A bull market is coming: Here's Warren Buffett's investing advice to help you cash in on it

It can pay to prepare for a stock market uptick.

bull market encapsulated by bull running up a rising stock market price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Historically, a market downturn has always been followed by an eventual bull market
  • I don't doubt there is a bull market somewhere on our horizon right now
  • Here's the Warren Buffett advice I'll be taking on board to make the most of a future stock market uptick

Warren Buffett is perhaps the world's most famous investor, which makes us fortunate that he is incredibly generous with his investing advice.

One of the key messages he routinely conveys is that, while the stock market has its hard times, it has historically pulled through – always eventually realising a bull market. He's widely quoted as having once said:

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

So, with that, how does the multi-billionaire suggest one makes the most of the down time so to win out in the inevitably approaching bull market? Keep reading to find out.

Warren Buffett investing advice to make the most of the coming bull market

Buy companies you believe in

The first Buffett advice I'll dive into is this:

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

The man behind Berkshire Hathaway is a firm believer in long-term investing. He aims to hold his investments for the years and decades to come, only selling if the company grows to be an unattractive asset.

Of course, if you're not aiming to sell, it's important to only buy shares in companies you truly believe will outperform over the long term.

Look for those with competitive advantages and strong safety nets

But how can one determine if a company will outperform in the future bull market?

Well, another key piece of investing advice offered by Buffett is to buy shares with competitive advantages and wide 'moats'.

Competitive advantages can be easy to spot. They can present as a 'sticky' product (one that's hard for customers to relinquish) or a strong brand.

A moat on the other hand, relates to the durability of such advantages. A company with a wide moat might have plenty of cash tucked away in case of hard times or a low-cost production method, for instance.

Trust in your knowledge

But recognising such traits often demands a level of prior knowledge. As Buffett advises:

Never invest in a business you cannot understand.

Any company can be understood by anyone, given they put enough time into acquiring knowledge of its business model, industry, strengths, and weaknesses.

However, that time might be better spent seeking out stocks within a person's "circle of competence", as Buffett puts it.

That way, one will likely recognise an opportunity faster and, perhaps, earlier than the broader market.

And the final Buffett advice: Don't get bogged down in short-term volatility

The final piece of Buffet investing advice I'll point to is this pithy quote:

Remember that the stock market is a manic depressive.

The stock market can shoot higher one day on a seemingly insignificant tidbit and plummet the following day on another.

But other than the long term, it typically accurately weighs the value of the companies housed on it.

Shares in the best companies will likely surge when the next bull market comes, with investors who jumped on board during its approach winning out.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

Businesswoman whispering in male colleague's ear as he looks surprised.
Investing Strategies

4 secrets of ASX millionaires

What's the secret sauce you might ask?

Read more »

Close up of woman using calculator and laptop for calculating dividends.
How to invest

I always look at this number before buying an ASX share

Here's one number that instantly tells me if a stock is worth a look.

Read more »

A couple are happy sitting on their yacht.
How to invest

No savings at 50? I'd buy ASX 200 shares and aim to retire rich

This could be the key to retiring wealthy even if you have no savings at 50.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP
How to invest

How to turn $500 into $50,000 of passive income a year with ASX shares

Here's how investors can generate significant passive income from the share market.

Read more »

How to invest

How to build a $500,000 ASX share portfolio from scratch

Getting rich in the share market isn't as hard as you might think.

Read more »

Person holding Australian dollar notes, symbolising dividends.
How to invest

I'd invest $20k in ASX dividend shares now to make a passive income

Generating meaningful passive income is possible with ASX shares. Here's how I would do it.

Read more »

a smiling picture of legendary US investment guru Warren Buffett.
How to invest

I would follow Warren Buffett's advice and buy ASX shares after the market selloff

These buy-rated shares could be the type that Warren Buffett would buy during a selloff.

Read more »

Man holding a calculator with Australian dollar notes, symbolising dividends.
How to invest

$10,000 invested in Pilbara Minerals shares 10 years ago is now worth…

Was it a good idea to sink your hard-earned money into this lithium miner back in 2015?

Read more »