Key Takeaways
- Long-term investing historically rewards patience far more than attempts to time the market.
- Warren Buffett emphasizes staying invested through volatility because missing even a few strong market rebounds can significantly reduce long-term returns.
- A decade in the market, despite setbacks, can build substantial wealth compared to sitting on the sidelines.
Warren Buffett has never been shy about reminding investors that volatility is part of investing. There will be ups and downs, but remaining calm and staying invested, and even buying additional stock during downturns, will ultimately lead to substantial gains.
For Buffett, long-term participation, not trying to time the market or jump on the latest investing trend, is what builds real wealth. Walking away from the market entirely is the far riskier choice. As Buffet wrote in his 2012 letter to Berkshire Hathaway Inc. (BRK.A, BRK.B) shareholders, “Periodic setbacks will occur, yes, but investors and managers are in a game heavily stacked in their favor…. The risks of being out of the game are huge compared to the risks of being in it.”
Long-Term Gains Are Often Worth the Short-Term Risks
A decade ago, the S&P 500 faced plenty of uncertainty: concerns about slowing global growth, rising market volatility in China, and plummeting crude prices made for a very uncertain market and shaky investor confidence. However, if you had invested $10,000 in an S&P 500 index fund that year and simply held on through all the ups and downs of the following decade, that investment would be worth roughly $30,000 by 2025.
This major increase in value happened despite some major downturns in the market over that decade: the 2018 correction, the 2020 pandemic crash, the inflation-driven slide of 2022. However, Buffett would likely remind you that feeling safe again often happens long after the recovery has already occurred. That is why he stresses emotional discipline and remaining calm through the volatile market swings.
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Why Staying in the Market Matters More Than Timing It
Buffett stresses that success comes from staying invested, ignoring short-term noise, and focusing on the broad upward trajectory of productive American businesses. History backs this up. Buffett frequently warns that trying to jump in and out of the market is a losing game. Even professionals struggle to do it successfully. Ordinary investors often sell when fear peaks and then re-enter after prices rise, thereby locking in losses and missing the rebound.
Important
Buffett’s philosophy is simple: the market rewards patience more than precision.
Being ‘In the Game’ Stacks the Odds in Your Favor
When Buffett says the game is “heavily stacked” in the investor’s favor, he’s referring to the fact that the stock market has risen about 10% per year, on average, for decades. (The inflation-adjusted real return is lower: 6.68%.) Of course, there have been fluctuations, some very drastic, during that time, but the market has still maintained a steady trajectory upward over the years. Businesses continue to innovate, expand, and create value over time, and the economy grows even through recessions and crises.
Additionally, time in the market is what allows compounding to work its magic. Even with occasional downturns, the stock market has historically trended upward, rewarding investors who stay invested. Each year of growth builds on the last, turning steady contributions into significant long-term gains that short-term timing simply can’t match.
The Real Risk Is Sitting on the Sidelines
Buffett’s core argument is not that downturns don’t matter, because they do. However, leaving the market entirely or waiting for the “perfect time” carries a far greater cost. Cash earns little. Inflation erodes purchasing power. And the market’s strongest gains often follow its worst declines. Someone who avoided the market for the last decade because it “felt risky” missed one of the strongest bull markets in modern history.
The Bottom Line
Volatility will never disappear. Headlines will always make the future look uncertain. But Buffett’s advice is clear: stay invested, stay patient, and let compounding do its work. If you give the market time, history shows it tends to reward those who remain in the game, not those waiting on the sidelines for the perfect moment that never arrives.