Warren Buffett Has 1 Simple Rule for Surviving a Stock Market Crash, and History Says It's Never Once Failed

It's been a roller-coaster of a week for the stock market. The Nasdaq Composite (NASDAQINDEX: ^IXIC) officially entered correction territory after falling by more than 10% from its October peak, while the S&P 500 (SNPINDEX: ^GSPC) and Dow Jones Industrial Average (DJINDICES: ^DJI) are down by around 6% and 5%, respectively.

Investors are also grappling with the downturn. The Fear and Greed index measures investor sentiment based on multiple stock market metrics, and it quickly plunged into the "extreme fear" category amid this week's turbulence.

But it's not all bad news right now. Warren Buffett has some timeless advice for investing during crashes and bear markets, and history says this strategy has worked out every single time.

Image source: The Motley Fool.

The key to protecting your investments

When the market is shaky, it can be tempting to avoid investing or even sell your stocks in fear that prices will fall further. According to Warren Buffett, though, that's one of the worst moves to make during a slump.

"A simple rule dictates my buying," Buffett explained in a 2008 opinion piece for The New York Times. "Be fearful when others are greedy, and be greedy when others are fearful." He went on to emphasize that "bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price." In other words, when the future is bleak, buy more.

In the years following the publication of that piece, the S&P 500 soared by nearly 1,000%, and the investors who reaped the biggest rewards were those who stayed invested even when it was tough.

^SPX data by YCharts

"Over the long term, the stock market news will be good," Buffett continued, noting the Dow's extraordinary rise from 66 to 11,497 during the 20th century.

"You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy."

History says Buffett's strategy has never been wrong

No matter how severe the short-term volatility is, the market has always managed to recover.

During the dot-com bubble in 2000, for example, the S&P 500 fell by nearly 50% as the tech sector collapsed. It took until 2007 for the index to reach another all-time high, and just a few months later, the Great Recession began.

However, between 2000 and 2020, the S&P 500 still earned total returns of more than 224%. In other words, even if you'd invested at seemingly the worst moment -- immediately before the onset of two of the worst recessions in U.S. history -- you'd still have more than tripled your money over 20 years.

^SPX data by YCharts

This trend holds up throughout history, too. Between 1919 and 2025, all of the S&P 500's rolling 20-year periods have ended in positive total returns, according to analysis from Crestmont Research. By holding an S&P 500 ETF or index fund for 20 years, it's historically been harder to lose money in the stock market than to make money.

What should investors do right now?

Regardless of what's ahead for the market, continuing to invest is key. However, it's more important than ever to choose your stocks wisely. Weak companies can thrive during periods of economic prosperity, but recessions and bear markets will hit those stocks the hardest. The weakest of them may crash and never recover at all.

Companies with strong fundamentals -- such as a durable competitive advantage, healthy finances, and a competent leadership team -- are the most likely to rebound after a crash. The more of these stocks you own, the better prepared you'll be to not only survive a downturn, but thrive over time.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.