Keeping a cool head when the stock market throws a tantrum is a simple and effective strategy that Warren Buffett’s used throughout his investing career to enormous success.
The billionaire investor has always followed some strict rules of engagement when prices start swinging aggressively. And by following in his footsteps, other investors can aim for a far superior long-term performance.
So what is the secret?
Investing during volatility: Buffett-style
Of all the advice that Buffett’s given over the years, the two most relevant during periods of volatility are arguably:
- “If a business does well, the stock eventually follows”.
- “Risk comes from not knowing what you’re doing”.
Put simply, investors should worry less about what the stock price is doing and focus entirely on what the underlying business is up to. Only then can an informed decision be made and the risks fully understood.
For new investors, heeding this advice is far easier said than done – not due to a lack of skill, but rather a lack of discipline. After all, anyone who’s just suffered a massive double-digit drop in one of their investments might think it’s mad to buy more when prices are seemingly in freefall.
This scenario’s undoubtedly played out for many RELX (LSE:REL) shareholders of late.
Between the start of 2026 and early February, RELX shares went into freefall, crashing by over 30% in just over a month. Novice investors who didn’t follow Buffett’s advice and sold their shares not only locked in a loss but also subsequently missed out on a 25% rebound that shortly followed.
What happened? And why are RELX shares back on the rise?
The opportunity in volatility
RELX found itself being aggressively sold off following a massive spike in fear that advanced AI models could invalidate the business model of countless software-as-a-service businesses.
It’s certainly a valid long-term concern. But with panic driving the decision-making process, almost every AI-exposed business, including this one, was sold off with prejudice.
It’s only the intelligent investors who took a step back and saw that RELX hasn’t only been preparing against this threat for years, but that its own AI tools have already been driving stronger growth and higher spending from customers.
As such, all of its leading divisions are delivering growth simultaneously with profit margins steadily expanding. And as investor nerves have calmed, more have recognised the initial overreaction, paving the way for a strong recovery rally.
What to watch
Investors seem to have overreacted to the disruption fears in early 2026. But there’s some justified cause for concern. Cheap and cheerful large language models, while seemingly unlikely to obliterate RELX, could nonetheless undercut the firm’s long-term pricing power, with customers opting for cheaper third-party alternatives to handle basic tasks.
With a large chunk of the market already relying on its data, if the group’s ability to charge premium prices diminishes, the result would be steady revenue deceleration, opening the door to challenges later down the line.
Right now, RELX’s business appears to be in a strong position, even if its share price appears weaker and worth considering. And by keeping tabs on where the risk lies, investors can follow in Warren Buffett’s footsteps along their wealth-building journey.
