How to protect my investments when the stock market crashes? This is a question I always ask myself whenever I make changes in my portfolio. For this purpose, I look at the advice and strategies adopted by top investors like Warren Buffett during a stock market crash.

Also known as the Oracle of Omaha, Warren Buffet is considered one of the greatest investors of all time. The American billionaire has survived multiple stock market crashes during his lifetime. His awe-inspiring investment success is no doubt a legendary tale.

It’s exceptionally difficult to predict market crashes. And the vast majority fail to do so accurately, leading to them missing out on explosive growth. But they do happen, and I will see another at some point in the future. Therefore, I religiously follow the investment strategies of expert investors like Warren Buffett. I have previously discussed how I follow his process to build wealth. But what about during a market crash?

Avoid borrowing money

During a stock market crash, borrowed money can be your worst enemy. The Oracle of Omaha’s does not use margin on any of Berkshire Hathaway’s investments. In fact, he always advises on having a substantial amount of excess cash to take advantage of flexibility in terms of financing your investments.

It’s worth mentioning that having zero debt will be an excellent advantage for investors like me during a stock market crash. And having cash will be a huge saviour. Why? Because with no financial obligations and plenty of liquidity, I can take advantage of the low prices to expand my portfolio.

Warren Buffett says ‘buy when everyone sells’

During a stock market crash, the whole market is dominated by a bearish trend. This negative momentum can even spread to companies that aren’t even affected by the catalyst that triggered the stock market crash. Everything from blue chips to penny stocks can be decimated.

But according to Warren Buffett, this is an excellent time to bag high-quality businesses that have usually traded at a high price. Suppose it can recover over the long term. In that case, the share could eventually sky-rocket, boosting my portfolio’s overall value.

Let me point out that buying stocks when everyone is selling requires a lot of homework. That’s because not every company selling at what could be a discount makes a good investment. Sometimes the price crashed for a very good reason. That’s why it’s paramount to research and understand how a stock market crash affects the underlying business behind a stock that has collapsed.

Final thoughts on stock market crashes

If anyone asks me that can a stock market crash can happen today? My answer would be yes. There is no defined rule for a market crash. Therefore, it is a sensible approach to stay prepared for difficult times.

Listening to Warren Buffett’s investment advice actually brings a huge change in my perspective about the market dynamics. His wisdom might seem out of the ordinary. But Warren Buffett’s consistent success journey throughout the decades is proof of his intelligent investment strategies. At least, that’s what I think.

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies, assets, and strategies mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.