Plain-English definitions, reviewed by an independent investor
Margin of Safety
Margin of safety is the gap between an asset’s intrinsic value and its price — your cushion against error.
Margin of safety is the gap between an asset’s intrinsic value and its price — your cushion against error.
Margin = (Intrinsic Value − Price) ÷ Intrinsic Value
Why it matters
It is the core rule of conservative investing: buy well below worth.
Common confusion
A bigger gap protects you when your estimate or the future is wrong.
Frequently Asked Questions
Why need a margin?
Because valuations are guesses; the cushion absorbs mistakes.
Who coined it?
Popularised by value investing tradition as protection against error.