What important investment truth does he believe the parable of Mr. Market reveals?

Okay, this question touches on the essence of value investing. Benjamin Graham's concept of "Mr. Market" might be my personal favorite investment metaphor because it's incredibly vivid and immediately highlights the most common mistake made by individual investors in the market.

Let me explain this parable in plain language and the investment truths it reveals.

The Core Investment Truth Revealed by the "Mr. Market" Parable: Treat the Market as a Servant, Not a Master

Imagine you own shares in a business alongside a fellow shareholder named "Mr. Market." Your partnership is quite peculiar:

He visits you every single day, without fail.
He comes to do only two things: either buy your shares or sell you his shares. Crucially, each time he names a price.
This "Mr. Market" has a fatal flaw: he's emotionally unstable, suffering from manic-depressive mood swings.
- When he's extremely excited and optimistic (like in a roaring bull market), he'll quote an exorbitantly high price for your shares. He's convinced the business has an incredibly bright future and is willing to pay top dollar.
- When he's extremely pessimistic and panicked (like in a severe bear market), he gets terrified, fearing the business will collapse tomorrow. In this state, he'll quote an unbelievably low price, practically begging you to take his shares off his hands.
The most important point: Although he pesters you daily, you don't have to listen to him. You can accept his offer, or you can simply say "Not interested today," close the door, and leave him be. He won't mind; he'll be back tomorrow with new offers anyway.

This tale seems simple, right? But Graham used it to reveal several crucial investment truths:

1. The Market Has Moods, But You Must Not

"Mr. Market" is the personification of the entire stock market. The market's daily price quotes are simply "Mr. Market" displaying his current mood. A market surge to the upper limit? He's euphoric. A crash hitting the lower limit? He's panicking.

Truth: Price fluctuations in the market often reflect the collective emotions of the crowd (greed and fear), not genuine changes in the fundamental value of a company. The intrinsic value of a good business doesn't undergo drastic, overnight changes just because investors feel happy or afraid today. Therefore, the intelligent investor seeks to use market sentiment, not be controlled by it.

2. Price is a Tool You Use, Not a Teacher You Follow

What does the daily price Mr. Market offers mean to you? It's not a divine commandment, nor is it the absolute answer. It's merely a reference.

Truth: Your investment decisions should be based on your independent assessment of the company's business, earnings power, and financial health (essentially, what you believe it's truly worth), not on the daily price quoted by Mr. Market.

When Mr. Market panics and quotes a price far below your valuation—a "fire-sale price"—that's your opportunity. You can calmly and happily buy shares in a good business from him.
When Mr. Market gets euphoric and quotes a price far above your valuation—an "exorbitant price"—that's also your opportunity. You can sell the shares you hold back to him and let him revel in his excitement.
If his quoted price seems reasonable—neither particularly good nor bad in your view—then simply do nothing. Sit back with a cup of tea, read the paper, and ignore him.

3. The Initiative Permanently Resides With You

The most critical point in the parable is that you can completely disregard Mr. Market. No one forces you to buy or sell on any given day.

Truth: Investing is not a poker game you're obligated to play every day. You have the right to choose when to act and when to observe. Keep the power to transact firmly in your own hands, acting only when the price is absolutely advantageous to you. One of the biggest mistakes ordinary investors make is feeling they must constantly watch the market and trade daily. Consequently, they get led by the nose by Mr. Market's emotions, buying high and selling low, becoming the proverbial prey ("getting slaughtered").

To Summarize

The "Mr. Market" parable teaches us, through a vivid story:

Do not regard the market as an omniscient "God" to be predicted and followed. Instead, view it as an emotional "trading counterparty" to be exploited.

Your investment success doesn't depend on predicting whether Mr. Market will celebrate or despair next. It depends on whether you possess independent judgment and, crucially, whether you have the rationality and discipline to capitalize on his mistakes when the market errs.

So, next time you see wild surges or plunges in the stock market, quietly ask yourself: Is "Mr. Market" having another episode, or should I join him in his frenzy? Answering this question clearly will completely transform your investment mindset.