Here's Warren Buffett's Best Advice To Prepare for a Bull Market

The past year has been a rollercoaster of ups and downs for the stock market, but things have started looking up in 2023.

Whether this upward trajectory will continue into a bull market is uncertain right now, especially as some economists still believe a recession is on the way. Either way, though, now is the perfect time to start preparing. Here’s legendary investor Warren Buffett’s best advice.

Warren Buffett at an event, standing in a crowd of people.

It’s time to “be greedy”

In 2008, during the worst of the Great Recession, Warren Buffett wrote an opinion piece for The New York Times. While all bear markets are different, his advice from back then still holds true today.

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“A simple rule dictates my buying,” he wrote in the article. “Be fearful when others are greedy, and be greedy when others are fearful.”

It may seem like a bad time to invest right now, with many investors concerned about a potential recession, inflation, layoffs, and general economic uncertainty. But now is actually the time to “be greedy” and invest more.

Nobody knows when the next bull market will begin. But by investing now while stock prices are still lower than they were a year or two ago, you’ll be well-positioned to take advantage of the upswing — whenever that may be.

Preparing for the next bull market

Perhaps the biggest mistake you can make right now is to wait too long to invest.

The stock market is always volatile in the short term, even during strong economic times. It’s next to impossible to know when a bull market has started until we’re in the thick of it. At that point, if you haven’t already invested, you’ll have missed out on substantial earnings.

For example, say you were investing in an S&P 500 index fund during the Great Recession. The S&P 500 officially bottomed out in March 2009 but still experienced ups and downs during the subsequent bull market.

^SPX Chart

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^SPX Chart

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If you had invested in February 2009, your portfolio would have immediately lost value. But by the end of the year, you’d have earned returns of more than 35%.

However, if you had waited to invest until August when the market had been recovering for several months already, you’d have only earned returns of around 13% by the end of the year.

In other words, waiting until the market is already on the upswing may seem safer, but you may miss out on the potentially lucrative recovery period.

Where to invest right now

The best thing you can do right now to prepare for a bull market is to invest in quality stocks from healthy companies and hold them for the long term.

Again, nobody knows for certain what the market will do in the coming weeks or months, and even strong stocks could see their prices fall further this year. But if the companies themselves have solid underlying fundamentals, they’re far more likely to rebound.

“I can’t predict the short-term movements of the stock market,” Buffett wrote in the Times piece. “What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”

It can be scary to invest during periods of volatility, but the market has managed to survive worse downturns in the past. By investing now, you’ll be well prepared for the potentially lucrative returns when the market inevitably rebounds.