The practical lesson is to keep enough accessible money for near-term needs that a market slump does not force you to sell long-term investments at a bad time. That is an interpretation of principles in Warren Buffett’s shareholder letters—not a verified Buffett quote or a prescribed cash amount. Liquidity can give an investor room to wait; it cannot prevent investment losses.
What Buffett’s advice means for an individual investor
In a bear market, falling prices can be especially damaging to someone who needs cash immediately. If a job loss or other expense arrives at the same time, selling investments to cover bills may turn a temporary decline into a realized loss. Cash set aside for foreseeable near-term needs can reduce that pressure.
The exact-titled Motley Fool article appeared in search results dated October 5, 2026, with an indexed summary describing this risk. Its full text was unavailable, so its “No. 1” ranking and any precise wording cannot be confirmed. Buffett’s own letters support related ideas, but do not show that he used that headline’s phrase or set a household cash target.
Why a long-term buyer may welcome lower prices
In Berkshire Hathaway’s 1997 chairman’s letter, Buffett wrote: “Prospective purchasers should much prefer sinking prices.” He explained that Berkshire shareholders who continued saving could benefit from lower prices because Berkshire and its investees could deploy funds more advantageously. The point is about a continuing buyer with time and money to invest—not someone who must sell to meet current expenses.
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The same letter reported that about 97% of Berkshire shares were held by the same investors at the beginning and end of 1997. That is a historical fact about Berkshire’s shareholder base, not a statistic about investors generally. Read the 1997 Berkshire Hathaway shareholder letter.
What Berkshire’s liquidity example does—and does not—show
Buffett’s 2014 letter describes liquid assets and an absence of significant near-term cash requirements as elements of Berkshire’s “financial staying power.” In its 2022 letter, Berkshire said it planned to hold cash and U.S. Treasury bills and avoid uncomfortable cash needs during financial panics and severe recessions. Those statements describe a company’s resilience strategy. A corporation’s balance sheet is not a ready-made emergency-fund formula for a household.
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For a person, the useful question is whether money needed soon is exposed to market declines. How much to keep accessible depends on personal circumstances; the cited letters do not prescribe a percentage or dollar amount. See Berkshire’s 2014 shareholder letter and 2022 shareholder letter.
Why borrowing can make a downturn harder to handle
Leverage can add urgency to a decline: debt payments or margin demands may leave an investor with less choice about when to sell. In 2014, Buffett wrote, “Berkshire shares should not be purchased with borrowed money.” He also said Berkshire shares had fallen about 50% from a high point three times since 1965, while noting that no one knew when a similar decline would occur. Those are Berkshire-specific historical observations, not a forecast or a measure of how often the broader market will fall.
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Buffett’s warning about leverage also has a behavioral dimension. In a 2018 CBS report, he said borrowings can leave an investor rattled by headlines during a volatile market. A price drop is not automatically a permanent loss, but debt and short-term cash pressure can make it harder to stay invested through one. CBS reported Buffett’s comments on borrowing and volatility on February 26, 2018.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Put the lesson into practice
- Separate near-term needs from long-term investments. Identify expenses you expect to cover soon and whether you have accessible funds for them without selling investments.
- Consider what could change your cash needs. A potential income interruption or other foreseeable obligation can make reliance on investment sales riskier. The Berkshire letters do not supply a universal reserve target.
- Review whether debt could force a sale. Consider how loan payments or other borrowing obligations would affect your choices if prices fell.
- Match investments to the time you can leave them invested. Buffett wrote in 2014 that he could not reliably predict market movements and recommended buying Berkshire shares only if an investor expected to hold them for at least five years. That statement concerned Berkshire shares, not a guarantee or a universal holding-period rule.
Buffett’s 2014 letter is available from Berkshire Hathaway. Its specific comments are about Berkshire shares and Buffett’s stated approach; they are not individualized portfolio advice.
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