Nervous About the Stock Market? This Is Warren Buffett's Best Advice.
If you're feeling fearful, it might be time to get greedy.
Overview
On the surface, investing in the stock market seems simple. The S&P 500 (SNPINDEX: ^GSPC) has generated an average annual total return of about 10% since its inception in 1957, even as the U.S. endured ten recessions. By simply investing in the S&P 500 through a low-cost exchange-traded fund (ETF) -- such as Vanguard's S&P 500 ETF (NYSEMKT: VOO) -- you'll likely outperform most individual stocks and actively managed funds over the long term.
But to reap those long-term gains, you need to stay invested through some steep drawdowns. Over the past 20 years, the S&P 500 experienced peak-to-trough declines of 57% from Oct. 2007 to March 2009, 34% from Feb. to March 2020, and 25% from Jan. 2022 to Oct. 2022. Those declines -- which were caused by the Great Recession, the COVID-19 crisis, and the Fed's rate hikes, respectively -- shook many "long-term" investors out of the market.
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Originally published at www.fool.com.