Kevin O'Leary warns against making this 1 big mistake when there's 'blood in the streets' — says he doesn't 'guess' when Wall Street panics. Here's what Mr. Wonderful is doing now

“Nobody likes volatility, but the market was extremely expensive,” O’Leary said in an interview with Yahoo! Finance on March 13. “I’ve lived through multiple corrections of up to 20%. I have to admit, I did some buying lately.”

The sharp pullback in stocks — particularly in the tech-heavy Nasdaq and small-cap Russell 2000 indices — caught O’Leary’s attention.

“I can’t catch the bottom, but I’ve seen great companies that still have great growth prospects selling down,” he said.

O’Leary believes this kind of downturn is exactly the moment investors should be stepping in, even if the headlines are full of doom and gloom.

“Everybody feels, ‘Oh my goodness, it’s the end of the free world as we know it’ — this always happens,” he said. “As an investor you learn that you have to hold your nose, and when there's blood in the streets you have to be buying. It’s an old adage, but it’s not incorrect.”

What O'Leary says he's buying

So, what exactly has O’Leary been buying? Rather than picking individual stocks, O’Leary revealed he buys indices, favoring rule-based exchange-traded funds (ETFs) that provide broad exposure while following a disciplined strategy.

“I use ALPS [mutual funds] because I once had an ETF company that did this,” he shared. “I use their OUSA product for the S&P 500 and OUSM for the Russell 2000, and I bought more because it's on sale.”

While O’Leary is confident in the long-term benefits of buying during downturns, he cautions against trying to predict the exact bottom.

“You just have to look long term and realize these are buying opportunities, but never think you're going to catch the bottom. I don't even guess to do that, I don't try to time the market,” he remarked.

O'Leary's strategy meets Buffett's wisdom

O’Leary isn’t the only high-profile investor who champions index investing — Warren Buffet has long been a vocal advocate of the strategy for everyday investors.

Buffett has previously stated: “In my view, for most people, the best thing to do is own the S&P 500 index,” meaning shares in an index fund.

The legendary investor, who Forbes estimates is worth $160-plus billion, believes everyday investors are better off putting their money into a broad-based, low-cost index fund that captures the long-term growth of the U.S. economy.

He believes so strongly in this strategy that he instructed 90% of his wife’s inheritance be invested in “a very low-cost S&P 500 index fund” after he dies.