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The ultimate "safety net" every investor needs to know about

by , 12 August 2015

In Chapter 20 of Benjamin Graham's book, The Intelligent Investor, there's an important investing concept that can be useful to every investor.

Benjamin Graham, encourages investing with a margin of safety.

Now if you don't know what that is, a margin of safety is simply the margin for error investors need, as it's impossible to pinpoint business value.

It's the difference between the real value of the stock and the price at which the stock is trading.

The aim is to pay less than the real value - that simple.

In other words, the aim is to buy assets at a rate below the valuation of the business, because it offers you a safety net.

Let me explain a little further…

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The greater the margin of safety, the less risky the investment

To explain what Benjamin Graham means when he talks about margin of safety, you can look at this example…

Let's say you think a company is worth R100 a share and you buy it for R95. You don't really have a real margin of safety.

But, if that company (worth R100) is a strong leader in the markets and you buy it for R75 a share, then you're getting a good margin of safety.

However, if that R100 company is a much riskier business, you'll want a much bigger margin of safety. This means you may want to wait until the company sells for R60, or even R50 a share.

You see, the greater the margin, the more freedom you have for any negative impacts or unforeseen events before you start losing money.

The greater the margin of safety, the less risky the investment.

A company that trades close to or above its real value offers almost no margin of safety. According to Benjamin Graham’s book, The Intelligent Investor, buying without a margin of safety is no better than speculation.

So, the reason why I bring up Benjamin Graham's infamous margin of safety concept, is because editor of Resource and Scarcity Report , Francois Joubert found a great opportunity for you to…
  
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Buy a company at a 35% discount, today!

How often do you get to buy a company’s shares at a 35% discount?

Well, in this month's issue of the Resource and Scarcity Report, which goes live this Friday at 4pm, Francois Joubert is offering his readers the chance to snap up one company at a 35% discount, today.

Francois is so positive about this company, because it offers a large margin of safety – just like Benjamin Graham famously preaches about in his book.

Now, I don’t want to give too much away.

So if you want to grab an awesome opportunity to add great profits to your portfolio, then I highly recommend you make sure you read this Friday's Resource and Scarcity Report. For more on how to get your hands on this publication, go here.


The ultimate "safety net" every investor needs to know about
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