In earlier post, we had discussed about why Warren Buffett says “Be fearful when others are greedy”. In this post, we will discuss about the next part of Buffett’s famous quote on Fear and Greed i.e Be Greedy when others are Fearful!
Let’s start with a question
In Stock Market, when do other people get scared and fearful?
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Of course, it will happen when prices of stocks are going down. In fact, not just going down, instead they are crashing too!
So, what will happen when stock prices will crash??
Price of stocks will be reduced and may become cheap also!
According to Warren Buffett, this is the time to be greedy when others are fearful about stock market.
As others are scared, they would sell their shares without even considering what is the right price of a stock!
All these would bring panic selling. But why we should buy during this panic selling?
“Prices that comes during panic selling hardly comes again”
When others are fearful, decline in markets can bring some exciting lower levels that shouldn’t be missed. Getting Greedy at such time can help us to buy shares at that levels that wouldn’t last for a long time.
Beside of this, being greedy during fear among others can help us in another way.
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Ups and Downs are the regular cycles of an economy. There is a time when condition of economy seems great, and all are positive about near future. There is also a time when condition of economy seems not good and future looks uncertain and doubtful. Weakening economy and economic indicators turning negative makes us more cautious and led to negative outlook on the stock market.
However, these always remain just cycles and in long term, an economy consistently goes up. There are very rare chances that any country’s economy would consistently decline over long term.
When sentiments are not good, near future seems negative, and stock market are declining, it could be a good time to turn greedy and buy some shares at lower levels. In long term, equities (stock markets) are always expected to perform well.
Source: Google Finance
(As we can see in above chart of Nifty50, many ups and downs came during last 20 years. But in long term, Nifty50 kept moving up)
Fear and Greed Quote of Warren Buffett can help us to earn money from Stock Operators Games! Continue reading to see how
How to earn money from stock market operators game!
Many stock operators plays a game with small investors before moving up a stock higher.
At first, they will hammer (broke) the stock price before making purchase. Hammering results decline in share price which causes small and short term investors to re think about their investment. On the basis of initial decline, many investors may think share price is going to fall more! Is risky to hold here! And therefore they should take exit from the stock!
When many investors have taken exit due to fear of more hammering, then operators starts buying the shares.
As many investors have already taken exit, it becomes easy for the operator to pull share price up.
Hammering may not necessarily mean that stock is going to rise after that. But many operators use this strategy before start purchasing shares.
If we turn greedy during stock operator’s temporary hammering, we may be able to buy shares of a stock at an attractive price and sell them at higher levels shortly.
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So, these were the lessons that we can learn from Warren Buffett’s famous investing quote “Be fearful when others are greedy and be greedy when others are fearful”.
Now when we know about the quote and uses of it, it should become easy for us to make money from stock market! Is not it?
Unfortunately, it’s not like that.
We know what Warren buffett mean to say from their quote. But for us, another big task is to decide where and when we have to implement this Fear and Greedy quote of Buffett!
We will have to judge ourselves when other investors are in fear and when they are greedy in stock market and in specific stocks? If you can judge this, you can surely get a great benefit from using this quote of Warren Buffett in Stock Market.
“Be fearful when others are greedy and greedy when others are fearful” is quite a smaller quote as compared to its significance in stock market. It describes about various things that happens in Stock Market, the mindset that we will need to earn money from share market, when we have to take exit from a stock and when we have to take entry.
Hoping that you have understood about the quote clearly now.
May you earn good amount money from stock market.
Good luck : )
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