The Intelligent Investor’s Motto: Margin of Safety

In Chapter 20 of The Intelligent Investor, Benjamin Graham covers the ” ‘Margin of Safety’ as the Central Concept of Investment.” This big idea or motto is the “secret of sound investment” distilled to three words.

Graham says “the function of the margin of safety is, in essence, that of rendering unnecessary an accurate estimate of the future.” When considering whether an investment carries a favorable margin of safety, calculations should be based on present circumstances, not overly optimistic or hoped-for future situations.

As I delve into this chapter, I learn that though the margin-of-safety principle is one of the main things, it’s not the only thing relevant to intelligent investing. Its companion is diversification. In addition, I discover that real-life adherence to safety margins isn’t simple or always achievable.

Still, the concept is important and mathematical framework, crucial to the task of selecting securities and building a portfolio.

How Should I Invest My 401k? 7 Steps to Making a Decision

If you invest in your 401(k) and stay invested, your account balance can grow to $1 million or more. According to CNBC, about 72,000 people have reached the status of 401(k) millionaire at the end of 2014.

But before you can accumulate a healthy retirement account balance, you need to decide how to invest your 401(k) dollars. Based on my readings, many struggle in selecting investments. Here are action steps that may bring clarity and offer guidance in making a decision: