What is Margin of Safety?
The discount between a stock's market price and its estimated intrinsic value.
In Depth
Coined by Benjamin Graham, the margin of safety is the buffer that protects an investor when the estimate of a company's intrinsic value turns out to be wrong. The larger the discount to fair value at purchase, the lower the risk of permanent capital loss.
Example
Buying a stock at $60 that you estimate is worth $100 gives you a 40% margin of safety.