The Daily Buffett

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Beyond the Market's Mood Swings

November 26th

Remember that the stock market is a manic depressive.

Warren Buffett

The stock market's inherent volatility oscillates between periods of extreme optimism and crippling pessimism, often without a substantial change in underlying circumstances. But this isn't merely a statement about market dynamics; it's a cautionary note about our own behavior as investors.

How often are we swayed by market's irrational exuberance, buying stocks at inflated prices, only to be engulfed by fear during market downturns and sell at a loss? This emotional yo-yo can lead to poor investment decisions.

The advice here is to maintain emotional balance irrespective of the market's mood swings. Instead of being swept up in market euphoria or panic, strive to be rational, patient, and discerning. Like a stoic, remain unaffected by external events, focusing instead on internal response.

Resisting this manic depressive behavior could not only help survive the market's tumult but potentially profit from it. After all, price is what you pay, value is what you get.

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