The investor's concept of a margin of safety

 The investor's concept of a margin of safety rests upon a simple and definite arithmetical reasoning from statistical data.

1. There is no guarantee that the fundamental quantitative approach will be successful in the future, but no reason for pessimism. 
2. "To have a true investment there must be present a true margin of safety." 

"It is our argument that a sufficiently low price can turn a security of mediocre quality into a sound investment opportunity--provided

• that the buyer is informed and experienced and 
• that he practices adequate diversification. 

For if the price is low enough to create a substantial margin of safety, the security thereby meets our criterion of investment.


http://www.conscious-investor.com/books/intelligentinvestor.pdf

Benjamin Graham - The Intelligent Investor

 Summary

1. Investment is most intelligent when it is most businesslike. 

2. Every corporate security may best be viewed as an ownership interest in, or a claim against a specific business enterprise ... and the investor seeking to make profits from his security purchases and sales, is embarking on a business venture which must be run in accordance with accepted business principles.

3. Principles of business

• know your business -- for the securities investor, this means do not try to make "business profits" out of securities--that is returns in excess of normal interest and dividend income. 
• do not let anyone else run your business unless you can adequately supervise, and you have unusually strong reason to have confidence in the integrity and ability of the person. 
• do not enter upon an operation unless a reliable calculation shows that it has a fair chance to profit-- not based on optimism, but on arithmetic. 
• have the courage of your knowledge and experience

http://www.conscious-investor.com/books/intelligentinvestor.pdf