Margin of Safety Calculation Framework

Knowing what a business is worth is necessary but not sufficient. The question that actually protects capital is: how much of a discount am I buying that knowledge at?

Why This Matters

The margin of safety is the difference between intrinsic value and price paid — and it is the investor's primary defence against two inevitable realities: being wrong in the analysis, and experiencing bad luck after a correct analysis. Graham developed this concept after the 1929 crash taught him that even sound analysis applied to good businesses could destroy capital if the entry price was too high. This framework converts an intrinsic value range into an actionable maximum entry price.