How would Warren Buffett handle a 2023 stock market crash?

The last time we had a FTSE 100 crash, investors dumped their shares and ran for the hills. Warren Buffett wouldn’t do that.

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.

Warren Buffett at a Berkshire Hathaway AGM

Image source: The Motley Fool

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.

Ahead of a possible market crash, we might worry about a new bank crisis and a financial meltdown. But I think top investor Warren Buffett might be rubbing his hands with glee.

He’s seen many slumps in his time, and came through them all. He took control of Berkshire Hathaway back in 1965. And he turned it into a stunning success.

From 1965 to 2022, the US S&P 500 index rose nearly 25,000%. That’s a great result. But Buffett has it well beaten. Berkshire Hathaway shares soared by a huge 3.8m%.

Learning

It’s very hard to come even close to that kind of gain, without Buffett’s brains and years of experience. But I think we can still learn from him to help us through any 2023 stock market crash.

Whatever happens, he never panics. Markets selling off shares? He’s out there looking for the best value ones to buy.

Raining gold

Warren Buffett famously once wrote:

Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.

Berkshire Hathaway letter to shareholders, 2016

If the market crashes, like it did in 2020, there’s an instinct to sell. We don’t like uncertainty and risk. We’ve evolved to avoid them and seek safety.

Safety

So, sell risky stocks when the storm is here? And stash some bars of gold under the bed? Well, that might help to save some cash.

But those who made the big money last time were buying up the cheap shares that the fearful were selling off. It was the greedy who struck it rich.

It would surely be just the same in a 2023 crash. I don’t know if US bank failures might trigger it. But the fear has already sent UK bank shares tumbling.

Bust banks

Will Barclays go bust, just because it operates in the US? It’s strictly regulated, and its liquidity is the best its been in decades. I think the rules brought in by the FCA after the last bank crisis should keep UK banks safe.

My Lloyds Banking Group shares are falling. And they might fall further. And, even without a full-blown banking crunch, there’s still inflation.

That remains stubbornly high, despite big interest rate hikes. If it carries on, it could put the dampers on UK stock market prices.

Sell, or buy

If that happens, will I sell my Lloyds shares and buy gold? Or put my money in a Cash ISA for a year or two? No, I’ll invest as much as I can in snapping up cheap shares.

I don’t have as big a washtub as Warren Buffett does to fill with shares. But I’ll buy as many as I can.

I already have some decent diversification. So my next purchase, as soon as I’ve saved a good investing amount, is likely to be Barclays. As long as it stays cheap, that is. Or, even better, gets cheaper.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. 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

Young black man looking at phone while on the London Overground
Investing Articles

1 delicious penny stock I reckon can deliver juicy returns and growth

This food delivery penny stock has experienced a surge in performance and uptake recently. Our writer is excited by its…

Read more »

Investing Articles

If I’d bought Rolls-Royce shares the day Tufan Erginbilgiç joined here’s what I’d have now

Harvey Jones is startled by just how fast the Rolls-Royce share price has risen since its transformative CEO took over.…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

How much do I need to invest in Lloyds shares to earn income of £1,000 a year?

Harvey Jones is getting income and growth from his Lloyds shares but wished he'd bought more of them. So he's…

Read more »

Illustration of flames over a black background
Investing Articles

Down 75%! Will the Saga share price ever be loved again?

The last few years have been incredibly difficult for those watching the Saga share price. But what does the future…

Read more »

Investing Articles

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »