Choose wisely. There is only one correct answer to each question.
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1.
If the price of one of your stocks falls, you should buy more of it right away. Correct?
Maybe, maybe not. First, find out why it fell. The fall may be due to deterioration of the company, for example. Or it may actually be a welcome correction.
2.
Imagine one of your companies misses quarterly earnings estimates. You should _______.
Determine why the company missed estimates and what its future growth prospects are. A company that misses earnings estimates may still have good growth prospects. Don't take the company's growth prospects for granted, though. Find out what the company's growth should be in the next year before doing anything.
3.
The price of one of your stocks shoots up. What should you do?
Determine why the stock is behaving the way that it's behaving. If the stock still meets your investment criteria, you'll want to hold on to it.
4.
When a company that normally pays regular dividends decides to cut its dividend payments, that is _______.
Usually a bad sign. Companies that pay regular dividends tend to be relatively stable. If a company cuts its dividend, that is probably a bad sign. Exactly how bad, or for how long, may be difficult to tell in the near term.
5.
The most relevant tool that will help you develop your criteria for investing is _______.
An investment policy statement. Though you will glean some important information from the other choices, an investment policy statement will lay down the criteria that will guide how you select and maintain your investments.
