A stock market crash like this one is a great opportunity to buy bargain FTSE 100 stocks and build wealth for your future, provided you stay calm. So do not panic, do not sell. Instead, listen to the greatest investor of all time, Warren Buffett.
He has faced a host of market crashes since the 1960s, and emerged richer every time. He did this by picking up top companies at bargain prices. You now have the opportunity to do likewise, as the FTSE 100 crashes due to the coronavirus.
These five Buffett quotes could help you profit from the stock market crash and build the wealth you need to retire early.
“There will be interruptions, and I don’t know when they will occur, and I don’t how deep they will occur, I do know they will occur from time to time, and I also know that we’ll come out better on the other end.”
This isn’t his snappiest quote, but it makes sense. We are in one of those “interruptions” now. Nobody knows how deep the stock market crash will be. However, it will pass, and we will come out better at the other end. Stay optimistic and continue to believe in the long-term wealth-building ability of the stock market.
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
The last big opportunity was more than a decade ago, during the financial crisis in 2008. If you put out the bucket then, it would be overflowing today. Today’s stock market crash is another of those infrequent opportunities.
“We’re buying businesses to own for 20 or 30 years. We think the 20- and 30-year outlook is not changed by the coronavirus.”
That should be your outlook too. Only buy shares you would like to hold for decades. In other words, top companies, with competitive advantages, strong balance sheets, and no major debt worries. Today they are cheap. In 20 or 30 years, they could be worth a lot more.
“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
Cash looks nice and safe as stock markets crash, but over the longer run it is truly “terrible”. Its real value will fall due to inflation, especially given today’s near-zero interest rates.
“The stock market is designed to transfer money from the active to the patient.”
Do not race about, buying and selling shares, in today’s overheated market. You will make bad decisions and squander money on trading charges. Choose your targets carefully, with the aim of holding them for the long term.
That is what Warren Buffett has done, and it turned out well for him.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.