facial massage.
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· Lehigh Valley Health Network ceremonially opened its first Carbon County hospital — a $78 million, 100,578-square-foot facility that officials billed as a “full-service community hospital.” It’s located at 2128 Blakeslee Boulevard Drive East in Mahoning Township.
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· The Conservatory music school in Bucks County will close after 34 years, and school officials say the COVID-19 pandemic is the cause. The nonprofit, located at 4059 Skyron Drive, Doylestown, will close June 30.
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· Hunterdon County Chamber of Commerce offices and the Unity Bank Center for Business & Entrepreneurship will be located at 119 Main St., Flemington. The building was erected in 1847 and was once the home of George Hall Large, who served as president of the New Jersey state Senate.
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· Dunkin’ reopens remodeled restaurant at 1174 MacArthur Road in Whitehall Township
· Muse Modern Med Spa at 325 Fifth St. in Whitehall Township will hold a grand opening June 4.
· Around Again, a consignment store, opened at 154 S. Main St., Phillipsburg
· Steak and Steel Hibachi, a restaurant in the works at 44 W. Walnut St., Bethlehem, still plans on opening late this summer.
· Take It Outdoors Recreation Hub has moved to a spot along the Schuylkill River Trail at Riverfront Park in Pottstown, Montgomery County
· Pedego Electric Bikes has a new outlet in Lambertville, N.J. at 13 N. Union St.
· Amanda Vachris has opened a new Keller Williams Real Estate office at 15 St. John St. in Schuylkill Haven.
· Easton’s new West Ward Market will open Wednesday and be open on Wednesday’s through the summer from 3 p.m. to 7 p.m. The market, created by the Greater Easton Development Partnership, will sell fresh produce on 12th Street, next to Paxinosa Elementary School.
· Ciao Sandwich Shoppe is adding a second location, this time on College Hill in Easton. Ciao plans to open at 325 Cattell St. in late summer. Ciao already operates in downtown Easton at 12 N. Third St
· Ma’s Crepes and Cakes will hold a grand opening and ribbon-cutting June 16 at 46 W. Broadway, Jim Thorpe. The celebration starts at 5 p.m., with the ribbon cutting at 5:45 p.m.
· Bethlehem’s Back Door Bakeshop will reopen as a wholesale operation at 7 E. Church St. in the city’s historic district. The business was open for nine years as a retail outlet at Broad and Center streets, before announcing in March that it would close the storefront April 3 and “go back to its origins as a wholesale business.”
·The Beef Baron on Catasauqua Road in Bethlehem is closed indefinitely for renovations
· The Brothers That Just Do Gutters are opening a new location in Allentown at 1302 N. 18th St.
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· Il Gaetano Ristorante will hold a grand opening on Friday, May 20, at 5:30 p.m. The 665 Columbus Ave., Phillipsburg.
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