Well, it took long enough.
After six months of markets locked in a narrow trading range, U.S. investors finally have awoken from their apathetic slumber.
Global stock markets sold off sharply yesterday in response to the unfolding crisis in Greece.
The technology-heavy Nasdaq suffered a three-standard-deviation drop based on the last three years of price action. Put another way, you'd expect such a drop to occur on only three out of 1,000 trading days.
And according to the CNN Fear and Greed Index, U.S. investors are now officially in "extreme fear" mode.
The last time investors were this pessimistic was back in October, when the Index hit 0 for several days over the course of two weeks.
As painful as these moments are, taking advantage of these occasions can really juice your portfolio's returns.
Mr. Market's Moodswings
Such sell-offs are always more about market sentiment than actual fundamentals.
Sadly, market sentiment is the red-headed stepchild of stock market investing.
In a world awash with and bedazzled by complex financial models, gauging market sentiment doesn't seem as legitimate, as, say, fundamental analysis.
After all, the best investors in the world know that the short-term price of financial assets is driven by little else.
Warren Buffett was a disciple of Ben Graham and a value investor. That places Buffett firmly in the fundamental analysis camp.
Yet, Buffett has said that the single-most-important thing he has ever read was Graham's chapter on Mr. Market's Moodswings in "The Intelligent Investor."
In his book, Graham compares the market to a manic-depressive.
Some days, Mr. Market is euphoric. On other days, he's very depressed. If you catch him on a euphoric day, he wants a very high price for his shares. If he's in one of his down moods, he's willing to sell you his shares for a pittance.
Mr. Market highlights the one thing you can predict with certainty about financial markets: investors will always overreact to events — whether positive or negative.
And it also highlights how savvy traders profit from just such overreactions.
Buffett himself walks the walk.
The last time the U.S. stock market experienced a 20% correction was in August of 2011.
In the first week of August, Buffett was buying his core holdings of stocks hand over fist, taking advantage of a fire sale in stock prices.