Here’s Warren Buffett’s Best Advice To Prepare for a Bull Market

The past year has been a rollercoaster ride of ups and downs for the stock market, but 2023 has been on the up again.

Whether this uptrend will continue in a bull market is currently uncertain, especially since some economists still believe a recession is imminent. Either way, now is the perfect time to start preparing. Here’s top advice from legendary investor Warren Buffett.

Warren Buffett at an event, standing in a crowd.

Image Credit: The Motley Fool.

It’s time to “be greedy”

In 2008, during the worst of the Great Recession, Warren Buffett wrote an op-ed for The New York Times. While all bear markets are different, his advice from back then still applies today.

“A simple rule governs my purchase,” he wrote in the article. “Be fearful when others are greedy and be greedy when others are fearful.”

It seems like a bad time to invest right now, with many investors concerned about a possible recession, inflation, layoffs and general economic uncertainty. But now is the time to “be greedy” and invest more.

Nobody knows when the next bull market will start. But if you invest now while stock prices are still lower than they were a year or two ago, you’ll be well-positioned to take advantage of the rebound — whenever that may be.

Preparing for the next bull market

Perhaps the biggest mistake you can make right now is waiting too long to invest.

The stock market is always volatile in the short term, even in tough economic times. It’s next to impossible to know when a bull market has started until we’re in it. If you haven’t invested by this point, you will be missing out on significant revenue.

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Suppose you have invested in one S&P500 Index funds during the Great Recession. The S&P 500 officially bottomed in March 2009, but continued to experience ups and downs during the ensuing bull market.

^SPX chart

^SPX data from YCharts.

If you had invested in February 2009, your portfolio would have lost value immediately. But by the end of the year, you would have earned returns of more than 35%.

However, if you had waited until August, when the market had already been recovering for a few months, you would have only returned around 13% by the end of the year.

In other words, waiting until the market is already on the up may seem safer, but you could miss out on the potentially lucrative recovery period.

Where to invest now

The best thing you can do now to prepare for a bull market is to invest in quality stocks of healthy companies and hold them for the long term.

Again, no one knows exactly what the market will do in the coming weeks or months, and even strong stocks could continue falling this year. But if the companies themselves have solid fundamentals, they’re much more likely to bounce back.

“I cannot predict short-term movements in the stock market,” Buffett wrote in the Just Piece. “However, the market is likely to move potentially significantly higher well before sentiment or the economy recovers, so if you’re waiting for the robins, spring is over.”

It can be scary investing during periods of volatility, but the market has managed to weather worse downturns in the past. By investing now, you’ll be well-prepared for potentially lucrative returns when the market inevitably recovers.

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