margin of safety concept

The margin of safety is a financial concept that provides a cushion to protect an investor or business from unexpected losses or errors. It involves purchasing assets or making decisions at a price significantly below their intrinsic or true value. This gap helps absorb surprises like market downturns or misjudgments, reducing risk. Essentially, it's a safety buffer that allows room for uncertainty, making investments more resilient and less likely to cause financial harm if circumstances fluctuate unexpectedly.