1. How much margin of safety should I consider?

A healthy margin of safety should be between 20% and 40%. However, if you’re investing in cyclical or volatile sectors, consider a margin between 40% and 50%.

2. How to calculate the margin of safety for a stock?

Just use the formula provided below to calculate the margin of safety for a stock. (Intrinsic Value – Market Price) / Intrinsic Value × 100 .

3. Can I use the margin of safety for mutual funds?

Yes, it’s possible. You can evaluate whether the underlying holdings of a mutual fund are undervalued.

4. Is a high margin of safety always good?

Generally, a high margin of safety is considered good for investors. However, a high margin may reflect genuine risks involved with the business.

5. How can I apply this principle using Dhan?

On Dhan, you can analyse the fundamentals of a company and check their valuation ratios. Also, track the long-term price trends. This approach makes it easier to find opportunities that offer a healthy margin of safety before you invest.