Market correction? Just do what Warren Buffett does, says one investor

  • Market corrections are often seen as a buying opportunity for many investors as they quickly reduce the value of equities.
  • Nusseibeh added that markets are in a different environment from the time that preceded the last financial crisis of 2008. The underlying economic picture is "really very strong," he added.
Warren Buffett
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Warren Buffett

Worried money managers who are fretting about the recent market correction and the future of their portfolios just need to follow the advice of legendary investor Warren Buffett, according to one investment manager.

"What do you do if the market drops from here? Warren Buffett famously says 'If I see a sale in my favorite store, I go and buy some more of the stuff I like'," Saker Nusseibeh, CEO of Hermes Investment Management, told CNBC Thursday.

Markets in the U.S. had dropped 10 percent at one point last week — pushing into correction territory — following a data release in the U.S. that sparked fears over a stronger-than-expected uptick in inflation. Market corrections are often seen as a buying opportunity for many investors as they quickly reduce the value of equities. Nusseibeh's comments highlight Buffett's famous line from 2008 when he said: "Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."

According to Nusseibeh, now that markets have slightly come off their recent highs, and given that economic growth is strong and there are good prospects for solid earnings, it's the moment to seize the opportunities in the stock market.

"So if you have a long-term view that markets are frothy, they have taken some of the froth out and if you are really investing for a 10-year horizon, yeah you buy the stocks that are solid, that you think you like the underlying earnings and you go into them and you wait until they calm down," he said.

Nusseibeh added that markets are in a different environment from the time that preceded the last financial crisis of 2008. The underlying economic picture is "really very strong," he added.

"There's a lot more to come. Ultimately if you're buying into shares, you're buying into the health of the corporate entities underlying and the corporate health in a lot of these entities is strong. And even moderate growth in wages will lead to consumer spend, and let's see what the effect of what the (President Donald) Trump administration has done on the U.S. economy, that's huge," he said.

However, Nusseibeh warned that it's important to have diversified investments and not concentrate all your portfolio in one place.

"The story is still for good corporate earnings but pick your time and, you're right, don't put all your money in at once," he said.