Why Long-Term Investors Don't Have to Worry About a Recession, According to Warren Buffett

If you're starting to grow increasingly concerned about the potential for a near-term recession, you're no doubt in good company. Although the economy seems strong, with unemployment sitting at just 3.4% on a national level, interest rate hikes and the banking industry crisis have the potential to lead to a downturn at some point in 2023.

A recession could have a number of unfavorable consequences. First, it could lead to an uptick in job losses. It could also result in a stock market tumble and drive brokerage account values downward.

An economic downturn might similarly impact IRAs, which is a problem since these are accounts retirees routinely draw from to pay their bills. But if you're not yet retired, but rather, are in the process of investing and growing wealth for retirement, then you don't necessarily have to lose sleep over a near-term recession. You just have to stick to this key piece of Warren Buffett advice.

Stay the course to avoid a financial hit

Warren Buffett is one of the most successful investors of all time. And a big reason is that he's managed to assemble a portfolio of quality assets that have performed well over time.

In fact, Buffett has long touted the importance of choosing quality investments rather than stocks that happen to go on sale. He's also a firm believer in the buy and hold strategy -- load up on good investments and hold them for as long as possible.

In fact, Buffett has been quoted as saying, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes." And if you take his advice to heart, a recession doesn't have to negatively impact you in the long run.

If a recession hits in 2023, you might see the value of your portfolio take a dive. But guess what? If you hang onto your investments rather than rush to sell them at a loss, you won't actually lose any money.

What might then happen is that the economy and stock market recover, and before you know it, your portfolio is back up to its pre-recession balance. And from there, your portfolio might grow even more through the years because you didn't unload any of the quality stocks or assets you put there in the first place.

Look at the big picture

It's definitely important to gear up for a recession by boosting your emergency fund to ensure you'll have money to pay your bills should your job go away. But the best way to prepare your portfolio for a recession is to make sure it's nice and diversified across a range of assets and market sectors, and to make sure every asset you own is a high quality one.

If you have doubts about specific stocks you own, by all means, unload the ones you think are performing poorly and are unlikely to recover. But generally, it's best to think long term in the course of your investing career. And once you remind yourself that you're not investing for a three-year window, but rather, a 40-year window, the idea of a recession becomes a lot less scary.