War 📍

Market volatility tends to stress out investors. A down day for the Dow can induce anxiety, and a sudden rally can entice investors to chase stocks they don’t fully understand. But legendary investor Warren Buffett has long argued that trying to avoid risk altogether can be a mistake. Rather than fearing market swings, he sees them as opportunities—if you know what you’re doing.

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it,” Buffett has said.1

The logic of this statement becomes clear when you consider investor psychology. While many reflexively shy away when prices fall, Buffett leans in. He has spent his career capitalizing on what he often calls “folly”—when the market as a whole seems to get the value of an underlying business wrong.2 Buying such “mispriced” companies, as Buffett sees it, has been central to his long-term investing success.