This is the way investors should prepare

Warren Buffett serves as CEO Berkshire Hathaway But will continue to serve as chairman of the board of directors of the conglomerate and its largest shareholder. He will still be the only "Omaha Oracle". Thanks to Buffett's amazing investment record, the nickname is well deserved.

At Berkshire’s recent annual shareholder meeting, “Omaha’s Oracle” seems particularly applicable. Why? Legendary investors commented on the stock market turmoil this year. More importantly, Buffett made a terrible stock market forecast.

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Buffett is not shocked by the recent market volatility. "What happened in the last 30-45 days, 100 days, whatever it was, during that period, was nothing," he told Berkshire Hathaway shareholders. "It was not a huge move," the 94-year-old added.

Perspective is crucial. Buffett pointed out Dow Jones Industrial Average (djindices: ^dji) In September 1929, nearly a year after he was born, he reached 381 in September 1929. It eventually dropped to 42, down about 89%. With this as a backdrop, he stressed: “This (recent downturn) is not a dramatic bear market or anything.”

However, Buffett also warned:

Compared to anything you've seen before, you'll see some time in the next 20 years. The world made a big mistake and had surprises in dramatic ways. The more the system gets, the surprise will appear in the left field.

Importantly, Buffett did not predict a stock market crash in 2025. He did not state that stocks would plummet this year, but believed that a large amount of sold out would occur sometime in the next two decades.

Why is the Investment Icon full of confidence in his terrible predictions? "It just happens regularly," Buffett explained.

By the way, he is right. this S&P 500 Index (snpindex: ^gspc) Since 1950, its previous nine peaks have dropped by 20% or more. This averages steep drops every eight years or so.

^SPX Chart
^YCHARTS SPX data.

Based on history alone, I suspect Buffett's prediction will also prove to be correct. Never 20 years have fallen at least 20% at some point. He would believe in “Omaha’s Oracle” when he predicted the future of the “hair curler” market.

One of Buffett's most famous quotes is: "When others are greedy and greedy, when others are afraid, be afraid." Again, he is right. The stock market crash offers a great buying opportunity for long-term investors.

But the main problem with Buffett's horrible prediction is that we don't know when to achieve it. How should investors prepare?

The most important thing to do first is probably to adjust your mindset. "I know people have emotions, but when you invest, you have to check them at the door," Buffett told Berkshire shareholders at the annual meeting. The stock market is "a great place to focus if you have the right temperament. But, Buffett added, "It's a terrible place to be afraid of the market that goes down and gets excited when the stock market goes up." ”

Another key move is to always prepare some cash to invest when opportunities arise. Buffett practiced this principle. When the stock valuation is a bubble, he builds Berkshire's cash stock. When the valuation is attractive, he puts the money into work.

But, at the same time, don't be afraid to buy stocks that meet your investment standards. Buffett has been a net seller of stocks in recent quarters, but he still bought some stocks in Berkshire's portfolio.

If the “hair curler” stock market that Buffett predicts is coming, you can prepare for it. Making the right move will ensure you keep your portfolio straight, even if the market becomes curled.

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Keith Speights holds a position at Berkshire Hathaway. Motley fool has a place and recommends Berkshire Hathaway. Motley Fool has a disclosure policy.

Warren Buffett's Terrible Stock Market Forecast: Here's How Investors Should Be Prepared Originally published by Motley Fool