Warren Buffett has spent decades hammering home the same message: stay invested in quality businesses for the long haul, and don't let market volatility shake you out of good positions.

In his 2016 letter to Berkshire Hathaway Inc. (BRK) shareholders, Buffett painted an optimistic picture of the U.S. economy while delivering a dose of reality. Quality American businesses are "virtually certain" to grow in value over time, he wrote. But here's the catch: market downturns will occasionally leave many companies behind, and nobody can predict when these painful moments will strike.

So what should investors do when the inevitable happens? Buffett offered two principles that sound simple but require real discipline to follow.

"The years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks," Buffett wrote. "During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted."

Think about that for a second. When everyone else is panicking, that's actually your opportunity. But you have to be calm enough to take advantage of it.

Since Buffett wrote those words, his prediction has largely played out as expected. The S&P 500 has posted double-digit gains in most years, with only two exceptions: a modest 4.4% decline in 2018 and a more painful 18% drop in 2022. Neither lasted forever.

Ignore the Doom and Gloom

Buffett's prescription for success is surprisingly straightforward. Investors who can overcome their personal fear and hold onto investments in large, conservatively financed businesses through market turbulence will "almost certainly do well."

The key is tuning out the noise. Buffett cautioned investors to ignore the naysayers who thrive on gloomy forecasts. The American economy, he argued, will keep climbing higher thanks to entrepreneurial spirit, productivity gains, abundant capital and innovation.

"No one can tell you when these traumas will occur," he said.

The Reality of Scale

Buffett expressed confidence that Berkshire's normalized earnings per share would continue growing year after year, supported by the company's strong business portfolio and financial fortress. That's largely proven true. Despite year-to-year swings, Berkshire's earnings per share have risen overall since 2016 through the end of 2024.

But Buffett was also refreshingly honest about the challenges of managing so much money. Berkshire's enormous size makes it virtually impossible to replicate the extraordinary returns it generated in earlier decades.

"As for Berkshire, our size precludes a brilliant result: Prospective returns fall as assets increase," he wrote.

It's the investing equivalent of trying to turn an aircraft carrier versus a speedboat. When you're managing hundreds of billions of dollars, there simply aren't enough great opportunities big enough to move the needle. But that's a nice problem to have.