What billionaire investor Warren Buffett says to do when the market tanks

Warren Buffett, chairman and CEO of Berkshire Hathaway. Photo / AP

The US stock market volatility continued Friday after the Dow Jones industrial average shedded over a thousand points for the second time this week.

The Dow tipped 1,032 points into the red, down 4.2 per cent, to close at 23,860 on Friday, just three days after dropping 1,175 points in the biggest stock market plunge in six years.

During times of stress and uncertainty, "Oracle of Omaha" Warren Buffett recommends keeping a level head, according to CNBC.

In response to the wild market fluctuations back in 2016, Buffett told CNBC that buy-and-hold is still the best strategy.

"Don't watch the market closely," Buffett advised.

"If they're trying to buy and sell stocks, and worry when they go down a little bit … and think they should maybe sell them when they go up, they're not going to have very good results."

Thursday's fluctuations came despite good economic news. Social-media company Twitter posted its first profit, and Yum Brands, Cardinal Health and Tyson Foods also exceeded earnings expectations. Nearly 80 per cent of companies that have reported so far this earnings season have surprised analysts to the upside.

Some say the fluctuations are because of the good news, with fears that an overheated economy and nascent inflation will push the Federal Reserve to raise rates. The latest inflation figures are anemic at 1.7 per cent.

In looking for companies to invest in, Buffet used the following example: "If you had a chance to buy into a good company in your hometown … and you knew it was a good company and knew good people were running it, and you bought in at a fair price, you wouldn't want to get a quote every day."

Instead of frequently checking a stock's price, "you'd look to the earnings and dividends over the years as determining whether you made a good investment or not. And that's what people should do with stocks."

Buffett's Berkshire Hathaway owns more than 80 business and has major stakes in giants such as American Express, IBM, Coca-Cola and Kraft Heinz.

- Additional reporting from Washington Post and CNBC.