Warren Buffett’s top tips to get rich in the market crash

Warren Buffett, the legendary American billionaire, has just turned 90. Here are some of his tips that could help you buy great shares in the market crash.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett, one of the greatest investors in the world, has just turned 90. He’s always liked building wealth by investing in a market crash. 

Market crash

Buffett hasn’t made many buys following this spring’s crash, to the surprise of many. However, news agencies announced that the Oracle of Omaha recently invested in a bunch of Japanese companies. I think Buffett believes another stock market crash will happen soon.

Right now the famous Buffett indicator is near its record highs. In plain terms, it means the stock market is worth much more than GDP. This is particularly obvious in the case of the US. In addition, there’s plenty of uncertainty still about Covid-19. Consumption levels all over the world are still quite low due to the current economic crisis. Plus, there are other dangers that could also lead to a stock market crash, including US-China relations and the US elections. 

So, I believe a market crash is coming. That’s why I see these pieces of advice from Buffett as particularly relevant right now.     

Tips from Warren Buffett

1. Think long term

To start with, the Sage of Omaha always invests for the long term. It might sound too simple. But there is a strong logic behind this approach. If you invest in a company with a high credit rating and a strong business model, you’re making a smart move. The company you buy should be profitable and keep paying dividends. You can reinvest these dividends and buy some more of these shares at every possible pull-back. In this situation, you’re highly unlikely to lose money. But if, for some reason, this company isn’t particularly popular among investors right now, don’t panic!   

Buffett put it this way: “Nobody buys a farm based on whether they think it’s going to rain next year. [They] buy it because they think it’s a good investment over 10 or 20 years”. This brings us to the next tip.

2. Ignore market moves

These days we are seeing a high-tech rally. With all of us staying at home, we are naturally interested in e-commerce, cloud technologies, video games, and various subscription services. This gives a boost to companies like Amazon, Netflix, Zoom, and Microsoft. On the other hand, some companies with long operational histories are down this year so far. 

According to Buffett, “Though markets are generally rational, they occasionally do crazy things. [Investors need] an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentalsA willingness to look unimaginative for a sustained period — or even to look foolish — is also essential”. In other words, “don’t watch the market closely”.

3. Buy index funds

In order to minimise the risks, it’s wise to invest in an index fund. Buffett always recommended buying a fund tracking the S&P 500 Index. But UK investors can get a very similar result by investing in the FTSE 100 Index. It would allow them to spread the risks and take advantage of the stock market recovery.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Anna Sokolidou has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Microsoft, Netflix, and Zoom Video Communications and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »