When the subprime mortgage crisis broke out in 2008, I held onto the only 80,000 yuan of principal I had, watching the market plummet thousands of points every day. Some people around me were crying while cutting losses, others leveraged to buy the dip and lost everything, yet by the end of that year, I doubled my principal. It wasn't luck; it was the four words 'margin of safety' that became my anchor in investment. Now, more than a decade later, that 80,000 has turned into tens of millions, and I firmly believe that true investment is not a gamble of chasing highs and cutting losses, but rather building a solid wall around the principal with rationality.
The first time I came across 'margin of safety' was in the university library, where I dog-eared Benjamin Graham's (The Intelligent Investor). The idea in the book that 'buying stocks is like buying bread; you should act when the price is below value' completely overturned my understanding of investment. When I first entered the market, I also followed the trend to buy popular stocks, feeling pleased when the stock price soared in just a few days, but soon I was deeply trapped. That loss made me realize that prices that deviate from value are mere castles in the air; only when a stock's intrinsic value is far higher than its market price does investment possess the confidence to withstand risks.
Before the 2015 stock market crash, the market was in a frenzy, with brokerage offices crowded with elderly people queuing to open accounts, and even street vendors discussing 'limit up.' One of the leading consumer stocks I held had a price-to-earnings ratio exceeding 50, far above its historical average. Although the stock price was still rising, I calculated that its intrinsic value could not support such a valuation, so I decisively liquidated my position. As expected, shortly after, the market experienced a sharp decline, leaving many trapped at the peak while I escaped with profits. Later, when the stock price adjusted to a reasonable range, I bought back in, and between this selling and buying, not only did I preserve my principal, but I also earned more shares.
In my view, the margin of safety is not an abstract concept but a calculable and executable operational guideline. I use discounted cash flow models to calculate a company's intrinsic value and compare it to the current stock price, only considering intervention when the discount rate exceeds 30%. Additionally, I never put all my eggs in one basket, diversifying my funds across high-quality companies in different sectors like consumer goods, healthcare, and technology, while strictly adhering to the margin of safety principle for each stock selection.
Some people say that this investment approach is too conservative, missing many opportunities for explosive growth. But I deeply understand that the core of investing is 'not losing money,' especially during a stage with limited principal. A significant loss may require doubling returns to compensate. Over the years, I have witnessed too many people who, in pursuit of high returns, ignored risks. They may shine for a moment, but ultimately cannot escape the market's punishment.
Today, my investment portfolio remains robust, even during the market winter of 2022, maintaining positive returns. 'Margin of safety' is like an umbrella, protecting me from the storms of the market. I firmly believe that investing is not about who runs faster, but about who goes further. As long as I adhere to this iron rule, multiplying the principal by hundreds of times is never an unattainable dream but rather a natural outcome@男神讲趋势 #加密市场反弹 $BTC
