Investing lessons
Buffett's rule from 1986: be fearful when others are greedy
By the newsroom · · 1 min read · ▶ 1:04
The essentials
- In his 1986 letter to Berkshire Hathaway shareholders, Buffett described fear and greed as "two super-contagious diseases" that will forever occur in the investment community.[1]
- His stated goal was "to be fearful when others are greedy and to be greedy only when others are fearful."[1]
- From 1965 to 2024, Berkshire Hathaway stock returned 5,502,284%, while the S&P 500, with dividends included, returned 39,054%.[2]
- For the week ending October 16, the Nasdaq fell 4.5%, its worst week since late June.[3]
What happened
Buffett wrote that the timing of these epidemics will be unpredictable.[1] He added: "Therefore, we never try to anticipate the arrival or departure of either disease."[1] He then set out a more modest goal: "we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."[1] As he wrote the letter, he noted that little fear was visible in Wall Street and that euphoria prevailed.[1] From 1965 to 2024, Berkshire's compounded annual return was 19.9%, nearly double the 10.4% recorded by the S&P 500.[4] That weekly drop snapped a monthlong winning streak for the Nasdaq.[3]
Free newsletter
The market stories that matter. Sourced, no hype.
What the video doesn't say
In the same letter, Buffett wrote that his company currently found no equities that came close to meeting its tests.[1] He also wrote that this statement "in no way translates into a stock market prediction."[1] In the 13 times the S&P 500 closed the year lower over the past 60 years, Berkshire fell more than the benchmark index only twice.[2] In 2022, when the S&P 500 fell 18.1%, Berkshire ended the year with a 4% increase.[4] There were also periods when Berkshire lagged, such as 2023, when the S&P 500 rebounded 26.3% and the stock added just 15.8%.[4]
Sources
- 1Chairman's Letter - 1986berkshirehathaway.com
- 2One chart shows how Warren Buffett trounced the S&P 500 over the past 60 yearsYahoo Finance · May 10, 2025
- 3Stock market today: Dow, S&P 500, Nasdaq sink as tech sell-off caps volatile weekYahoo Finance · October 19, 2026
- 4Warren Buffett's return tally after 60 years: 5,502,284%CNBC · May 5, 2025
Photos: Mark Hirschey (CC BY-SA 2.0), JonClee86 (CC BY-SA 3.0), Aaron Friedman (CC BY 2.0), Vlad Lazarenko (CC BY-SA 3.0), Paul Sableman (CC BY 2.0), Hurstbergn (CC BY 4.0), Georgio from San Francisco, USA (CC BY 2.0), Nielsoncaetanosalmeron (CC BY 4.0), Anthony Quintano (CC BY 4.0), Ken Lund from Reno, Nevada, USA (CC BY-SA 2.0). Cropped.
Free newsletter
The market stories that matter. Sourced, no hype.