Benjamin Graham, considered as the Father of “Stock Investing” and Teacher ( Mentor ) of Warren Buffett, has formulated a mental strategy and instructed to follow. For successful investing it may be useful.
Graham's favorite allegory is that of Mr. Market, an obliging fellow who turns up every day at the shareholder's door offering to buy or sell his shares at a different price.
Let us imagine “ Mr.Market ” and our self are doing a business conjointly. It means he is our partner, co-share holder. Every days prices being told in the share market, can be considered as on behalf of our business rights, claiming prices by him.
Often, the price quoted by Mr. Market seems plausible, but sometimes it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or ignore him completely.
Our friend each and everyday, he mentions the conjoint business stock prices offers. At the same time his stock prices he is capable to sell will also be kept in front off. Even though company and its activities being stable our friend Mr.Market, claiming prices will be varying day by day ( even for minutes also ) remains unstable. Friend is probably a fickle minded person.
Sometimes he may be anxious. During that time companies good future will alone be seen by him. During pleasant mentality times, or moments, he may offer any price to buy our stocks. He fears that we may steal the profits from the companies business. At any attempt he intends to acquire our stocks, is the prime concern for him.
In some other times, he may seems to be felt Dull and Tired. For the company , and the World a bad future only accomplishes , will be considered by him. Since, we may push our assets to him, in fear, he may offer very low prices for the stocks. Those stocks owned by him , will be attempted to pushed to us, to sell.
Another Magnificent character can be found. We even never care about him, he never minds it at all. Mr. Market doesn't mind this, and will be back the following day to quote another price.
The point of this anecdote is that the investor should not regard the whims of Mr. Market as a determining factor in the value of the shares the investor owns. He should profit from market folly rather than participate in it. The investor is advised to concentrate on the real life performance of his companies and receiving dividends, rather than be too concerned with Mr. Market's often irrational behavior.