The FTSE 100 hit another all-time high this week. Despite that, the market feels volatile and some investor nervousness is palpable.
Billionaire investor Warren Buffett has had his fair share of rough markets to contend with over the decades. Here are three of his practical thoughts about investing when markets are volatile.
Understand what you’re investing in
A classic sign of a market bubble is when hordes of people put money into a share just because it has strong positive momentum, with no understanding of what the business is.
Buffett sees a share as a stake in a business. When investing, rather than looking at a chart and trying to discern a pattern in it, he considers whether he would like to own the whole business and if so, what would be an attractive price for an individual share.
Taking such an approach involves understanding a business, assessing its financial prospects and having a point of view on what a fair valuation would be.
If Buffett does not feel he understands a business, he will not invest in it.
Don’t be unnecessarily alarmed by price swings
Given that approach to investing, Buffett does not worry too much if a share he owns goes down in value. After all, he is investing for the long term. So the swings of the stock market – even significant market volatility – need not bother him if he is not planning to sell those shares.
However, that does not mean he pays no attention to what is going on in the stock market. After all, turbulent stock markets can throw up the opportunity to buy into great businesses at much lower prices than just a short time before. That is exactly what Buffett did during the 2008 financial crisis.
Take the long-term view
In a rough market, it can seem as if things may never be the same again. In such a situation, taking a long-term approach to investing can be not only potentially rewarding, but also reassuring.
For example, I have hung onto my shares in well-known footwear maker Crocs (NASDAQ: CROX). So far, they have been a crushing disappointment. Tariff concerns have played havoc with investor sentiment. Actual tariffs have hurt the company’s business model.
Weak consumer sentiment in the US and exchange rate fluctuations are only some of the other risks that mean that this has been a pretty rough year so far to be a Crocs shareholder. The share price is down 29% so far in 2025.
But I have hung on because, over the long term, I continue to like the business. It has a lot of what Buffett looks for when investing, as it happens: scale, a proven business model, an easy to understand business, and strong branding.
Will it come good? I hope so and have no plans to sell my shares. Meanwhile, I am taking a long-term view and ignoring the short-term share price movements. Over a five-year timespan, the Crocs share price has risen 34%.
