Building in a Margin of Safety When Buying Shares

Benjamin Graham's 'margin of safety' principle has helped many a value investor

Chris Menon 7 May, 2013 | 6:00AM
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In Theory

‘Margin of Safety’ are the three most important words in investing according to Warren Buffett.

It was a term first popularised by Benjamin Graham, known as the ‘father of value investing’, who once taught Warren Buffett about investing.

In his seminal book The Intelligent Investor, Graham explained that to have a “true investment” as opposed to a speculative one, there must be a “true margin of safety”. “And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.”

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About Author

Chris Menon  is a financial journalist writing for Morningstar.co.uk.