How should investors deal with the mood swings of Mr. Market?

Okay, this question is a classic and a compulsory lesson in every investor's growth journey. Let's talk about this topic in plain language.

Treat "Mr. Market" as a Tool, Not Your Mentor

Imagine you have a highly emotional business partner named Mr. Market. You two run a good company together (which represents your stock holdings).

This Mr. Market has a problem: he suffers from severe bipolar disorder.

Sometimes he's extremely excited (manic): He'll rush into your office, arms waving excitedly, telling you your company is the best in the world with a bright future! Then, he'll offer an outrageously high price to buy your shares from you.
Sometimes he's extremely depressed: He'll walk in slumped over, telling you the world is ending and your company is doomed. Then, he'll quote a ridiculously low price, begging and pleading for you to buy his shares so he can escape his misery.

The key is, he shows up every single day, every day offering you a price – either to buy yours or to sell you his.

So, how should you treat him?

What Most People Do (And Why It's Wrong)

Many new market entrants treat Mr. Market like a "prophet."

When Mr. Market is excited, they get excited too, thinking there must be some good news they don't know about, and rush to buy at high prices.
When Mr. Market is pessimistic, they panic too, believing the sky is falling, and rush to sell at a loss.

The result? They fall right into the "buy high, sell low" trap. They are completely led around by Mr. Market's emotions, becoming his "emotional slaves."

What Should the Intelligent Investor Do?

Benjamin Graham tells us that intelligent investors adopt a completely different approach. They firmly keep the initiative in their own hands.

1. You Are the Boss, He Is the Servant

Remember, Mr. Market is there to serve you, not instruct you. You have every right to tell him: "Thanks for your offer, but I'm not interested today." You don't need to trade with him every day; in fact, the fewer trades you make, the better you'll likely do. He can't force you to do anything.

2. Do Your Own Homework: Know What Your Holdings Are Worth

This is the core principle. Before Mr. Market knocks on your door, you must have an independent, fundamental estimate of your company's value.

It's like knowing roughly what your house is worth. You wouldn't get excited and offer more just because a realtor tells you prices are soaring today, nor would you panic and sell at a discount because they say prices are crashing tomorrow. Because you have a sense of its value.

For stocks, this "sense" is the company's intrinsic value (its earning power, asset base, growth prospects, etc.). You need to spend time researching to reach a conclusion: "I think it's roughly worth X dollars."

3. Use His Emotions, Don't Be Used by Them

Once you have that grounding, Mr. Market transforms from a terrifying "emotional monster" into a very useful "trading tool."

When he's extremely pessimistic (market crashes, widespread despair): He comes to you saying the company is doomed, willing to sell you his shares at a very low price (e.g., far below your estimated value). This is your opportunity! Calmly tell him: "That price is great, I'll buy all you're selling." This is "be greedy when others are fearful."
When he's extremely optimistic (market euphoria, everyone's talking stocks): He comes to you saying the company is the future center of the universe, willing to buy your shares at a sky-high price (e.g., far above your estimated value). Here, you should be wary and tell him: "That price is too tempting, I'll sell you my shares." This is "be fearful when others are greedy."
When his quote is lukewarm (price is roughly what you estimated): You can safely ignore him. Have some tea, read a book, do something else. You don't need to do anything because there's no obvious bargain opportunity.

Core Takeaway: Your Mindset Is Everything

Put simply, how you handle Mr. Market's mood swings is fundamentally a question of investor psychology. You need to:

Think independently: Your buy/sell decisions should be based on your assessment of the company's value, not the market's daily quotes.
Demand a margin of safety: Act when Mr. Market is pessimistic, buying a dollar's worth for fifty cents. This price difference is your cushion, key to handling uncertainty.
Maintain a long-term perspective: Don't obsess over next quarter's earnings; focus on the company's next 5-10 years. Treat investing as owning a business, not a gamble for quick profits.
Control your emotions: Recognize that fear and greed are the investor's greatest enemies. Mr. Market is the very personification of these two emotions. See through him, and you're more than halfway to victory.

Remember, Mr. Market is just a clerk, providing prices, not wisdom. You are the investor who must apply wisdom to make decisions.