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The allegory of Mr. Market in Benjamin Graham's 'The Intelligent Investor' is a metaphor for the stock market. Mr. Market is a fictional character who offers to buy or sell shares of a business at different prices each day, often quoting either exuberantly high or absurdly low values. This erratic behavior represents the volatility of the stock market. A sensible investor, according to Graham, should not rely on Mr. Market to understand the underlying value of their shareholding. Instead, they should take advantage of Mr. Market's mood swings, buying when he quotes low prices and selling when he quotes high prices.
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Graham gives the allegory of Mr. Market to illustrate the investor's ideal attitude to the stock market. Imagine you paid $1000 to buy a small share in a private business. One of the partners, Mr. Market, tells you every day what your share is worth and offers to buy or sell additional interest in the business. Unlike a private buyer, Mr. Market often quotes exuberantly high values or absurdly low ones. Given this situation, there is no way a sensible investor will rely on Mr. Market to understand the underlying value of their shareholding. However, they would be more than happy to buy from Mr. Market when he quotes meager rates and sell to Mr. Market when he quotes relatively high rates.
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This book will not teach you how to beat the market. However, it will teach you how to reduce risk, protect your capital from loss and reliably genera...
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