To understand the market, we can see it as a hypothetical investor driven by panic, euphoria and apathy on any given day. Investing is a reaction to this mood. Investment markets follow a pendulum-like swing: between euphoria and depression, between celebrating positive developments and obsessing over negatives, and thus between overpriced and underpriced. The more extreme the swing, the faster the reversal.
Stocks can be volatile, that is the nature of a market that allows the public to vote prices in, and you must remember that volatility is not just prices going down, but up as well, and this is where outperformance comes from.
There are only three things that can happen to a stock – it goes up, down, or stays the same. Should not be surprised when one of this happens; even Berkshire Hathaway has seen its stock price decline by 50% from top to bottom three times ......