This Is Warren Buffett's Single Best Piece of Advice for Every Investor Heading Into a Bear Market

The question isn't if another bear market is coming. It's when. That can sound a little scary when you put it like that. But it's not meant to instill fear. It's meant to set proper expectations.

If you think that stocks will continue to just go up, a bear market can cause you to panic, sell when prices have already fallen, and miss the subsequent recovery. But if you know that 20% to 30% corrections happen from time to time, you're much more likely to behave rationally when they do. That mentality can help improve your portfolio's long-term returns.

Warren Buffett viewed pullbacks as opportunities. He often uses them as chances to pick up shares of quality businesses at discount prices. The deeper the bear market, the better the opportunity, as long as the business is still in good shape.

In his 2009 letter to Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) shareholders, Buffett dropped another of his signature investing quotes. This one would be particularly insightful for how investors should handle bear markets: "Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

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Bear markets are more frequent than you think

Over the past 150 years, a bear market, defined as a decline of at least 20%, has happened roughly once every six years. The median decline is 33%. The last one occurred in 2022, when the S&P 500 (SNPINDEX: ^GSPC) fell by around 25%.

To put that into some perspective, the typical long-term investor should expect to experience roughly half a dozen bear markets throughout their lifetime. Of course, they won't happen on a schedule. The bear markets between the dot-com tech bubble and the 2008 financial crisis occurred roughly six years apart. However, the next one after that didn't occur until the COVID-19 pandemic, about 12 years later. The 2022 bear market happened just two years after that.

Investors should always be prepared for bear markets. The volatility and drawdowns are simply the price of admission for investing in stocks and trying to maximize your long-term returns.

Investors should take advantage of lower prices, not run away

Buffett feels you should view buying stocks like you would view buying clothes or food. In those instances, you'd be more inclined to buy knowing that these things are on sale. People should feel the same way when it comes to buying stocks.

Plus, if you're someone investing regularly in a 401(k), IRA, or just a regular, taxable brokerage account, continuing to buy shares even though prices have declined gives you the opportunity to actually improve your long-term returns.

Historically, stocks have recovered from every correction and bear market. If you've bought and held throughout these events, this is the ideal long-term focus that investors should maintain. If you kept buying as well, your returns might be even better because the discounted shares you bought experienced additional gains of their own.

This is what Buffett is referring to when he says to pull out the bucket when it starts "raining gold." Bear markets are infrequent enough that you don't get the opportunity to buy on sale very often. When it happens, you should race to take advantage of it.

Nobody knows when the recovery will begin

The biggest justification for staying the course and continuing to invest throughout bear markets is that no one can see the future to know what's coming next.

Too often, people decide to sell their stocks only after much of the decline has already occurred. Then, when the recovery has already started, people decide that conditions have improved and buy back stocks too late. Essentially, they've locked in losses and missed out on the subsequent gains. This is why investor returns are consistently lower than the returns of the investments themselves.

Taking advantage of pullbacks requires discipline, especially when the rest of the world is running for the exits. If you can maintain a long-term perspective, understand that periodic downturns are going to occur, and continue the process of making periodic monthly investments, you're going to be way ahead of most people.

It's a strategy that Warren Buffett would endorse.

David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.