If a Stock Market Crash Is Coming, This Is Warren Buffett's Single Best Piece of Investing Advice

The market has been surging lately, with major indexes including the S&P 500 (SNPINDEX: ^GSPC), Nasdaq Composite (NASDAQINDEX: ^IXIC), and Dow Jones Industrial Average (DJINDICES: ^DJI) up by 25%, 36%, and 22%, respectively, over the past 12 months.

It's anyone's guess when the next downturn will begin, but no bull market can last forever. Fortunately, investing legend Warren Buffett can offer some encouraging advice to investors right now.

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Buffett's advice to nervous investors

In some ways, fear is driving the market right now. The Fear and Greed Index measures investor sentiment on a scale from 0 to 100, with lower numbers indicating greater fear and higher numbers indicating greed.

In early May, the index reached a high of 71, firmly in the "greed" category. That number dropped to 59 a month ago and, as of this writing, is now at 37. To be clear, this doesn't mean a market downturn is looming; rather, it suggests many investors are exercising more caution.

One of Warren Buffett's most famous pieces of investing advice is for investors to "be fearful when others are greedy, and be greedy when others are fearful." With many stocks at record highs, some investors may interpret this advice as a suggestion to avoid the market right now. However, perhaps more importantly, it actually serves as a reminder to invest in the right places.

The best stocks to invest in right now

Some stocks are flying high right now, breaking record after record. But stock price alone doesn't make for a strong investment. Companies with shaky fundamentals often struggle to recover from a recession or bear market, and those stocks are especially risky right now.

Right now may be the time to "be fearful" of those particular stocks. That said, there are also plenty of undervalued stocks that many investors overlook. If you're avoiding the market entirely out of fear, you risk missing out on potentially lucrative gains.

"[I]nvestors are right to be wary of highly leveraged entities or businesses in weak competitive positions," Buffett explained in a 2008 New York Times article. "But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records five, 10, and 20 years from now."

^SPX data by YCharts

Since that article was published, the S&P 500 has earned total returns of more than 1,000%. Investors who took Buffett's advice and stayed in the market for the long haul have reaped the rewards. Even if volatility is looming, strong businesses still have decades of growth potential ahead.

If you're nervous about the market right now, it can be tempting to avoid investing entirely. However, with a long-term outlook, investing in quality stocks can set you up for substantial gains. In other words, now is a fantastic time to "be greedy."

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.