🎯 Goal: See that market price can drift from value, and buying with a margin of safety protects you.
Price is what the market asks; value is what the business is really worth. They often diverge because of crowd emotion. Good investors buy when price is below value by a cushion — the margin of safety — so they stay fine even if their estimate is a bit off.
Let’s explore
🏷️
Price is what you pay; value is what you get. Markets swing greedy then fearful, so price orbits value.
🛡️
Margin of safety = buying below your estimated value by a cushion. That buffer protects against mistakes.
🧠
Absolute price (8,000đ vs 80,000đ) says nothing about cheap/expensive — compare to value and profit.
Practice activity
🧮 You value a stock at 20,000đ and buy at 15,000đ. Margin of safety?
Worked example: Margin of safety = (20,000 − 15,000) ÷ 20,000 = 25%. A 25% cushion means even if you were a bit too optimistic, there's room not to lose.
Quick quiz
1. Difference between price and value?
→ Price is paid, value is received
2. Margin of safety means?
→ Buying below value by a cushion
3. Value 50,000đ, buy at 40,000đ. Margin of safety?
→ 20%
4. Is an 8,000đ stock cheaper than an 80,000đ one?
→ Can't tell from absolute price
5. Why does price drift from value?
→ Market greed/fear
🎯 Real-life mission
Pick something you're thinking of buying. Before checking the price, estimate its "true value to you". Then compare with the asking price. Only buy if price ≤ your value (a margin of safety). Note your decision.