Legendary investor Warren Buffett warned investors that owning stocks requires accepting the possibility of a 50% decline, even when nothing is fundamentally wrong with the underlying business.
Buffett, during the 2020 Berkshire Hathaway Inc. (NYSE:BRK) annual meeting, said investors should not expect to identify every market bottom or time purchases perfectly. “You’re not going to pick the bottom, and nobody else can pick it for you,” Buffett said, adding that investors must be prepared for stocks to fall 50% or more after purchase.
The “Oracle” of Omaha pointed to Berkshire, saying the company’s value declined by half on three separate occasions despite no underlying business problem.
He identified borrowing and emotional decision-making as greater dangers than temporary market declines. “If you can’t handle it psychologically, then you really shouldn’t own stocks, because you’re going to buy and sell them at the wrong time,” he said.
Buffett also said that investors should trust their own understanding and judgment rather than relying on others to tell them what to do. “If you don’t understand it yourself you’re going to be affected by the next person you talk to,” he said.
The investor also said he could not determine whether one day represented an ideal buying opportunity, but emphasized that investing should be evaluated over 20- or 30-year periods.
Wall Street’s Bull and Bear Views Collide
Buffett’s investing wisdom is particularly relevant amid renewed evidence of market volatility. Wall Street reversed its post-midterm optimism on Thursday as AI-linked chipmakers suffered their worst selloff since the COVID-19 crash. The iShares Semiconductor ETF (NASDAQ:SOXX) plunged 12.8%, while the Philadelphia Semiconductor Index (SOX) fell 12.3%. SOXX recovered on Friday, closing 3.51% higher at $136.53.
Fundstrat’s Tom Lee blamed the recent tech stock sell-off on a “blue tsunami” policy shock and heavy liquidation in Asian markets. He also said fears surrounding AI are exaggerated, despite reports of large hedge funds facing liquidation. Lee compared the market turmoil to the tariff-driven selloff and DeepSeek shock, noting that corporate earnings had remained resilient despite previous policy disruptions. He expects companies to similarly adapt to the potential policy shock from a Democratic “blue wave.”
However, economist Peter Schiff warned of further market declines, citing potential slower productivity, higher government spending, wider deficits and increased regulation. He also predicted higher taxes, inflation, and interest rates would pressure the U.S. economy and stock market.
Meanwhile, President Donald Trump blamed Democrats for the stock market’s sharp selloff following their midterm victories, claiming the decline had hurt Americans’ 401(k) retirement savings. In a Truth Social post, he called it one of the worst market days in history but promised stocks would eventually emerge “BIGGER AND STRONGER THAN EVER BEFORE.”
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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