Margin of Safety: The Core Concept Behind Intrinsic Value Investing
Margin of safety explained: what it is, why it matters, and how investors use intrinsic value to avoid overpaying for stocks.
What is margin of safety?
Margin of safety is the gap between a stock's intrinsic value and its market price. If price is meaningfully below value, you have a buffer against mistakes and uncertainty.
Why it matters for investors
- Valuations are estimates, not facts.
- Unexpected events happen (recessions, competition, regulation).
- A buffer can reduce the chance you permanently lose capital.
Find margin of safety candidates
Use stock pages and the screener to compare price vs intrinsic value across thousands of stocks.
FAQs
What is a good margin of safety?▼
Many investors look for 20–30% or more, but it depends on business stability and confidence in the valuation assumptions.
Does a margin of safety guarantee profit?▼
No. It is a risk-management concept, not a guarantee. Fundamentals can deteriorate and valuations can be wrong.
Related
Intrinsic Investor is for education and research only. Not financial advice.