Below are my reflections and answers to the discussion questions posted at Modern Graham for chapter 20 – Margin of Safety as the Central Concept of Investment – of the Intelligent Investor written by Benjamin Graham.
1. What quote from this chapter do you think best summarizes the point Graham is making?
“Thus, in sum, we say that to have a true investment there must be present a true margin of safety. And a true margin of safety is one that can be demonstrated by figures, by persuasive reasoning, and by reference to a body of actual experience.”
2. What Safety Margins do you utilize in your investing?
- A business I am able to understand, i.e., within my circle of competence
- A business with a long-term sustainable competitive advantage
- A business with a management that possess talent and integrity
- An attractive price (when compared to a conservative estimate of intrinsic value)
3. What did you think of the chapter overall?
Great chapter. The concept of margin of safety is one of the cornerstones in investing to be applied by the investor.