MARGIN OF SAFETY.”* Graham explained that a margin of safety could be attained by buying stocks and bonds at a “favorable” discount to their “appraised value.” That gap between price and value would provide a cushion to absorb the impact of an investor’s own “miscalculations,” “worse than average luck,” and “the unknown conditions of the future.” It was a worldly-wise strategy, built on a recognition of human frailty and the hazards of history. We make mistakes. We have bad luck. The future is unknown.
