This blog post examines the psychology and strategy behind why some investors seize opportunities amidst the extreme fear of a market crash.

When others fear, be greedy

Whether it’s investing or sales, ultimately, it’s an act of generating profit through “transactions” in the market. So where does this profit, or gain, come from? It comes directly from the other party.
To buy shares, there must be someone willing to sell them; to sell a product, there must be someone willing to buy it. In other words, the market always operates through the interlocking of someone’s “buying” and “selling”. Therefore, to gain profit, one must first and foremost be able to read the other party’s mind.
Only by understanding the other’s thinking can one move against their logic; conversely, the power to think oppositely – “reverse thinking” – enables one to seize opportunities. This “reverse thinking” is particularly crucial in mass markets where the public participates. This is because the common thinking of the masses, i.e., common sense, is directly reflected in the market.
This is precisely the point we must focus on. Why must we defy common sense? If your judgements and actions mirror the masses, you will buy and sell at the same time as everyone else. In such circumstances, expecting profit becomes difficult.
There is a Chinese proverb: “승다죽소 (승다죽소)”. It means “many monks, little porridge”, describing a situation where demand far exceeds supply. Investment opportunities are no different. If everyone recognises a particular investment opportunity and jumps in all at once, the profit you can take from it will inevitably be extremely limited.
The world-renowned investor Warren Buffett speaks clearly about this situation.

‘Be fearful when others are greedy, and greedy when others are fearful.’

When the market plunges, most people are gripped by fear and rush to exit the market. Whether it’s stocks or property, the moment asset values fall, people focus solely on avoiding losses. Yet Warren Buffett emphasises that precisely these moments present the best investment opportunities.
Conversely, what about when the market is booming? As share prices rise and property prices soar, people flock to the market en masse. Even ordinary individuals unfamiliar with investing get involved. At such times, Buffett advises keeping your distance from the market.
There is a famous saying related to this.

‘When the greengrocer starts buying stocks, that’s the time to get out.’

This does not mean greengrocers should not invest in stocks. Nor does it imply they shouldn’t know about stocks. The real meaning embedded in this saying is that the very fact everyone is participating in the market is itself a danger signal.
If most people are already buying stocks, the market’s purchasing power has reached its peak. The absence of further buyers means the potential for stock prices to rise has largely been exhausted. From this point, the market becomes more likely to decline.

What choice is rational in such a situation?

Continuing to buy as prices rise risks significant losses when the downturn begins. Therefore, even during a bull market, cool-headed judgement and maintaining a proper distance are essential. The more the market surges, the more one should recall the emotion of “fear”; the more the market plunges into panic, the more one must guard against “greed”.
In all social transactions where human emotion and psychology intervene – be it the economy, stock markets, property markets, or currency markets – crowd psychology exists.
And the repetitive flow of this crowd psychology can be summarised thus:

‘It revives amidst despair, rises amidst hesitation, and crashes amidst euphoria.’

This cycle does not end after one instance. It repeats. And within this flow, the true investor stands on the opposite side to the masses, seizing opportunities. Choices that defy common sense, timing that differs from others, ultimately create dominance in the market, and that is the very source of profit.

In conclusion

As Warren Buffett stated, the attitude of being greedy when others are fearful transcends mere investment strategy; it represents a shift in perspective when viewing the market. Rather than blindly following the crowd and conventional wisdom, we need a perspective that steps back, observes, and discerns the underlying currents of crowd psychology.
One must become an investor who accurately reads market currents and responds with reason, not emotion. Only then can one seize genuine opportunities and grasp market dominance within one’s grasp.
Now, add this question to your investment strategy:

‘Am I currently thinking like the masses? Or am I standing on the opposite side?’

The answer to that question may well determine your next profit.