If you’re searching for a book to guide you to financial success, Warren Buffett recommends Benjamin Graham’s “The Intelligent Investor” as the essential read.
At the 2012 Berkshire Hathaway Annual Meeting, Buffett highlighted two chapters as particularly crucial: “Chapters 8 and 20 are really all you need to do to get rich in this world.”
In Chapter 8, Graham introduces the concept of “Mr. Market,” a metaphor for the stock market’s volatility. Buffett explained, “In the market, you’re going to have a partner named ‘Mr. Market,’ and the beauty of him as your partner is that he’s kind of a psychotic drunk. He will do very weird things over time, and your job is to remember that he’s there to serve you, not to advise you.”
Buffett emphasized the importance of maintaining a rational perspective: “If you can keep that mental state, then all those thousands of prices that Mr. Market is offering you every day on every major business in the world, practically, he is making lots of mistakes. He makes them for all kinds of weird reasons. All you have to do is occasionally oblige him when he offers to either buy or sell from you at the same price on any given day, any given security.”
By understanding and applying these principles, investors can leverage market fluctuations to their advantage and achieve financial success.
Buffett’s full explanation
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© 2024 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.