Warren Buffett's rule for investing during the financial crisis

In his view, the long-term value of innovative US companies would continue to grow, despite the short-term difficulties of the crisis. Buffett warned against investing in "highly leveraged entities, or companies in weak competitive positions", but urged readers to see that the slowdown offered an opportunity to buy strong companies to low price.

"In short, the bad news is an investor's best friend – it allows you to buy a piece of America's future at a declining price," Buffett said in the editorial. "Fears about the long-term prosperity of many of the country's healthy companies are meaningless, and these companies will suffer the repercussions they have always done. new results in 5, 10 and 20 years. "

This prediction proved correct: in the 10 years since the fall of Lehman Brothers, the S & P 500 has increased by 130%. Companies like Apple and Amazon have reached new heights, reaching trillion dollar valuations.

According to CNBC's calculations, if you had invested $ 1,000 in Apple in early August 2008, its value would have been greater than $ 9,222.50 on August 2, 2018, more than nine times more, including the appreciation. prices and dividends excluded.

Buffett's strategy was not perfect – he admits his timing was a little disappointing in October, as markets continued to plummet in 2009. "It was long-term," Buffett told CNBC "but it was well at least four or five months."

Of course, it is human to want to make investments when markets are rising, said Buffett on Monday in an interview for CNBC's documentary "Crisis on Wall Street: The week that shook the world".

"People are becoming interested in something because it's going up, not because they understand it or anything else," Buffett said. "The guy next door, that they know how much more stupid than them, gets rich and they are not."

But instead of acting on emotional instincts, Buffett's advice is to follow this simple rule.

"Although the markets are generally rational, they sometimes do crazy things," Buffett wrote in his 2018 shareholder letter. "Seizing the opportunities then offered does not require great intelligence, a degree in economics, or familiarity with business. Wall Street jargon, like alpha and beta.

"What investors need instead is an ability to ignore the fears or excitement of the crowd and focus on a few simple fundamentals – the desire to seem unimaginable for an extended period of time.

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