Recent inflation and down markets have undoubtedly caused concern for investors, so today we’re bringing you real investment advice on down markets from five influential investors, ranging from venture capitalists and entrepreneurs to authors and a TikTok “finfluencer,” who have seen their fair share of market fluctuations. The common thread? Stay the course and don’t panic.
Long-term investors know that fluctuations in the market are inevitable. They also know the market will eventually recover. And since they’re in it for the long haul, short-term fluctuations don’t cloud their judgment; they choose to see them as an opportunity.
Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.”
Known to many as the most successful investor of the 20th century, Buffett is no stranger to risk but believes there should be a methodology behind it.
While he’s not a fan of cryptocurrencies, Buffett is famous for his investing philosophy of being aggressive when others are fearful. This quote is from the 1986 Berkshire Hathaway shareholder letter. Over a 40-year span, Buffett’s annual shareholder letters have become a must-read for many investors because of their wealth of wisdom, ranging from investment strategy to company culture, and more.
While often quoted in financial articles, the context is often excluded. The whole quote is, “And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”
Buffett is saying that the market cannot be timed, but if you’re going to use the herd as a measure of success, the wise thing to do is to avoid buying with the herd. And when the herd is panicking and selling off their stocks, that’s the time he recommends buying. While easier said than done, this timeless advice rings true, even 36 years later.
A clear example of this advice in action is during the dot-com bubble of 2000 when experienced, institutional investors were getting out as retail investors made their most aggressive investments at the height of the bubble. (We all know how that turned out.)
Jim Cramer: “There’s always a bull market somewhere.”
Cramer, host of Mad Money on CNBC and an anchor on Squawk on the Street, ends every TV and radio show with the phrase, “There’s always a bull market somewhere.” In other words, solid investment opportunities always exist, even when markets are down. In a recent article, he explained why you shouldn’t stop investing during a recession.
While he acknowledged how scary the current market may seem, he recommended investors ask themselves, “What companies have historically done well in a recession?” and invest accordingly. Referencing the fact that people still have to brush their teeth and wash their hair during a recession, he encourages investments in staples that are needed regardless of the economy.
Tori Dunlap: “When you’re managing your investments, especially if your investments are down, don’t look at it.”
Dunlap, founder of Her First $100k, has been dubbed “TikTok’s Finance Queen.” After saving $100,000 by age 25, she quit her corporate job and has since made it her mission to empower women to make sound financial decisions.
In a recent podcast, Dunlap discussed how to prepare when the economy is unstable, and encouraged her listeners to limit the amount of time they spend monitoring investments, especially during down markets. “Not looking at your investments during a time of instability is so helpful to your anxiety […] I’m only giving you permission to do this if you are still consistently investing and if you have a plan already put together.”
She added that she only looks at her portfolio once per week, even as an investing expert because “what happens on a random Tuesday, what happens even in a year, a random year, doesn’t really matter over decades.” That’s because, as Dunlap says, 125 years of stock market data shows that you will make money with a steady, patient, and consistent long-term approach. That is, of course, assuming you make sound investments and spread risk over a variety of asset classes.
Barbara Corcoran: “Every bad turn is an opportunity—the competition thin[s] with every recession.”
As one of Shark Tank’s original investors, Corcoran is a well-known TV personality, venture capitalist, and real estate mogul. In a Bigger Pockets podcast episode, Corcoran shared tips on how to become successful during a market downturn, including:
- Use adversity to your advantage.
- Stop feeling sorry for yourself.
- Recognize that every downturn creates opportunity.
- Focus on what you can control.
- Trust your gut.
While not specifically investing advice, her point regarding opportunity applies because it encourages resilience during down markets. She stressed that she became the leading broker because of downturns, not in spite of them. During hard times, many investors will panic and cut their losses. Others will hang on through the difficulty, and those are the ones who will stand to gain a lot on the other side of a downturn.
Ramit Sethi: “Real long-term investors know that you can’t time the market. Success is about time in the market.”
Sethi, a personal finance expert, entrepreneur, and best-selling author of I Will Teach You to be Rich went on to explain, “That means every month, consistently and automatically, you are saving. You are investing.” In a CNBC article, he discussed how readers can recession-proof their lives. When markets are down and when markets are up, he invests consistently.
Sethi is a big proponent of dollar-cost averaging, which he defines in his book as “a fancy phrase that refers to investing regular amounts over time, rather than investing all your money into a fund at once.” He continues, “By investing over a regular period of time, you don’t try to time the market. Instead, you use time to your advantage.”
In his view, long-term investors should focus on what they can control right now, including:
- Creating an automatic savings plan
- Automating investments in a 401(k) or other retirement plan
- Ensuring investments are properly diversified
- Conversing with your boss about how to be a better performer so you’re top of mind for raises and promotions
Sethi says that “If you’re doing those things, then you don’t need to worry about what recession might or might not be coming.”
Diversify Your Portfolio
If you’re interested in diversifying your investments as many expert investors do, open a tax-advantaged Alto IRA or CryptoIRA to get started.