Okay, okay…easier said than done, but you can follow his principles. Resist the temptation to do something just for the purpose of acting. The correct response in dealing with a bear market (this or future ones) may very well be to "do nothing". If you're a long-term investor (10+ years), then hopefully you have a comprehensive strategy in place that was designed with the knowledge that down markets WILL happen along the way. If that's the case, tinkering with your portfolio as a reaction to what's happening currently is probably a bad move. If you DON'T have a strategy and you feel worried about the market, now may be the time to work with a professional to get that plan in place to guide you when things feel turbulent.
You can't control the market, but there are plenty of other aspects of your money that you do have the power to influence. So, think about where you can make an adjustment in an area you have complete control over. The best way to act may be to:
Decrease your spending – something Warren probably doesn’t need to be concerned about, but maybe the rest of us do.
Increase your savings.
Focus on building up cash for emergencies.
Or put more cash in the market!
If you have enough cash for defined short-term goals and your emergency fund, then anything over that amount should be in the market and going to work for you – not sitting in the bank losing purchasing power to inflation.
Now is a great opportunity for long-term investors to buy into the market at lower prices. It can feel scary to jump in when everyone else is fleeing, but that's one big reason why Warren Buffett is famous.
Warren Buffett has a lot of investing principles, but these three seem to be most appropriate during a bear market:
1. You don't need to time the bottom perfectly, you just need to recognize when everyone else is running for the hills and have the discipline to buy the high quality stocks they are selling - “Be fearful when others are greedy, and be greedy when others are fearful!"
2. Don’t lose money - the only way to truly lose money is to sell stocks for a loss. "You've got to be prepared when you buy a stock to have it go down 50% or more and be comfortable with it, as long as you're comfortable with the holding."
3. Don’t check the prices everyday – “If you're making a good investment in a security, it shouldn't bother you if they closed down the stock market for five years.”