Timing in Stock Market

One recurring question that people often asks is :

Now this is beautifully explained by Benjamin Graham through the analogy of Mr. Market.

According to that, you are partner in a business with a crazy person Mr. Market.

Mr. Market has wild mood swings.

Every day he offers you to Buy your shares at a particular price or Sell his shares at a particular price.

Sometimes he’s in very Good mood and tend to name a price higher than true value of business

And he will accept with joy your shares at that price.

At other times he is in such Bad mood that he tend to name a price very low than true value of business.

And you can take advantage of Mr. Market’s crazy offer to buy his shares.

The real beauty of this whole scenario is that you always have the choice of not doing anything.

Now the important part here is, if we can’t value a business then we won’t recognize the opportunities that Mr. Market offers.

The key here is ‘true’,’fair’,’optimum’ value of business which is just the value that is supported by the value investing principles.

Let's say you have an idea about the 'optimum' value of a business.

Then you will be able to see the whole scenario with a completely different perspective.

Now, whenever Mr. Market is in bad mood you will see this time as a 'Shopping' time.

Prepared with your shortlisted value stocks that are at maximum bargain i.e. at a good Margin of Safety (MoS) from their optimum value.

You go on to purchase them without thinking about what the crowd is doing.

Similarly, when you see Mr. Market in a very good mood you can sell those stocks which have surpassed their optimum value.

And now in a 'hot' zone where the crowd think that they have found next big thing.

We'll explore more...Stay Tuned