What is a margin of safety?

The margin of safety is the gap between a stock's price and your estimate of its intrinsic value, expressed as a percentage of value: (fair value − price) ÷ fair value. Benjamin Graham called it the three most important words in investing — it's the cushion that protects you when your estimate is wrong.

What's a good margin of safety?

It depends on how confident you are in your fair-value estimate. Graham often looked for one-third to one-half off. For a stable, predictable business a 20–25% margin may be enough; for an uncertain one, demand more.

How do I find fair value to put in?

Use one of the framework tools: a DCF intrinsic value, the Graham Number, a PEGY fair value, or a Rule #1 sticker price. Even better, compare several — if they cluster, you can trust the number more.

Benjamin Graham

Margin of Safety Calculator

The gap between price and value — and the price to wait for.

Margin of safety = (fair value − price) ÷ fair value

Fair value / share

From a DCF, Graham, PEGY or sticker price.

Current price

Target MoSoptional

The discount you want before buying.

Enter a fair value and the current price.

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How it works

Every valuation is an estimate, and estimates are wrong. The margin of safety is the discipline that accounts for that: only buy when the price is comfortably below your estimate of value, so that even if you're too optimistic, you don't overpay.

Enter a fair value and today's price to see the margin you'd be getting right now. Set a target discount and the tool tells you the exact price to wait for — which is the number worth setting a price alert on. Deciding your margin before you buy is how value investors turn an opinion about value into an actual buy rule.

Frequently asked

What is a margin of safety?: The margin of safety is the gap between a stock's price and your estimate of its intrinsic value, expressed as a percentage of value: (fair value − price) ÷ fair value. Benjamin Graham called it the three most important words in investing — it's the cushion that protects you when your estimate is wrong.
What's a good margin of safety?: It depends on how confident you are in your fair-value estimate. Graham often looked for one-third to one-half off. For a stable, predictable business a 20–25% margin may be enough; for an uncertain one, demand more.
How do I find fair value to put in?: Use one of the framework tools: a DCF intrinsic value, the Graham Number, a PEGY fair value, or a Rule #1 sticker price. Even better, compare several — if they cluster, you can trust the number more.

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More free valuation tools

DCF Intrinsic Value CalculatorWarren Buffett's discounted cash flow — a stock's intrinsic value from the cash it throws off.Graham Number CalculatorBenjamin Graham's fair-value ceiling from earnings and book value.PEG & PEGY Ratio CalculatorPeter Lynch's growth-adjusted value — is the price fair for the growth you're buying?Rule #1 Sticker Price CalculatorPhil Town's sticker price and margin-of-safety buy price from future earnings.Reverse DCF CalculatorThe growth rate the market is already pricing in — is it realistic?

Educational Use Only · Not Financial Advice

Analysis, scores, valuations, and buy zones are derived from publicly documented investor frameworks (Buffett, Lynch, Benjamin Graham, Phil Town) for learning purposes only. They are not recommendations from licensed financial advisors. Past performance does not guarantee future results. Prices may be delayed up to 15 minutes. Always conduct your own research before making any investment decisions.