Absorbing Quote by Michael Mauboussin
“Edge also implies what Ben Graham…called a margin of safety. You have a margin of safety when you buy an asset at a price that is substantially less than its value. As Graham noted, the margin of safety 'is available for absorbing the effect of miscalculations or worse than average luck.' ...Graham expands, "The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price."”
About This Quote
A margin of safety is buying an asset far below its intrinsic value, providing a cushion against errors or bad luck.
In simple terms: Buy low, protect against risk.
Key Takeaway
Buy at a discount to create a buffer.
Themes
value investing
risk management
valuation
behavioral finance
investment strategy
Mood
cautious
analytical
confident
Type
advice
principle
observation
When to use this quote
- stock selection
- real estate acquisition
- venture capital valuation
- portfolio construction
- financial modeling
Key Concepts
margin of safety
intrinsic value
price paid
miscalculation
Practical Applications
- investment analysis
- risk assessment
Questions to Reflect On
- How does price affect the size of the margin?
- What errors does a margin of safety guard against?
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