Margin of safety is the gap between a stock's estimated intrinsic value and the price you pay for it, expressed as a percentage. It is the cushion that protects an investor if their valuation proves too optimistic. The concept, central to value investing, was popularised by Benjamin Graham.
Worked example
If a stock's intrinsic value is estimated at $100 and you buy at $70, your margin of safety is (100 − 70) ÷ 100 = 30%.
Why it matters
A margin of safety acknowledges that every valuation involves uncertainty. Buying well below your estimate of value reduces the damage from forecasting errors and bad luck. Graham often looked for discounts of a third or more.
Frequently asked questions
There is no fixed rule, but many value investors look for a discount of at least 20%-30% to intrinsic value, with larger buffers for riskier or harder-to-forecast businesses.
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Built & maintained by Worthmap · Last updated September 26, 2026
Educational use only. This tool provides estimates for informational purposes and does not constitute financial, investment, tax, or legal advice. Results are based on inputs you provide and mathematical models, they do not guarantee future performance. Always consult a qualified financial adviser before making investment decisions.