◈ GLOSSARY · INVESTING
Margin of safety.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
The discount between what an investment is worth and the price you pay for it — buying at a price meaningfully below your conservative estimate of intrinsic value, so that mistakes in valuation don't compound into permanent loss.
◈ IN PRACTICE
Example
Benjamin Graham introduced the concept in The Intelligent Investor. If you estimate a stock's intrinsic value at $100, a margin of safety means you only buy at $70 or below — leaving 30% room for valuation error, unforeseen events, or bad luck. The discipline isn't about being precisely right about value; it's about being protected when you're wrong.
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