It’s a Sunday evening. You’re going through your portfolio, only to see some of your preferred blue-chip stocks sliding from their all-time highs. It doesn’t matter to you. Your friends at KRIIS have done their homework, and you know this scrip is going to be successful in the long term.
The market opens on Monday and the stock falls further. Maybe a little too close to your buying price. Sounds familiar, doesn’t it? As a rational investor, you think to yourself, “Wow! A good stock available at a discount. Time to buy some more”. Before you know it, you’ve added more to your retirement portfolio; something your future self will thank you for.
What you just experienced is a principle called Margin of Safety (MoS). Your brain allocated an intrinsic value against a scrip and made you buy more when it fell below that value. A panicking mind would have considered selling, but you averaged your position and stand to gain a lot more when the stock invariably starts moving up. MoS, above anything, teaches us the true value of being patient, and knowing that there is a right time to enter every stock. Not every opportunity is one to buy, and sometimes, we must just ride the storm.
“The function of the Margin of Safety is, in essence, that of rendering unnecessary an accurate estimate of the future” – Benjamin Graham
Therefore, at KRIIS, we follow a steadfast principle of Margin of Safety factoring growth, quality of stock and euphoria in the market. At times, we may cash out at a peak while simultaneously purchase in times of relative distress as we firmly believe in “Be fearful when others are greedy and be greedy when others are fearful”
