Investing Guide · Chapter 10
Mastering Margin of Safety: Your Path to Profitable Investing
Understand the concept that protects investors from losses.
Margin of safety is the difference between value and price, establishing it as fundamental to profitable investing decisions.
Mr. Market
Ben Graham's metaphor presents the market as an emotional partner that fluctuates between optimism and pessimism, creating pricing inefficiencies that investors can exploit for profit.
Applying Margin of Safety
Calculate both the Sticker Price (intrinsic value) and the Margin of Safety Price to ensure purchasing assets significantly below their calculated value, protecting against overpayment.
Beyond Stocks
The margin of safety principle extends to real estate investments—purchasing property below market value, improving it, and reselling at higher prices follows the same protective strategy.
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