Warren Buffett Said ‘Bad News Is an Investor’s Best Friend’ and If You’re Not Ready for Stocks to Drop 50%, You Shouldn’t Be Investing
The stock market is taking a beating—again. The Nasdaq just hit its lowest level since 2020, the S&P 500 is deep in the red, and investors are scrambling. Recession fears, inflation worries, and policy uncertainty have Wall Street on edge.
But Warren Buffett? He’s been here before. And if history is any guide, he’d tell you that now is not the time to panic—it’s the time to pay attention.
Buffett has spent decades reminding investors that bad news is often their best opportunity. During the depths of the 2008 financial crisis, he penned a New York Times op-ed titled “Buy American. I Am.” The market was tanking, fear was at an all-time high, and yet Buffett was buying.
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Why? Because, as he put it, “bad news is an investor’s best friend.” Economic downturns bring stock prices down, giving long-term investors the chance to buy great companies at a discount. The trick isn’t predicting what the market will do next—it’s understanding the difference between price and value.
Buffett has always dismissed the idea of timing the market. “Will stocks decline in the coming days, weeks, and months? This is the wrong question to ask… primarily because it is entirely unanswerable,” he said. What really matters is whether stocks are selling for less than they’re worth.
And he’s been right. The S&P 500 kept dropping after his 2008 op-ed, losing another 26% before finally turning around in March 2009. But those who listened to Buffett and bought during the chaos ended up reaping massive gains in the years that followed.
Buffett has a simple rule: “Be fearful when others are greedy, and be greedy when others are fearful.” That lesson has held true in every major market crash, from the Great Depression to 2008 to COVID-19.
At Berkshire Hathaway’s (NASDAQ:BRK, BRK.B)) 2020 shareholder meeting, Buffett compared fear to the virus itself: “Some people are more subject to fear than others.” He argued that some investors “really shouldn’t own stocks” because they panic when prices drop and sell at exactly the wrong time.
“You’ve got to be prepared, when you buy a stock, to have it go down 50%—or more—and be comfortable with it, as long as you’re comfortable with the holding,” he said.
While many investors scramble for safety in cash, Buffett warns against it. “Today people who hold cash equivalents feel comfortable. They shouldn’t,” he wrote in 2008. Inflation erodes the value of cash, while equities almost always outperform over time.
That said, despite Buffett’s well-documented distaste for holding cash, Berkshire Hathaway is currently sitting on a record $350 billion. Some believe this signals that Buffett sees the market as overvalued and is waiting for a correction—positioning himself to deploy that cash when stocks become a bargain, just as he has done in past downturns.
His advice was to think like hockey great Wayne Gretzky: “I skate to where the puck is going to be, not to where it has been.” Markets move ahead of sentiment and economic recovery. By the time things “feel safe,” the best opportunities are long gone.
Buffett doesn’t pretend to know what the market will do tomorrow. But he knows that over time, the stock market has always rewarded those who stay invested. “Most major companies will be setting new profit records five, 10, and 20 years from now,” he predicted in 2008.
And history has proven him right—again and again.
Ultimately, investing in stocks isn’t for everyone. Not everyone has the risk tolerance to weather major market declines, and that’s okay. There are plenty of ways to build wealth, and for those who prefer stability, safer options like bonds or diversified index funds might be a better fit. The key is knowing your own financial comfort zone and making decisions that align with your long-term goals.
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