A logical investor must take irrational market behavior into account when choosing stocks to buy, sell, and hold. Fear and euphoria cannot dominate the actions of someone who really knows the companies and industries in which he or she invests, but other people’s fear and euphoria should influence one’s choices. Do not blindly follow the herd, but pay close attention to its movements. Opportunity exists in the gap between a company’s value and the herd’s perception of its value. Of course, it can take a long time for the herd to catch up, but that is how an entrepreneurial investor’s patience is rewarded.
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