Margin of Safety Calculator
Benjamin Graham's core investing principle. Compare a stock's intrinsic value against its current market price to determine your margin of safety, the buffer that protects you from valuation errors and market volatility.
Enter Values
Compare a stock's intrinsic value against its current market price to determine your margin of safety.
Your Margin of Safety
Strong Safety25.0%
Meets your 25% target. The stock price is below your buy-below threshold.
Analysis
Margin of Safety
25.0%
(IV − Price) ÷ IV
Dollar Discount
$50.00
Below intrinsic value
Buy Below (at 25% MOS)
$150.00
Maximum buy price
Upside Potential
+33.3%
If price reaches IV
What Is Margin of Safety?
Benjamin Graham wrote in The Intelligent Investor: "The function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future." In other words, you don't need to be exactly right about a stock's value. You just need to buy it cheap enough that being somewhat wrong still works out.
The margin of safety is the gap between what you think a stock is worth (intrinsic value) and what you actually pay for it (market price). The larger the gap, the more room for error.
Why It Matters
- Valuation is imprecise: Even the best analysts can't predict future earnings perfectly. A margin of safety absorbs estimation errors.
- Markets are unpredictable: Bear markets, recessions, and black swan events can push stock prices below even conservative valuations. Buying with a margin means you're already positioned for turbulence.
- It creates asymmetric risk/reward: If you buy at a 30% discount to intrinsic value, your downside is cushioned while your upside remains full.
Need an intrinsic value estimate? Use our intrinsic value calculator with four valuation models, or check pre-calculated fair values for 510+ US stocks.
Margin of Safety Calculator FAQ
What is margin of safety in investing?
Margin of safety is the difference between a stock's estimated intrinsic value and its current market price, expressed as a percentage of intrinsic value. If a stock has an intrinsic value of $100 and trades at $70, the margin of safety is 30%. It's a buffer that protects investors from errors in their valuation assumptions.
How is margin of safety calculated?
The formula is: Margin of Safety = (Intrinsic Value − Market Price) ÷ Intrinsic Value × 100. For example, if you estimate a stock's intrinsic value at $200 and it trades at $150, your margin of safety is ($200 − $150) ÷ $200 = 25%.
What is a good margin of safety?
Benjamin Graham recommended a margin of safety of at least 25-33%. Warren Buffett has said he looks for a 'significant' margin of safety but doesn't specify a fixed number. Conservative value investors often target 30-50%. The right margin depends on your confidence in the valuation: higher uncertainty calls for a larger margin.
Who invented the margin of safety concept?
Benjamin Graham, the father of value investing, introduced the margin of safety concept in his 1949 book 'The Intelligent Investor.' He called it the central concept of investment and the secret of sound investment. His student Warren Buffett has called it the three most important words in investing.
How do I calculate intrinsic value?
There are several methods: DCF (Discounted Cash Flow) projects future cash flows, Graham Number uses earnings and book value, PEG ratio adjusts P/E by growth rate. Our intrinsic value calculator combines all four models (DCF, Graham, PEG, DDM) into a weighted composite for a more robust estimate.
Is a higher margin of safety always better?
Not necessarily. A very high margin of safety might mean: (1) the market knows something you don't, the stock is cheap for a reason (value trap), or (2) you'll miss opportunities waiting for unrealistically deep discounts. The key is balancing safety with opportunity cost. Most successful value investors buy at 25-35% margins rather than holding out for 50%+.