Margin of safety

The margin of safety itself is the gap between the price you pay and what you think a stock might be worth.

This expression was a favourite of the father of value investing techniques, Benjamin Graham.

He suggested that the best way to ensure you don't overpay for an investment is to buy when the market price is below a stock's 'intrinsic' value. That value may be obtained by applying a number of different valuation techniques for example, discounted cash flow.

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