The Dow Just Jumped 1,100 Points. Here's What Warren Buffett's 2008 Rule Says to a 66-Year-Old Retiree Who Almost Moved $600,000 to Cash on Friday

Warren Buffett wrote in The New York Times on Oct. 17, 2008, a month after Lehman Brothers failed, in a piece titled "Buy American. I Am." He said: "What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up." The sentence after it was: "So if you wait for the robins, spring will be over." 24/7 Wall St. reported that Monday fit the rule. The Dow rose more than 2% to roughly 52,400. The S&P 500 index fund rose 2.4%, its biggest gain since April 8, and the Nasdaq-100 fund rose 3.5%. That came three trading days after the S&P 500 fund's 4.4% drop on Thursday, its worst day since April 2025, and one trading day after stocks closed their worst week since the tariff week of April 2025. The worries that drove last week's selling had not been settled over the weekend. The main change on Monday was a drop in oil prices.

A retired couple, 66 and 63, with $1.8 million held 65% in an S&P 500 index fund, $1,170,000 at Friday's close, and $630,000 in bonds and a money market fund. Social Security pays them $4,800 a month, $57,600 a year, and they spend $118,000, so they draw $60,400 a year from the portfolio, 3.4% of it. On Friday afternoon, after a week of headlines, he typed an order to move $600,000 of the IRA's index fund to cash, the money market fund, until things settled down. He did not send it. Their stock sleeve was worth $1,239,695 at the S&P 500's Oct. 6 record. Thursday took $53,799 out of it in one session. It closed Friday at $1,170,000 and Monday at $1,197,607, a gain of $27,607 in a day, and it is still $42,087 under the record.

The $600,000 that was almost in the money market fund would have missed $14,158 of Monday's gain. The larger cost is the one Buffett's sentence describes. If you sell until it settles down, you need a signal that it has settled, and the usual one is the index back at its record. The S&P 500 fund's record is 6.0% above Friday's close, so $600,000 that waits for that signal buys back $566,268 worth of Friday's shares, $33,732 less, and only if the record is the first sign of calm. In exchange, the money market fund would pay about 4.17%, the 3-month Treasury bill rate: $25,020 a year, or $2,085 a month.

Buffett was careful to say what the rule does not do. "Let me be clear on one point: I can't predict the short-term movements of the stock market," he wrote. He published on Oct. 17, 2008, with the S&P 500 fund at $93.21. It kept falling for five months, to $68.11 on March 9, 2009, a loss of 26.9% after his piece ran. The recession ended in June 2009, but the National Bureau of Economic Research did not announce that until Sept. 20, 2010, and by that day the fund had risen 67.7% from its low. A year after the piece ran, the fund was up 17.8% from where he published. Five years after, 85.8%. Today it is 8.07 times the price on the day it ran, price only, with dividends excluded: $100,000 held through all of it is $807,467. The same $100,000 rolled in 3-month Treasury bills since that day is $129,634. His other line in the piece was about that choice: "Today people who hold cash equivalents feel comfortable. They shouldn't."

The reason the rule works is in the calendar of the S&P 500 fund's daily closes since 2000. Of its 20 best days in that span, 12 came within 10 trading days of one of its 20 worst days. The two biggest, Oct. 13, 2008 (up 14.5%) and Oct. 28, 2008 (up 11.7%), landed in the middle of the worst stretch of the crisis. The third biggest, April 9, 2025 (up 10.5%), came three trading days after the tariff drop that still marks the last week worse than the one just ended. $100,000 put in the fund on Jan. 3, 2000, and left alone was worth $517,501 on Monday, 6.31% a year, price only. If you missed the 10 best days, you have $224,552, 3.06% a year. If you missed the 20 best, you have $131,516, 1.03% a year, less than the $169,619 that 3-month Treasury bills returned over the same stretch.

The rule says the recovery arrives before the all-clear. It does not say when, and it does not say Monday was the start of it. In 2008 the fund fell another 26.9% after Buffett wrote, and the 1,100 points the Dow gained on Monday leave the S&P 500 fund 3.4% below its record and the Nasdaq-100 fund 10.6% below its own. If you draw $60,400 a year, you cannot wait five years for the robins with money you need next year, and Buffett was writing about his personal account, which he said had held nothing but Treasury bonds until then. Their $630,000 outside stocks covers 10.4 years of draws at $60,400 a year. The 2007 to 2009 fall took the S&P 500 fund 5.4 years to repair, from its October 2007 peak to the first close above it in March 2013, and the 2000 to 2002 fall took 7.2 years. A reserve that covers a decade means no stock has to be sold in a bad year, which is the only thing the Friday order was trying to buy, at a cost of $14,158 on its first day.