Warren Buffett isn’t scared of down markets—and these 7 reasons explain why
How I avoided a financial disaster in 2008—and how you can apply the same strategy today.
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When the Markets Flinch, the Portfolio CEO Gets to Work
Hey Portfolio CEOs,
How’s it going?
Oh, so you’re telling me last week was the 4th worst 2-day market drop since the 1950s? That sounds fun.
Yeah, it’s been a week.
The Nasdaq has already slipped into bear market territory—down over 20%—and the S&P 500 is trailing not far behind, with a 14% year-to-date drop.
Meanwhile, Treasury Secretary Scott Bessent gave us a quote that will probably be stitched onto a few political t-shirts:
“It’s a Mag 7 problem, not a MAGA problem.”
Translation? Tech got overhyped by the AI buzz and now it’s paying the price.
But blaming the tech sector (again) misses the bigger picture: 75% of S&P 500 companies are down this year.
As a CEO, don’t make this about overvalued stocks or politics—it’s about knowing how to navigate when the waters get rough.
So what am I doing?
I’m not selling in a panic or doom-scrolling Bloomberg.
I’m sticking to the WealthOps game plan:
Reviewing my positions
Reassessing risk
Making sure I’m holding value—not hype
Executing my business plan like a Portfolio CEO
For those of you who have the majority of your tech equity tied to a single stock, this is your moment to reassess.
I’ve been there.
It’s one thing to believe in your company, but it’s another to ride every market twitch with your entire net worth on the line.
Concentration creates risk, and right now, risk management is the name of the game.
This is why I’m revisiting one of Warren Buffett’s classics:
“The 7 Rules of Warren Buffet in a Downturn.”
His timeless advice isn’t just for the billionaires—it’s for anyone serious about building generational wealth.
Because when you're running your portfolio like a business—not a hobby—volatility isn't terrifying. It's strategic.
This Week on the Podcast!
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In 2008, the world was unraveling.
Markets were crashing. Fear was everywhere.
And I wanted to sell everything.
I was staring at my portfolio, watching it bleed. Every instinct said: Get out. Cut your losses. Protect what’s left.
But instead of reacting—I paused.
And I asked myself one simple question:
“What would Warren Buffett do?”
Turns out, he wasn’t panicking.
He was buying.
He was calm.
He was rational.
He was focused on value, not fear.
So I followed his lead.
I didn’t sell.
I stayed in.
And my portfolio recovered.
That moment changed how I invest forever.
Since then, I’ve diversified into hard assets like real estate. I’ve built a more resilient portfolio. One that doesn’t get rattled every time the stock market dips.
But when things do get shaky?
I still ask the same question:
“What would Warren do?”
And the good news?
He’s already given us the playbook.
Buffett’s 7 Rules for Down Markets
1. Be Patient and Disciplined
“The stock market is designed to transfer money from the active to the patient.”
When fear floods the market, most people act fast. Buffett doesn’t. He waits.
He trusts his process, his research, and his time horizon.
In a down market, patience isn’t passive—it’s a power move.
Strategy tip: Build your watchlist when times are good, so you can act decisively when they’re not.
2. Avoid Emotional Decisions
“The most important quality for an investor is temperament, not intellect.”
Panic is contagious. So is hype.
Buffett avoids both.
He doesn’t follow headlines or social sentiment—he follows his principles.
Down markets are emotional minefields. And emotion is where most investors lose money.
Check your mindset before your portfolio. Are you reacting—or responding?
3. Hold Cash Reserves
“Cash... is like oxygen: you don’t notice it until it’s gone, and when you do need it, it’s the only thing you need.”
Buffett always has dry powder ready.
Why? Because downturns bring rare opportunities—and if you’re fully invested, you can’t take advantage.
Cash gives you confidence. And options. And time.
Cash isn’t just a safety net. It’s a strategic weapon—when used wisely.
4. Know What You Own
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Buffett doesn’t invest in things he doesn’t understand.
No speculation. No guesswork.
He sticks to his circle of competence.
Because when the market goes south, uncertainty spikes—and the only thing that keeps you grounded is knowing what you own and why.
Test this: If trading were suspended for five years, would you still feel good about owning this asset?
5. Focus on Quality
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Buffett isn’t hunting for hype stocks—he’s looking for businesses with real earning power.
Think: strong free cash flow, loyal customers, and a durable competitive advantage (aka a moat).
In a downturn, quality gets discounted—but its value doesn’t disappear.
That’s when Buffett steps in.
Ask yourself: Is this business built to last, or built for the last hype cycle?
6. Use Volatility to Your Advantage
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Market drops aren’t setbacks—they’re sales.
When prices fall, value investors go shopping. Buffett isn’t trying to time the bottom—he’s buying businesses he already believes in… at better prices.
Don’t run from volatility. Prepare for it. And when it comes, have your list (and your convictions) ready.
7. Crashes Are Temporary
“In the 20th century, the United States endured two world wars, a depression, numerous recessions... yet the Dow rose from 66 to 11,497.”
The economy stumbles. Markets fall.
But history shows us: they recover.
What matters is not if the market crashes—it’s how you behave when it does.
Zoom out. Think in decades. Trust that time in the market beats timing the market.
Bottom Line:
Buffett’s rules aren’t flashy.
But they’re timeless—especially in a crisis.
They help you zoom out.
Stay grounded.
And make smart moves when others are losing their grip.
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PS .
Final Thoughts from Charlie Munger