In the past two days, there have been two hot topics in the market:

One is the significant drop in the South Korean stock market shared in yesterday's article.

The other is the discussion sparked by a few comments from Dan Bin, due to the drops in both the US and Korean stocks.

Dan Bin's comments are as follows:

“When there is a big drop, one must dare to buy; I just finished using my remaining bullets.”

“Over the years, I think one must overcome something? Not daring to buy stocks when there is a big drop. For example, if I plan to buy 100 million, if you are afraid to buy, then you buy 10 million; if I am afraid to buy 10 million, you buy 1 million.”

I agree with the reasoning Dan Bin is presenting; fundamentally, it aligns with what Buffett says, “Be fearful when others are greedy.”

However, if these words are directly expressed to the public, one must still be quite cautious, particularly as two essential preconditions cannot be overlooked in my view.

The first precondition is: the stocks that are experiencing a big drop must be truly understood by the investor, knowing where their value lies, and having a reasonably fair valuation of their worth in mind.

The second precondition is: the price after the stock drops must be a worthwhile price to enter. If the price after the drop is still not a good entry point, then buying is unnecessary.

These two preconditions are essential not only for the stock market but also for any market (including the cryptocurrency market that we are more familiar with).

Many retail investors rush in to buy a target (whether a stock or a crypto asset) not because they understand this stock/crypto asset, nor because they have assessed the value of this stock/crypto, but solely because the market designates it as a “trend” or a “hot topic,” triggering anxiety and FOMO that makes them feel like they would be out of touch with the times if they didn’t participate.

With such a mindset and reasoning, even if a target truly is a gem, most people will not make money from it, and may end up losing money.

From my experience, buying a target during a big drop can sometimes be feasible, but other times it isn't. The key distinction here lies in the investor's ability to tolerate risk and their assessment of the intrinsic value of the investment target.

In the cryptocurrency ecosystem that we are more familiar with, Bitcoin dropped from $120,000 to the current $60,000, and Ethereum fell from nearly $5,000 to now under $2,000.

In terms of percentage drops, both of these have significant declines, conforming to what Dan Bin said about “daring to buy during a big drop.” However, from my perspective, at this price point, I’m more optimistic about Ethereum, so I would not buy Bitcoin at this level but would rather continue buying Ethereum.

By the same token, for those AI-related stocks that have dropped significantly recently, after such a drop, are they worth buying?

Ultimately, it still depends on how investors evaluate their intrinsic value.

Only when the market price is below the intrinsic value assessed by the investor is it worth buying; otherwise, one should remain a bystander.

Dan Bin did not mention these two preconditions (in fact, I even think that even if he had, most people would not carefully consider the reasoning behind it).

So I boldly predict that there will definitely be many retail investors rushing in to buy those heavily dropped popular stocks because of Dan Bin's remarks. Even if these stocks rise in the end, the vast majority of retail investors will not be able to benefit from that rise, and will instead incur losses and exit during the price fluctuations along the way, only to come back and criticize him.

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