Much of the power of the margin of safety concept lies in its wide applicability. As Benjamin Graham explained, the margin of safety constitutes a “favorable difference between price on the one hand and indicated or appraised value on the other.”

It’s something of an “all purpose” risk minimization tool with which one can proceed with a fair degree of certainty that regardless of day-to-day price fluctuations, one’s principle is likely to be secure. Quite simply, the wider the margin of safety, the lower the risk and the greater potential for gain.

When I select REITs for the High Alpha REIT portfolio, I am essentially looking for companies that have the widest margin of safety, and that I believe have the best possibility for outsized share price appreciation. Sir John Templeton sums up the margin of safety as follows:

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