What is Margin of Safety?
Margin of safety is the difference between a stock's intrinsic value and its market price — the buffer that protects investors from errors in analysis.
Formula
Margin of Safety (%) = (Intrinsic Value - Market Price) ÷ Intrinsic Value × 100
How to Interpret
A larger margin of safety reduces downside risk. Benjamin Graham recommended buying only when the margin exceeds 25-30%.
Typical Ranges
25-50% for most value investors. Higher for riskier or unpredictable businesses.