Nervous About the Stock Market? This Is Warren Buffett's Best Advice.
If you're feeling fearful, it might be time to get greedy.
Investing in the stock market may appear straightforward at first glance. Since its founding in 1957, the S&P 500 has delivered an average annual total return of roughly 10%, despite the nation experiencing ten recessions. A straightforward approach to capitalize on this long-term performance is to invest in the S&P 500 via a low-cost exchange-traded fund, like Vanguard's S&P 500 ETF (VOO), which can often outperform individual stocks and actively managed funds.
Yet, attaining those long-term returns necessitates maintaining investments during significant downturns. Over the past two decades, the S&P 500 has witnessed peak-to-trough declines of 57% from October 2007 to March 2009, 34% from February to March 2020, and 25% from January 2022 to October 2022. These downturns - resulting from the Great Recession, the COVID-19 crisis, and the Federal Reserve's rate hikes, respectively - led many long-term investors to withdraw from the market.
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