Money

Warren Buffett: 'Any time the market takes a sharp dive,' read this book

Warren Buffett, Chairman and CEO of Berkshire Hathaway.
David A. Grogan | CNBC
Warren Buffett, Chairman and CEO of Berkshire Hathaway.

Despite a generally positive economic outlook, one asset manager warns that signs of a potential market crash are now appearing.

Regardless of whether it happens sooner rather than later, any time the market drops, Oracle of Omaha Warren Buffett recommends keeping a level head and picking up a copy of "The Intelligent Investor."

"Any time the market takes a sharp dive and you get tempted to sell or something, just pull out this book and re-read it," he says in a video posted on Gates Notes, adding, "When I read this book, it changed my life."

First published in 1949, the investing manual is written by Buffett's former teacher and mentor, Benjamin Graham. It outlines Graham's philosophy of "value investing" — buying stocks when they are undervalued and holding them for a long period of time — which would become a hallmark of Buffett's investment strategy.

"All of the important ideas in investing really are in that book," Buffett said at the 1996 Berkshire Hathaway meeting.

And there are only about three important ideas to understand, he added. "One is to think of investing as owning a business and not buying something that wiggles around in price. The second one is your attitude toward the market. … The final one is on the margin of safety, which means, don't try and drive a 9,800-pound truck over a bridge that says it's, you know, 'Capacity: 10,000 pounds.' But go down the road a little bit and find one that says, 'Capacity: 15,000 pounds.'"

Buffett consistently recommends "The Intelligent Investor" to his shareholders and followers, but it can be especially helpful during times of uncertainty. As he told CNBC back in 2016, when the market tanks or is fluctuating, Graham's buy-and-hold strategy is still the best.

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