“Markets can remain irrational longer than you can remain solvent” Famous Quote by John Maynard Keynes:

The adage “Markets can remain irrational longer than you can remain solvent” implies that market prices may diverge from their intrinsic value for a very long time, possibly resulting in losses for investors who go against the trend, even when they are eventually right about the mispricing of the market. This draws attention to the dangers of attempting to time the market and the value of paying attention to market psychology and propensity for extended irrationality.
Here’s the breakdown:
Irrationality:
Markets may be subject to influences outside of fundamental value, including investor sentiment, speculation, and herd behavior.
Solvency:
Whether an investor has the means to pay his or her debts. If an investor wagers against a mispriced market and the market just keeps on behaving irrationally, he might end up losing heavily and perhaps even go insolvent before the market comes back into balance.
Keynes’ Quote:
The quotation, credited to John Maynard Keynes, is highlighting that market behavior may be erratic and even soundly reasoned investment may go awry if the market is slow to self-correct.
Implications for Investors:
Timing Risk:
Attempting to forecast precisely when a market will self-correct to its intrinsic value is very difficult and risky.
Role of Fundamental Analysis:
Although it is important to comprehend the fundamentals of the market to make smart investment decisions, it is also critical to recognize the likelihood of sustained deviance from those fundamentals.
Diversification and Risk Management:
Investment diversification and risk management are key to averting the possibility of market volatility and sustained irrationality.
Long-Term Perspective:
A long-term investment strategy of emphasizing fundamental value and holding for the long term can assist investors in riding through market volatility and hopefully enjoying growth over the long term.