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The margin of safety

Buffett says that if you were driving a lorry weighing 9,800lbs, you would not feel comfortable driving across a bridge built to carry 10,000lb. There is not enough margin of safety.

Always leave a margin of safety. Don't try to cut things so close. You wait until something kind of shouts at you in the stock market.

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Principles for investing

Principles for investing

The intelligent investor by Ben Graham helped to set Warren Buffett's philosophical framework for investing in three ways:

  1. Stocks are businesses
  2. How the investor should react to the stock market
  3. The margin of safety

You can build all kinds of structures on ...

56

775 reads

How to focus on investments

How to focus on investments

  • Look for three businesses that you won't trade after you buy them. You will want to own them for the rest of your life.
  • Look for businesses with an enduring competitive advantage. That will mean a business with some kind of moat around it, for example, patent protection.
  • The ...

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A stock is part of a business

You will be buying a share of a business – not merely a piece of paper that goes up and down in value.

You have to think about what kind of a business you are getting into. What are its economic characteristics for its competitors? What's its management like?

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How the investor should react to stock market fluctuations

How the investor should react to stock market fluctuations

Most people react the wrong way to stock prices. They feel good when their stocks go up and bad when they go down.

Your partner in investing is Mr Market. He's obliging. He comes around every day and tells you what he'll pay you for your interest in the business or what he'll sell you. Some...

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Running away from your problems is a race you`ll never win.

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What is Margin of Safety?

What is Margin of Safety?

‘Margin of safety’ is the difference between a stock price and its intrinsic worth, or value.

So if a stock is trading at  $70 in the market, and you calculate the company’s intrinsic value as $100, you have a margin of safety of  $30 (100 minus 70). In other terms, the sto...

Have Margin of Safety

Things don’t always go as planned. You need to have a buffer between what we expect to happen and what could happen. That’s margin of safety.

Engineers build a bridge to sustain more than double its maximum capacity. Investors only choose business they understand so that they can calculate ...

Margin of Safety

Margin of Safety

This is a principle of investing wherein an investor purchases securities only when their market price is significantly below their intrinsic value.

The formula to determine the intrinsic value of something is:

Margin of Safety = Market Cap / Deep Value Barg...

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