Equity investing: What’s the margin of safety on your investment?
financialexpress.comBy Malvika Saraf and Parthajit Kayal In the principle of investing, the margin of safety is the difference between the intrinsic value of a stock against its prevailing market price. Intrinsic value is the actual worth of a company’s asset or the present value of an asset when adding up the total discounted future income generated.
In other words, when the market price of a security is significantly below one’s estimation of its intrinsic value, the difference is the margin of safety. Because investors may set a margin of safety according to their own risk preferences, buying stocks with margin of safety allows an investment to be made with minimal downside risk. Understanding margin of safety
The margin of safety principle was popularised by
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