1. What is Margin of Safety?

The Margin of Safety (MOS) is a financial metric that measures the difference between the intrinsic value of an investment and its current market price, expressed as a percentage of the intrinsic value. It provides a buffer against errors in estimation or market volatility.

2. How Does the Calculator Work?

The calculator uses the Margin of Safety formula:

Where:

• \( Intrinsic\ Value \) — Estimated fair value of the investment (USD)
• \( Market\ Price \) — Current market price of the investment (USD)

Explanation: The formula calculates what percentage below intrinsic value the market price is trading at. A higher MOS indicates a larger safety buffer.

3. Importance of Margin of Safety

Details: Margin of Safety is a key concept in value investing, helping investors minimize downside risk. Benjamin Graham recommended typically buying at 50-66% of calculated intrinsic value.

4. Using the Calculator

Tips: Enter the estimated intrinsic value and current market price in USD. Both values must be positive numbers, with intrinsic value greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Margin of Safety percentage?
A: Typically, 20-50% is considered adequate, though conservative investors may require higher margins.

Q2: How is intrinsic value determined?
A: Through fundamental analysis using methods like discounted cash flow (DCF), earnings multiples, or asset-based valuation.

Q3: Can MOS be negative?
A: Yes, a negative MOS means the market price exceeds your estimated intrinsic value, suggesting overvaluation.

Q4: Does MOS guarantee investment safety?
A: No, it only provides a buffer. The actual safety depends on the accuracy of your intrinsic value estimate.

Q5: How often should I recalculate MOS?
A: Whenever there are significant changes in company fundamentals or market price movements.