Mr. Market

March 18, 2014
Written by PenderFund

Mr. Market is the subject of a parable, created by Benjamin Graham, author of The Intelligent Investor and held by many as the father of value investing. He is an allegory for the stock market. Personifying the market allows Graham to demonstrate how psychology plays a huge part in its movement. This parable provides daily valuations of your assets and both offers to buy them from you or to sell you more accordingly: “Sometimes his idea of value appears plausible and justified by business developments… Often,… Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems …a little short of silly.” Thoughtful investors must have the emotional equanimity to focus on valuing companies within their circle of competence and either ignore these price fluctuations or take advantage of prices when they fluctuate far from their estimated intrinsic value range.

“Individuals who cannot master their emotions are ill-suited to profit from the investment process.” Benjamin Graham


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