Investors looking to buy shares should hope that prices will fall, but that’s easier said than done. It’s never fun when you bought something last week at 20% off.

The key to success in the stock market, however, is finding ways to buy stocks when prices are inexpensive. It’s more about mindset than technical knowledge and experience.

Trading and investing

In the stock market, there is an vital difference between trading and investing. Traders want to make money by buying stocks at one price and selling them at a higher price.

There’s nothing wrong with that. However, for traders who buy shares, a drop in price is a bad thing – it makes it much harder for them to make money.

Investing is different. It involves trying to make money from your core business and the cash it generates, rather than selling it to someone else at a higher price.

It’s a good thing for investors to see the value of their stocks decline. Selling is not part of their plan, so the lower price gives them the chance to purchase a larger share of the company’s future profits at a lower price.

Staying composed

I think it can be helpful to remember the difference between trading and investing when stock prices are falling. For investors, this has no impact on the development of the situation.

If the share price falls due to a change in the underlying business, this is a problem for investors. However, it’s uncommon for a company to suddenly become 20% worse.

A good example is Metaplatforms (NASDAQ:META). The stock price is down 23% from its 52-week high, but investors who bought the stock at these prices may not need to worry.

It doesn’t look like much has changed in the core business. The only difference is how the stock market views the same evolving situation.

Focus on business

What caused Meta’s share price to drop was the company’s third-quarter earnings report. The company has increased its guidance on how much it plans to spend on artificial intelligence (AI) infrastructure.

The market previously viewed this type of event as a positive sign. However, investors are now a bit more cautious about the returns that immense investments will ultimately generate.

Another problem is depreciation. Meta’s accounting is based on the fact that its chips have a useful life of five years, but with Nvidia introducing recent products to the market every year, this can be an ambitious goal.

However, the company’s competitive position remains intact. And that gives investors looking for a return on their core business something to focus on when the share price falls.

Investing ups and downs

Big moves in the stock market are often the result of changes in investor sentiment rather than changes in the underlying business. And I think that’s what happened with the recent demise of Meta.

In situations like these, investors may want to take a second look at what they own. However, if everything is largely going according to plan at the company, they don’t have to worry.

If they don’t want or need to sell their investments, a lower share price isn’t a problem. And it may be an opportunity to buy more shares at a more attractive level.