Margin of Safety Calculator
The margin of safety is the gap between what you think a business is worth and what the market charges for it — the buffer that absorbs your estimation errors, bad luck and the future's general refusal to cooperate. Graham called it the central concept of investment.
Enter your intrinsic value estimate (from a DCF, Graham Number or your own work), the market price, and the minimum cushion you demand. You get the current margin, and the buy-below price where the stock actually clears your bar.
How it works
- Margin of safety = (intrinsic value − price) ÷ intrinsic value.
- Buy-below price = intrinsic value × (1 − required margin) — your limit order, in effect.
- A negative margin means the price already exceeds your estimate of worth.
Frequently asked questions
How large a margin of safety should I demand?
Scale it to uncertainty: 20–30% for predictable, high-quality businesses; 40–50% for cyclicals, turnarounds or anything whose intrinsic value you hold loosely. The margin exists to absorb errors in YOUR estimate — the shakier the estimate, the fatter the cushion.
Margin of safety vs upside — aren't they the same?
Same gap, opposite denominators, different sizes: a stock at ₹60 with IV ₹100 has a 40% margin of safety but 67% upside. Upside markets the opportunity; margin of safety measures the protection. Investors survive on the second number.
What if my margin of safety is negative?
The market price exceeds your value estimate — by your own analysis you'd be paying more than it's worth. The honest moves are: pass, or revisit the estimate with evidence (not with a higher growth assumption reverse-engineered from the price).
Does a big margin of safety guarantee a good outcome?
No — it shifts the odds. A 50% discount to a wrong valuation is still a bad buy (value traps are exactly this), and cheap stocks can stay cheap for years. The margin buys you the right to be somewhat wrong; the valuation still has to be roughly right.
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This tool is an educational estimate, not investment or tax advice. Rates and rules change — verify current figures and consult a professional before acting.