Worried About a Bear Market? Here's What Warren Buffett Says to Do

Market volatility is back. After two straight years of up markets -- 2023 and 2024 were some of the best years in the S&P 500's history -- 2025 has brought back the pain.

While the S&P 500 index has not officially fallen 20%, therefore triggering a bear market declaration, it is in its sharpest drawdown since 2022 and has gone through some wild gyrations in recent weeks due to tariff mayhem. The volatility index has shot up 100% year to date.

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When prices are falling, it can induce stress and make you believe now is the time to aggressively trade your portfolio. Warren Buffett disagrees with this notion. The best investor has lived through a dozen market downturns, understanding better than anyone that contrarian thinking and a long-term mindset is how you win in the stock market.

Here are three pieces of advice Warren Buffett has when dealing with bear markets.

Bear markets are your friend

In a bear market, the price of the stock market is falling. That has nothing to do with the value of the companies listed in the United States, though. Warren Buffett recommends viewing stocks as a contract that gives you an ownership stake in a business. Or, if you buy an S&P 500 index fund, you are buying a slice of the future earnings power of American businesses.

Think of it like buying goods at a retailer or supermarket. Would you rather your grocery bill be $200 or $100, assuming it is the exact same goods? Everyone would choose $100; it is illogical to think otherwise. Look at the stock market the same way. If the S&P 500 index falls 50% from all-time highs, you are able to purchase collective ownership of an American business at a 50% discount, which you should be enthusiastic about doing.

This is why Warren Buffett says bear markets are an investor's best friend. People who purchase stocks, especially younger people, are able to do so at a significant discount to historical prices in a bear market. Young investors should cheer falling stock prices because it gives them an opportunity to buy an ownership stake in a business at a cheaper price.

Be greedy when others are fearful

Cheering about falling stock prices relates to another piece of Warren Buffett's advice and perhaps his most famous adage: Be greedy when others are fearful. Falling stock prices occur when people are more afraid, thinking of the short term and following headlines, looking for signals to buy or sell. At this moment, Buffett believes the best investors act with a contrarian mindset.

When others are fearful, and the price of a stock you like has fallen 90%, it can pay handsomely to lean in when others are scattering for the exits. For example, we can look at Buffett's investment in Moody's (NYSE: MCO) at his investment company Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) in the wake of the Great Recession of 2008. Investors were scared out of their minds because of Moody's poor judgement in bond ratings, which led to the crisis, and the stock fell around 80% from all-time highs.

While everyone was scared, Buffett was buying up shares of Moody's for Berkshire Hathaway and is now the largest shareholder of the stock. Since the beginning of 2011, shares of Moody's are up close to 20x, making it one of Buffett's best investments of the 21st century.

MCO Total Return Level data by YCharts

Take the long view

Buffett consistently espouses that investors should take the long view. To illustrate this point, he always recommends an imaginary scenario. Say the stock market was going to close for the next 10 years, meaning nobody could buy or sell anything from their portfolio for a decade. Would you still want your current portfolio allocation? If not, you may be too short-term focused. Buffett says if you don't want to own a stock for 10 years, you shouldn't own it for 10 minutes.

This advice can help you zoom out during bear markets, which can be painful to experience but usually only last less than a year. If you have a time horizon of a decade or longer for your portfolio, it makes a bear market much easier to stomach. Eventually, stock prices will converge with the earnings power of the underlying businesses.

Take the long view, have a contrarian mindset, and think of stocks like ownership stakes in businesses instead of squiggly lines on a screen. Use this Buffett advice, and you will do fine in any future bear markets.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Moody's. The Motley Fool has a disclosure policy.