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Would Warren Buffett buy stocks in a market crash?

Kirsteen Mackay
close-up photo of investor Warren Buffett

World-famous investor Warren Buffett has accumulated a fortune worth over $70bn throughout his seven decades of stock market dealings. At 89 years-old, Buffett is still chairman and CEO of Berkshire Hathaway, his main investment vehicle. Who better to look to for advice on getting started in buying stocks and shares?

With the world battling the coronavirus pandemic, global financial markets are not having a good time. Prices are volatile and fortunes are being lost, but for cautious and prudent investors I believe money can still be made.

Value investing strategy

Over the years, Warren Buffett’s value investing strategy has made many millionaires out of ordinary investors. Long ago, he divulged his tenets for investing. These are the main points he considers when looking to buy shares in a company.

One of these is choosing a business that he understands. So, if you’re following suit, do you understand the business you want to buy shares in? Does it have a competitive edge that you understand and respect? If the answer is yes, then this is a great place to start. If not, then you probably don’t want to be buying shares in a company you don’t understand.

Follow Warren Buffett’s lead

One of Warren Buffett’s famous quotes is: “Price is what you pay. Value is what you get.

This rings true for me at times like these because when a stock price is fluctuating rapidly it’s nigh on impossible to time your purchase at the lowest price point. If you’re confident in the company you’re buying shares in, then the price you pay should be almost irrelevant. Accepting that your stock purchase could lose value in the short term but will ultimately gain over the long term isn’t easy. I’d say it’s one of the most difficult thought processes that long-term investors need to get to grips with.

Market crash opportunities!

In his February shareholder letter, Buffett said he expects Berkshire’s portfolio of US-listed stocks to deliver “major gains”, albeit irregularly.

Buffett encourages investors to think long term, focusing on Berkshire’s operating results and the intrinsic value of its stock holdings.

The pandemic poses a challenge for even the most esteemed investor. However, Buffett has decades of experience of investing and outperforming in down markets. He advocates that over the long term, Berkshires performs “in a very, very safe manner”.

He has a framed copy of the New York Times from the 1929 stock market crash, hung in his Berkshire Hathaway office. It also serves to remind us that anything can happen, and careful consideration over your investments is vital.

I’d be very surprised if Buffett wasn’t buying stocks during this market crash. He knows how to spot value in top quality companies, and I’d bet that’s exactly what he’s doing.

The post Would Warren Buffett buy stocks in a market crash? appeared first on The Motley Fool UK.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020