Margin of Safety (Investing)
Computes the margin of safety of an investment: how far the market price sits below the estimated intrinsic value, as a percentage. It's the core concept of Benjamin Graham's value investing — buying an asset for well less than it's worth to build in protection against estimation errors and surprises. The larger the margin, the more comfortable the purchase. A negative margin means the price already exceeds the estimated value. Enter the intrinsic value and the market price.
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Margin of Safety (Investing)
Computes the margin of safety of an investment: how far the market price sits below the estimated intrinsic value, as a percentage. It's the core concept of Benjamin Graham's value investing — buying an asset for well less than it's worth to build in protection against estimation errors and surprises. The larger the margin, the more comfortable the purchase. A negative margin means the price already exceeds the estimated value. Enter the intrinsic value and the market price.
Benjamin Graham's cushion
Every estimate of a company's value can be wrong. The future is uncertain, assumptions slip, the analyst miscalculates. Benjamin Graham, Warren Buffett's mentor, summed up the defense against this in three words: margin of safety. The idea is to buy an asset for well less than you think it's worth, leaving room to be wrong and still come out ahead.
The calculation is simple: how far the market price sits below the intrinsic value, as a percentage. A stock you value at 100 that the market sells at 70 has a 30% margin. That cushion is what separates the disciplined investor from the speculator. The harder the business is to predict, the larger the margin it makes sense to demand.
Enter the intrinsic value you estimated and the current market price. The tool returns the margin as a percentage; when it goes negative, it's a sign the price has already passed your value estimate. Remember the margin is only as good as the value estimate behind it, so the hard work is still valuing the company.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.