• Warren Buffett’s Berkshire Hathaway has had some steep share-price drops over the years.
  • In his annual letter to shareholders, Buffett said the inability to time such declines is the strongest argument against using borrowed money to buy stocks.
  • Warren Buffett used lines from Rudyard Kipling’s “If” to illustrate what debt-free investors should keep in mind during market downturns.

Warren Buffett’s huge success as an investor has not come without its low moments.

In his 2017 letter to shareholders published on Saturday, the Berkshire Hathaway CEO detailed the most painful downturns the company’s share price has endured. They include a 51% decline from September 2008 – March 2009, during the financial crisis.

But a major lesson from Buffett’s success is his focus on the long-term. In his letter, Buffett waxed poetic to illustrate the importance of keeping a cool head when markets are going haywire. He picked out lines from “If” written by the British Nobel laureate Rudyard Kipling in 1895.

Buffett also said the drawdowns in Berkshire’s price were “the strongest argument” against ever borrowing money to buy stocks, since there’s no way to tell how far stocks can fall in a short period.

"No one can tell you when these [big declines] will happen," Buffett said. "The light can at any time go from green to red without pausing at yellow. When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That's the time to heed these lines from Kipling's "If:"

"If you can keep your head when all about you are losing theirs . . . If you can wait and not be tired by waiting . . . If you can think - and not make thoughts your aim . . . If you can trust yourself when all men doubt you... Yours is the Earth and everything that's in it."

You can read the full poem here.

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