Key Takeaways
- Chasing popular investments typically means entering the market when profits have already been made
- Significant market downturns are part of investing — Berkshire itself has experienced three declines exceeding 50%
- Skipping just the top 10 performing days in the market can slash your returns by over half
- Index funds with minimal fees provide the best approach for most investors during turbulent times
- Prioritize quality, long-term holdings over speculative, trendy opportunities
Warren Buffett recently shared his perspective with CNBC regarding market turbulence and the proper approach for younger investors when facing downturns. His guidance is simple yet grounded in nearly a century of investment wisdom.
At 95 years old, Buffett transitioned from his CEO role at Berkshire Hathaway as 2024 concluded. Even in retirement, his investment philosophy continues to influence millions of investors worldwide.
When both the Nasdaq Composite and Dow Jones Industrial Average slipped into correction territory in late March, driven by technology sector worries and international tensions, many investors grew anxious.
Buffett remained calm. “Three times since I’ve taken over Berkshire, it’s gone down more than 50%,” he explained to CNBC. “This is nothing.”
Among Buffett’s core principles is avoiding the temptation to jump on trending investments after they’ve already soared. His famous saying — “What the wise do in the beginning, fools do in the end” — captures the danger of late-stage buying.
The dotcom era provides a perfect example. As 1999 drew to a close, countless investors rushed into internet companies without examining their business fundamentals. The subsequent crash left many of these firms bankrupt.
Cryptocurrency followed a similar pattern. Those who invested early with proper understanding profited handsomely. Latecomers who bought near peak prices because of fear of missing out typically ended up selling at significant losses when markets collapsed.
Why Panic Selling Destroys Wealth
Exiting positions during market declines can devastate your portfolio’s long-term performance. Had you invested $10,000 in the S&P 500 during 2006 and maintained your position through 2025, your investment would have grown to approximately $81,000.
However, being absent from the market for merely the 10 strongest-performing days throughout that timeframe would reduce your gains to roughly $36,000, based on data from J.P. Morgan Asset Management.
Thomas Balcom, who founded 1650 Wealth Management in Florida, recently counseled a 20-year-old investor whose holdings had declined approximately 10%. The young investor contemplated liquidating his S&P 500 index fund position.
Once Balcom demonstrated that the portfolio maintained proper diversification and the decline represented temporary volatility, the investor decided to maintain his positions.
The Power of Diversification and Patience
Buffett has consistently advocated for low-fee, broadly diversified index funds as the optimal strategy for regular investors. Distributing capital across numerous companies minimizes losses when individual sectors underperform.
For younger clients, Balcom frequently recommends the Schwab 1000 Index ETF as a starting point, which provides exposure to 1,000 major U.S. corporations while charging just 0.03% in annual fees.
Thomas Van Spankeren, serving as chief investment officer at RISE Investments in Chicago, recently guided one client toward reducing concentrated technology positions. His recommendations included incorporating dividend-paying stocks, small-capitalization companies, and international markets.
“Buy and hold is very important, but you also need to know what you own,” Van Spankeren emphasized.
Buffett noted he’s prepared to put capital to work — but exclusively in high-quality businesses he intends to own indefinitely, rather than pursuing quick profits.
