StocksResult
📝 What is Margin of Safety?
🛡️ What is Margin of Safety?
Imagine you are buying a raincoat ☔.
The shopkeeper says its original price is ₹1,000 but offers it for ₹600!
👉 You got a big discount of ₹400.
Even if the raincoat gets slightly damaged, your loss is less because you paid much less than the original price.
This difference between what something is worth and what you actually pay is called Margin of Safety (MOS) in investing.
📈 Margin of Safety in Stock Market
In the stock market, every share has its real value (called intrinsic value).
But stock prices go up & down daily because of market mood swings. 🎢
If you believe a company’s real value is ₹1000 per share, but you get to buy it at ₹700 –
Congratulations! 🎉 You have a ₹300 Margin of Safety!
💡 Why Margin of Safety is Important?
✔️ Protects you from mistakes:
If your calculation of the company’s value was slightly wrong, MOS saves you from big losses.
✔️ Protects from market surprises:
Bad news? Stock crash? Don’t worry – your MOS gives you a cushion.
✔️ More return potential:
Buying cheap means higher chances of profit when price moves up.
🧐 Simple Example
Let’s say you found a company:
✔️ You think its real value = ₹500/share based on profits, growth, and assets.
✔️ But its market price = ₹350/share right now.
✔️ Your Margin of Safety = ₹150/share (or 30%)
So, even if the market falls or your estimate was wrong by ₹50-₹100, you are still safe. 🦺
🚧 But Wait… Be Careful!
❌ A cheap stock is not always safe.
Some companies are cheap for a reason (bad business, losses) – avoid them.
✔️ Only apply MOS to good, strong, profitable companies.
📝 In Short
👉 Margin of Safety = Real Value – Market Price
💥 The bigger the MOS, the safer you are.
Famous investor Benjamin Graham always said:
“Buy with a margin of safety, and you reduce your risk.” 🏦
🎯 Final Thought
Always hunt for stocks with a Margin of Safety. It’s like buying a valuable thing on a huge discount offer. 🎁
Remember: Safety first, profits later! 🚀💰