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Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor
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Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor

4.34  ·  Rating details ·  6,006 ratings  ·  179 reviews
Investors are all too often lured by the prospect of instant millions and fall prey to the many fads of Wall Street. The myriad approaches they adopt offer little or no real prospect for long-term success and invariably run the risk of considerable economic loss - they resemble speculation or outright gambling, not a coherent investment program. But value investing - the s ...more
Hardcover, 248 pages
Published October 1st 1991 by HarperCollins
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 ·  6,006 ratings  ·  179 reviews

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Jun 25, 2014 rated it really liked it
Top 5 Quotes / Thoughts:
1. Page 5: “You don’t understand. these are not eating sardines, they are trading sardines” [Difference between investment (buying stream of cashflows) and speculation (return solely dependent on re-sale).]

2. Page 81: “Buffet’s first and second rules of investing: 1) don’t lose money; and 2) never forget the first rule” [Don’t expose yourself to appreciable loss of principal. Make sure that your downside is bounded (Taleb).]
a. Compound interest is the 8th wonder of the w
Ankur Gupta
Jul 03, 2014 rated it it was amazing
I read this book after reading "Fooled by Randomness", and that had left me wondering whether trading/investing is really purely random or can there really be method to the madness. Much to my delight, Seth Klarman does provide a sound method to achieve investment success that is based on business fundamentals than pernicious speculation, relying on the "wisdom" of the market. The book is a fascinating read, especially for someone with a non-finance background but fresh out of a B-School, where ...more
Jun 16, 2012 rated it it was amazing
Anyone interested in taking a hands-on approach to their portfolios would benefit from Klarman's guidance in Margin of Safety. The author likens Wall Street to a casino full of speculators with odds stacked in their favor, and against the individual investor that tries to compete on uneven ground. The opening line is a quote by Mark Twain: "There are two times in a man's life when he should not speculate--when he can't afford to and when he can." Klarman implores the reader to implement and foll ...more
Brady Bunte
Nov 24, 2013 rated it it was amazing
Although I wouldn't spend $1000 for this book, he surprised me by summing up in a few simple sentences...

- how the mortgage tranched CDOs are flawed,
- how the rating agencies are claiming it was unforseeable, and
- how it could all blow up by a credit crunch.

But the most amazing part was that he did this in 1991 (when the book was published) and that is way before the mortgage CDOs were in full swing.

I just wish I had read the book earlier.

Brady Bunte
 Korance Goodwin
May 17, 2017 rated it liked it
The original value investor Benjamin Graham's current equivalent is this guy: Seth Klarman. Some may think that Warren Buffet is applying Graham's principles, but more than anyone Klarman really mirrors Graham's thinking.* Like Graham, Klarman grew up Jewish on the East Coast. Both did well in school and had plenty of opportunities in academia but decided to take to money management instead. Like Graham, Klarman's greatest claim to fame was this book he published: Margin of Safety- Risk Averse S ...more
Jan 15, 2014 rated it liked it
I had high hopes for this book since the ratings were amazing. However, I gave this book 2 stars because many of the ideas and concepts that were mentioned were already known to me. I also found this book more difficult to read than other investment books, perhaps due to the writing style.
Mar 22, 2011 rated it it was amazing
Margin of Safety is a famous phrase coined by Ben Graham half a century ago, and taken up by Seth Klarman here as a full volume. Unfortunately, this book is no longer in print, but I managed to score a copy without having to pay the $500 price advertised on

The book is in three parts. First, a strong case for fundamental value investing as the only sound framework for making investment decisions; second is a scathing critique of "institutional investing," culminating with Klarman's ri
Oct 12, 2010 rated it it was amazing
Shelves: investment
An excellent book written by an highly credible figure in the value investing world. I didn't always agree with the author. For example, I do think a long consistent track record of paying meaningful dividends is worth considering along with more direct value factors like P/E and P/B and I prefer the Graham/Lynch approach of diversifying into 20-30 stocks (versus focusing on 10 mega-picks) which I consider prudent and worth the slight reduction in potential return. However, I was extremely impre ...more
Jan 30, 2012 rated it it was amazing
Excellent. It was a far superior read the the intelligent investor as it 1) included all of the same ideas + some additional ones 2) wasn't sooo old, so the language was much clearer and easier to follow; 3) wasn't riddled with examples from the 60's(i.e. wasn't written from the perspective of being a "current" guide to the markets; 4) was significantly shorter/more concise.

Sukhesh Miryala
Dec 03, 2014 rated it really liked it
Great outline about how to think about investing, and less about specific strategies to invest. Provides great lenses to look at investing followed by illlustrative anecdotes. Some of the actual advice is a bit dated (but to be expected given the age of the book). This book is a must read if you are interested in learning about how value investors (of which Seth Klarman is a legend) think.
Tomas Krakauskas
Sep 10, 2018 rated it really liked it
A lot of wisdom from personal S.Klarman experience, illustrated with real examples. However I find this book more suitable for novice investors who seek basic knowledge on value investing principles
Jul 11, 2019 rated it liked it
When I saw someone reading this on the train to work one morning, I knew I should read it. It's exactly the kind of thing I'd be interested in. The fact that it turned out to be WAY out of print only fanned my desire to read it. Used copies go for hundreds of dollars! My library system didn't have it. I congratulated myself on using InterLibrary Loan to find some library in the US that did, only to find that it's so valuable no library was letting go of it, if their copy hadn't already been stol ...more
Mar 30, 2010 rated it it was amazing
Geeking it out in the rain. Re-reading a book I bought randomly at The Strand and read in 1996 when I first started in the business. I guess there was only one printing in 1991, and now it's impossible to find and goes for over $1000 for a decent copy on Amazon or Ebay. Hmmm.... Is actually a great primer on how to think like a smart professional investor. Concepts aren't hard, but I don't imagine it would be all that interesting for the individual investor. ...more
Dude-von Dudenstein
Jan 10, 2015 rated it liked it
Shelves: finance, investment
Good introduction to value investing. The author dwells too much on what's wrong with other valuation methods without talking about how should an investor go about executing value investing. Pros of value investing are too less compared to cons of investing time analysing the underlying businesses. Book is not really targeted towards an audience and seems to wander between individual investor and institutional one. Recommended read but the content delivery is lacking coherence.. ...more
Jun 04, 2014 rated it it was amazing
Woke up regarding the meaning of Value. Very impactful book. Most important finding is that the value is outside S&P500, and probably at the top of the bottom-performers of the day, week, month.
Aug 08, 2019 rated it really liked it
skip the first 1/3, the rest is good to read
Aug 13, 2017 rated it really liked it
I find the book a little bit disorganized, I have summarized a few points below:

1. There is one crucial difference between investment and speculation:
Investments throw off cash flow for the benefit of the owners; speculations do not. They return to the owners of speculations depends exclusively on the vagaries of the resale market.

and this coincides with Buffett's view as well, as he once said:
So there’s two types of assets to buy. One is where the asset itself delivers a return to you, such as
May 23, 2020 rated it really liked it
Though Margin of Safety is slightly more advanced than many other of its "investment classics" and perhaps not as applicable for a beginning investor (in Klarman's own words, it is "not a book about investing, but a book about thinking about investing"), it is probably one of the clearest manifestos for value investing. However, unlike the standard "cultish" value investment stuff you might find on the internet, it is mature and logical, without any sense of entitlement, and acutely aware of its ...more
Abir Kar
May 25, 2021 rated it really liked it
Margin of Safety is a relatively modern alternative to Benjamin Graham's classic 'The Intelligent Investor' - that being said it is by no means up to date. However the careful reader will find precious nuggets of wisdom specially with regard to the internal workings of financial institutions and how they are not as efficient as they are made out to be. The book teaches us to be wary of investment bankers and analysts as both these groups suffer from a myopic worldview. Even institutional investo ...more
Jan 31, 2018 rated it liked it
If I'd paid the going rate for a used, poor condition copy of over $1000, I would be disappointed. The book has some good information, albeit much of it out of date. I disagreed with a lot of his notions around speculation and think Buffet communicates these sentiments much more reasonably and convincingly. ...more
Dec 30, 2021 rated it really liked it
Took me a while, and I ended up reading it in small chunks at a time. It's considered a "cult hit", but fundamentally the ideas about value investing and the concept of margin of safety can be found in a ton of different resources nowadays. Yet it was interesting to read the original material, which is originally highly inspired by Benjamin Graham's The Intelligent Investor. ...more
May 31, 2021 rated it really liked it
I see why it’s a classic, but still rate Howard Marks’ book slightly over it.
Daniel Olshansky
Nov 10, 2015 rated it it was amazing
Another great read for any Buffet "disciples" who are interested in value investing and security analysis.

Other than graham's own books, it's difficult to say that it was a quintessential read, but it packed a lot provided how short it was. Reiterating concepts of fundamental analysis including key ratios and discount cash flow, this book delivered the basics of value investing in a very concise manner. Aside from reviewing basic principles, and hearing the opinion of another experienced investo
Gabriel Pinkus
Oct 09, 2014 rated it it was amazing
Shelves: favorites
I really enjoyed this book! Mr. Klarman spends a lot of his time in some very complex investments, but holds his head above the water to find investments selling for a deep discount.

Klarman's rebuttal of beta and diversification theory were both insightful. Klarman writes: Diversification is not the number of things you own, but the differences in the risks that they entail (paraphrasing from memory). That is the best description of diversification that I have ever read.

I do have one complaint
Jun 01, 2020 rated it liked it
Seth Klarman is a great investor and speaker (as I have listened to him talk multiple times). However, this book was more an investment philosophy book as I did not take away any major insights. Good read though if you are starting out.

My notes on the book are below:

I. Where Most Investors Stumble
1. Speculators and Unsuccessful Investors
Investing is buying things that have cash flows, where as speculating is buying something you think you can sell later
Market fluctuations are caused by day to d
Apr 06, 2015 rated it it was amazing
This book is a comprehensive guide to value investing - an investing approach defined by Ben Graham and followed by most successful investors and hedge fund managers. It covers many topics from the mechanics of financial industry and markets, value investing process and tools, to advice for choosing brokers or money managers. It provides many examples of value opportunities and it covers business valuation too, although very briefly - so don't except much (or any) numbers crunching.

Book covers a
Piinhuann Chew
Sep 18, 2019 rated it liked it
A detailed footnote of Benjamin Graham's "The Intelligent Investor".

It went very detailed into:
- how to value companies broadly that can allow you to make quick decisions (instead of being paralysed by over analysis) at the same time won't be committing too much error in the event that your analyses are wrong
- what kind of undervalued investments should investor buy that might result in stellar returns (in the event that it succeeded) and at the same time won't lose you a lot of money (in the ev
Vikas Kukreja
Jul 04, 2015 rated it it was amazing
This book is divided into 3 parts comprising 1. How market works, 2. How to invest and 3. Searching for investments. First part is an eye opener for any wanna be investor to learn how wall street works and why prices deviate from their intrinsic value. Second part focuses on basics of investing, delving into highly important valuation techniques. This is crux of the book and is worth reading many times. Third part focuses on how to search for investments, its good but is less relevant for Indian ...more
Apr 04, 2013 rated it really liked it
Shelves: business
Priceless book (even if Amazon disagrees). The book is broken up into principles of investing we all know, yet rarely follow when methods are actually put to practice. How is Klarman different from all the other finance writers? Instead of beating the proverbial dead horse of investing dogmas , this book explains how we all come up short because of Wall Street's house edge and our bias towards the latest investing fad. Given this context, the age old investing lessons we all choose to ignore for ...more
Brad Felix
May 12, 2014 rated it it was amazing
It's hard to convey how important this book is to someone who is not on the buy-side of the investment management industry. He logically articulates all the structural, behavioral, and logical errors that institutional investors commonly commit. In terms of his value investment philosophy, it is no wonder his returns have been so strong. He is simply willing to go places where other investors do not, which tilts the odds of performance in his favor. ...more
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Seth Klarman is an American hedge-fund manager and a billionaire who founded the Baupost Group, a Boston-based private investment partnership, and the author of a book on value investing titled Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. Klarman is a graduate of Cornell University and Harvard Business School where he was a Baker Scholar.

Klarman grew up in

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35 likes · 1 comments
“There is nothing esoteric about value investing. It is simply the process of determining the value underlying a security and then buying it at a considerable discount from that value. It is really that simple. The greatest challenge is maintaining the requisite patience and discipline to buy only when prices are attractive and to sell when they are not, avoiding the short-term performance frenzy that engulfs most market participants.” 0 likes
“Economist Paul Rosenstein-Rodan has pointed to the “tremble factor” in understanding human motivation. “In the building practices of ancient Rome, when scaffolding was removed from a completed Roman arch, the Roman engineer stood beneath. If the arch came crashing down, he was the first to know. Thus his concern for the quality of the arch was intensely personal, and it is not surprising that so many Roman arches have survived.” Why should investing be any different? Money managers who invested their own assets in parallel with clients would quickly abandon their relative-performance orientation.” 0 likes
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