Mr. Market

The stock market is difficult to understand. The guru, Warren Buffett, likes to describe the market as a person who is always ready to buy or sell you a business, but the problem with him is that he is very emotional. Buffett calls this person Mr. Market.

On some days when Mr. Market is very happy, he sees everything in an optimistic light and he will sell you a business at a very high price. On other days, he will be depressed and can see only doom and gloom, and will sell you a business at a low price.

You are free to transact with Mr. Market on any day, or not transact at all. He will always come back tomorrow and quote you a different price. Depending on his mood, the prices will be all over the place. You are free to take advantage of him, and buy a good business from him on his down days, or sell him a bad business when he is feeling on the top of the world.

However, you should never be influenced by his mood, i.e. you too, start feeling super happy on days when he is also happy, and buy a lousy business from him at a high price. Millions of individual investors never understood this, so they never take advantage to buy a good business at a cheap price from Mr. Market when he is feeling sad, but instead, only buy from him when he is bright and sunny.