In the past couple of days, there have been two hot topics in the market:
One is the sharp drop in the Korean stock market that I shared in yesterday’s article.
The other is the discussion sparked by some remarks made by Dan Bin, following the heavy falls in both the US and Korean stock markets.
This is what Dan Bin said:
“When there’s a big drop, you must be brave enough to buy. I’ve just used up the rest of my bullets.”
“After so many years, what do I think one must overcome? Not daring to buy stocks when there’s a sharp drop. For example, if I’m planning to buy 100 million's worth and you’re not brave enough, then just buy 10 million. If you’re not brave enough to buy 10 million, then buy 1 million.”
I very much agree with the logic Dan Bin presented here; essentially, it’s the same as what Warren Buffett says: ‘Be greedy when others are fearful.’
However, when making such statements directly to the public, one must be very cautious, especially not to leave out what I see as two indispensable preconditions.
The first precondition is: the stock that has dropped sharply must be one the investor truly understands, knows where its value lies, and has a fair estimate of its value in mind.
The second precondition is: after the big drop, the price must actually be worth buying. If the post-drop price is still not worth buying, then there’s no need to buy.
These two preconditions are essential not only in the stock market, but in any market (including the crypto market we’re more familiar with).
Many retail investors rush in to buy an asset (whether it’s a stock or a crypto asset), not because they understand the asset, or because they’ve evaluated its value—but simply because the market has labeled it as "hot," "a trend," or other descriptions that make them feel anxious or afraid of missing out if they don’t participate.
When people buy into an asset with this mindset, even if it truly is valuable, the vast majority of them won’t make money from it; they might even end up losing money.
In my experience, buying an asset during a sharp drop can sometimes be feasible, but sometimes not. The key difference lies in the investor’s ability to handle risk and evaluate the intrinsic value of the investment.
Take the crypto ecosystem we’re more familiar with: Bitcoin fell from $120,000 to around $60,000 now, and Ethereum dropped from nearly $5,000 to below $2,000 today.
Looking at the magnitude of the downturn, both have dropped significantly, which fits Dan Bin’s statement that "after a big drop, you must dare to buy." But in my view, at these price levels, I’m more optimistic about Ethereum, so I wouldn’t buy Bitcoin here, but would rather continue to buy Ethereum.
By the same logic, should you buy those AI-related stocks that have plunged recently, after such a sharp drop?
Ultimately, it still depends on how investors assess their intrinsic value.
Only when the market price is below the intrinsic value estimated by the investor is it worth buying; otherwise, it’s best to stay on the sidelines.
Dan Bin didn’t mention these two preconditions (in fact, I even think that even if he did, most people wouldn’t really think deeply about the reasoning behind them).
So I dare to boldly predict that there will definitely be quite a few retail investors on the market who, because of Dan Bin’s remarks, will now rush in to buy those hot stocks that have dropped sharply. And even if these stocks do eventually go up, the vast majority of retail investors will not ride out the gains, but will instead lose money and cut their losses during the price swings, then turn around and blame him.
