Over the past three years, the stock market has become a hotbed for investors. The S&P 500 index hit record highs repeatedly during the bull market, accumulating a total gain of 78% over the period. Investors flocked to growth stocks, which typically benefit the most from a positive market environment, with stocks in the artificial intelligence and quantum computing fields receiving particular attention.
However, in recent weeks, uncertainties have accumulated, putting pressure on market sentiment. This has triggered significant market volatility, as can be seen from the fluctuations in the S&P 500 index. Against this backdrop, investors might wonder: Is now really the time to buy stocks?
During difficult market periods, it is wise to seek advice from an investment master—Warren Buffett, the investment guru who has led Berkshire Hathaway to outperform the market over more than 60 years. His advice remains timeless. Should one really buy stocks during market turmoil? Buffett’s words below provide an exceptionally clear answer.
First, let’s take a closer look at the positive and negative factors that have driven stock market performance in recent years up to today. As mentioned earlier, investors eagerly snapped up AI and quantum computing stocks, attempting to seize these potentially game-changing technological opportunities, causing the stock prices of many related companies to soar. Amid optimism that the interest rate environment is expected to lower, investors have also favored growth stocks outside the technology sector. It is well known that a low-interest-rate environment is conducive to corporate profit growth, as companies can borrow more cheaply and benefit from increased consumer spending on their products and services.
Although concerns over import tariffs in the spring of last year weighed on the stock market, it rebounded as agreements were reached and some tariffs were not implemented. Meanwhile, the growth narrative for AI and quantum computing continued. However, in recent weeks, a series of issues have emerged, ranging from potential disappointments in AI revenue to worries about the situation in Iran, adding to investors’ psychological burden. All these factors have prompted some investors to pause their investment plans or even sell off some of their stocks.
Now, let’s return to the initial question and Buffett’s answer to it. When the market is turbulent, should you really buy stocks? One thing to keep in mind: during such times, many quality stocks often get caught up in the downturn, meaning their stock prices may fall even though their long-term prospects remain bright. This happens because some investors get spooked and flee the market.
In his 1986 letter to shareholders, Buffett penned these enduring quotes about Berkshire Hathaway’s investment strategy: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
This means Buffett aims to buy when stock prices fall and others are fleeing. Because of this, he is able to purchase top-quality stocks at very reasonable prices. Moreover, if the stocks he recently bought decline further, it doesn’t matter to Buffett, as the billionaire is known for holding stocks for the long term—which gives the stocks ample time to recover and rise.
So, should you apply this strategy amid the current market volatility? The answer is yes, but as Buffett consistently practices, it must be based on individual stock analysis. This means carefully selecting companies with strong growth records and reliable long-term prospects, and choosing stocks whose valuations have reached reasonable or even cheap levels.
Buffett’s answer to our question is exceptionally clear: when others are fearful, it’s time to be greedy, in order to buy quality long-term stocks at low prices.
