1986
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Buffett chooses to zig when the rest of the market is zagging—be fearful when others are greedy and greedy when others are fearful.
✍️ Memorable Quotes
“What we do know, however, is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Fear often leads to panic selling and market downturns, while greed can create an irrational energy and market bubbles. The stock market is a perpetual see-saw between these two emotions, and it operates on a sliding scale.
According to Warren Buffett, the timing and intensity of these emotional outbreaks are unpredictable. It’s impossible to accurately predict when fear or greed will grip the market or how tight their hold will be.
Instead of trying to do so, Buffett chooses to zig when the rest of the market is zagging—be fearful when others are greedy and greedy when others are fearful.
When the market is booming and everyone is buying (driven by greed and FOMO), Buffett becomes cautious. High valuations during these times often precede corrections or crashes.
On the other hand, during market downturns when panic sets in (driven by fear) and share prices plummet, Buffett sees opportunities to buy undervalued assets at a discount.
Adopting this contrarian approach can help investors avoid the pitfalls of herd mentality and capitalize on the opportunities that are presented to them by a manic and erratic Mr. Market.