Margin of Safety

Explanation

Benjamin Graham introduced the margin of safety concept in 'The Intelligent Investor' (1949). If you estimate a stock's intrinsic value at $100, buying at $70 provides a 30% margin of safety. This buffer protects against errors in your analysis, unforeseen negative events, and general market volatility. Buffett considers margin of safety the three most important words in investing. The required margin varies with uncertainty — blue-chip companies may warrant 15-20%, while speculative companies may require 40-50%.

How Stoquity Uses This

Stoquity incorporates margin of safety analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.