May volatility creates 3 buying opportunities for long-term investors

Stocks trade near all-time highs as late-May volatility increasingly unnerves investors, testing the resolve of those who bought near the peak.

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it," Warren Buffett, chairman of Berkshire Hathaway, has said. The legendary investor has long urged market participants to treat volatility as a buying opportunity rather than a reason to sell.

Buffett's framework — buy quality companies when fear drives prices below intrinsic value — is particularly relevant as the market navigates late May's crosscurrents. The approach centers on three principles: focus on business fundamentals rather than stock prices, avoid speculative trades, and maintain a long-term holding period measured in years, not months. According to Investopedia, Buffett's strategy emphasizes that "time in the market, not timing the market" is what drives wealth creation.

For investors sitting on cash, the current volatility near all-time highs presents a dilemma: wait for a deeper correction that may not come, or buy now and risk a pullback. The resolution may come in early June, when the monthly jobs report will offer the next major data point on whether the economy can sustain current equity valuations.

Why Volatility Favors the Prepared

Buffett's advice carries particular weight given his track record through multiple market cycles. During the 2008 financial crisis, Berkshire Hathaway deployed billions into companies like Goldman Sachs and General Electric at favorable terms, generating substantial returns as markets recovered. The same principle applies today: investors with cash reserves and a clear strategy can use volatility to their advantage.

The key differentiator between successful long-term investors and those who underperform is behavior during drawdowns. Data from Dalbar shows that the average investor significantly underperforms the market precisely because they buy during euphoria and sell during panic — the opposite of Buffett's approach.

What to Watch in the Weeks Ahead

Three events will determine whether late May's volatility resolves into a buying opportunity or a deeper correction. The first is the early June jobs report, which will show whether the labor market remains resilient enough to support corporate earnings at current levels. The second is the Federal Reserve's next policy meeting, where any shift in rate-cut expectations could trigger a reassessment of equity valuations. The third is second-quarter earnings season, which will test whether companies can maintain margins in an environment of elevated input costs and mixed consumer demand.

For long-term investors, the playbook remains unchanged: identify companies with strong balance sheets, durable competitive advantages, and reasonable valuations, then use periods of volatility to build positions gradually.

This article is for informational purposes only and does not constitute investment advice.