What should you do when the price drops?

I saw a post on a facebook page and somebody mentioned that he had been quite successful all these while and did not experience a major correction before and asked for an opinion on what should he do if the price suddenly dropped by 40%?

I can vaguely remember it was either 2007 or 2008 when I was in my 2nd job with about 30k in shares. Then suddenly, the market just crashed. I saw the share price dropped like a falling dagger. It was S$2 and suddenly it became S$1.4...$1.3...$1.2. Something inside you tanked as well. Imagine it is 300k or 3m, how will you feel?

If you are a value investor, you will definitely experience several crashes during your investment journey. Do you have the grit to hang on to your shares and will not be affected by others who are frantically selling their shares? 

Markets are highly unpredictable and can be extremely volatile from time to time. Ben Graham has a brilliant metaphor to describe this and will teach you how to handle sudden drop in market price. 

He introduces Mr Market, every day Mr Market will offer you a price for the stock. You have the option to buy, sell or do nothing. It doesn't matter what you do to Mr Market, he will be back the next day. 

Mr Market is a manic depressive guy. When he is in a good mood, he gets greedy and quotes ridiculously high prices. When he is depressed and fearful, he will quote you dirt cheap price. 

The daily price does not reflect how well the company is actually performing. When Mr Market is depressed, it is the best time to scope up shares of good companies and sell when Mr Market is overly optimistic. Sometimes, it pays to be still and do nothing.