Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett's 3 Favorite Books)

“Mr. Market is your servant, not your guide.” —Warren Buffett

Good news! The market is dropping

Do you like to shop for deals? I sure do! Who doesn’t like to buy a quality product at a cheaper price? I buy more stuff when prices are low. Then, when the price increases, I buy less, or none.

Price and value are completely different things. When Mr. Market is in high spirits and prices are high, we sometimes experience a bubble. It occurs when there is no sustainable relationship between the value and the price of a company.

Benjamin Graham has a quote: “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” This profound statement signifies his ideology that accumulating more shares—or equity—in the business is paramount over the day-to-day activity of the market.

The stock market gives each investor a unique opportunity to invest in real companies—as an owner—and proportionally share the company’s profits. Now, Warren Buffett may own a bigger part of Coca-Cola than you can afford, but the principle is exactly the same.

stock market consists of real companies. That little difference changes everything. It also explains why value investors consistently beat the stock market year after year.

The best part about Mr. Market is that you can ignore him for years, yet he will keep coming back every day with new offers.

They think the current price always reflects the true value of the company. This idea is especially popular within academia.

Value investors like Warren Buffett and Benjamin Graham strongly disagree. They believe the stock market moves in the short term due to emotions and in the long term due to value. Mr. Market may be a fictitious character, but he’s a symbol of the emotional psychology the stock market follows in the short term. There is good reason to believe that Warren Buffett is right: he’s accumulated over 60 billion dollars in personal wealth using value investing.