InsiderFlow › Glossary › What is the margin of safety?
The margin of safety is the discount between price paid and estimated value: the cushion protecting you from valuation errors.
The concept comes from Benjamin Graham, Buffett's mentor: since every value estimate is imprecise, buy only when the price sits far below your estimate — say 30–50% less. That way, even if your math is off, you're unlikely to lose much.
It's the idea separating investing from speculation: you don't need to predict the future exactly, just pay little enough that you can afford to be wrong.
On InsiderFlow these concepts come alive on real data: what big funds and insiders are buying, explained every day.
Graham suggested at least a one-third discount; the more uncertain the business, the more margin you need.
No, it reduces it: it protects against estimation errors, not against radical changes in the business.