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The Intelligent Investor by Benjamin Graham is one of the most popular books out there to help one invest. It’s a book recommended by Warren Buffett who was taught by Graham in college. If one wants to invest in stocks, it is a book that should definitely be considered. In the book, there is a character called Mr. Market, and in this article, I want to analyze that character.
Mr. Market represents the stock market as a whole. When I buy a share of Blackrock, what I bought is a piece of the business. I now own part of the company Blackrock. That business has revenue and some of that gets turned into profit which goes to the owners of the business. Now, think of the market as a person. That person, Mr. Market, comes up to you every single day and throws out a price to buy your part of the business. Going back to Blackrock as an example, let’s say that someone owns one share of Blackrock. Mr. Market is currently offering to buy their piece of the business for $741.72. One might look at that and think that that’s a crazy offer as they believe their part of the business is worth more than that and decide not to sell or maybe they will believe their piece of the business is not worth that at all and decide to sell.
Mr. Market should be looked at as a tool. When one owns a piece of a business, that business has value. Mr. Market will often try to buy that value at prices that are way below the actual value. That’s when the intelligent investor ignores Mr. Market. Mr. Market will also try to buy that value for way more than the value one owns is actually worth and that is when one should take advantage and sell to Mr. Market.
In summary, when one buys a stock they are buying a piece of the business. One should look at the market itself as not the decision maker on the price of value but as a person offering to buy one’s part of a business at various different prices. One should take advantage when the market gives them a price above their value, but should not listen when the market gives them a price below their value. One should not see the market as the decision maker on what their business is worth but as a possible opportunity.
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