Choose wisely. There is only one correct answer to each question.
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1.
To limit volatility?
Diversify. Owning a variety of investments is the best defense against volatility.
2.
How can you limit company-specific risks?
Invest in a variety of stocks. To limit the operational and price risk that one company poses, invest in a variety of companies.
3.
To help you develop your investment philosophy about volatility and risk, you should check your stock prices every day.
False. Checking your stock prices every day will likely not help you develop a philosophy, although if you're fortunate, it can help you learn to tolerate daily fluctuations.
4.
Which is NOT a way that volatility can lead you to miss the forest for the trees?
Volatility may make you buy or sell a security based on your goals. Volatility can make you invest too conservatively or make an investment decision based solely on short-term performance. Either way, you're not seeing the forest (your goal) for the trees (volatility).
5.
Learning to tolerate day-to-day gyrations in your portfolio is not helpful for dealing with risks in the longer term.
False. Most likely, it will help you to put risk into perspective and help you tolerate longer-term risks.
