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1.
Which of the following is the most important driver of a company's future profits?
Its competitive positioning. Competitive positioning will ultimately drive future profits, which in turn will drive the company's stock price.
2.
To be a successful stock investor, you need _______.
Patience and the ability to think about future trends. Remember that successful stock investing is like chess, where thought, patience, and the ability to peer into the future are rewarded. Stock investing is not about trading.
3.
In general, the more frequently you trade, _______.
The higher your tax bill. The more frequently you trade, the higher your tax bill. This is because capital gains will be realized more often. Trading activity is actually inversely correlated to returns. The more you trade, the more commissions you will incur.
4.
The stock market tends to _______.
Be temperamental, over-reacting to near-term news. "Mr. Market" tends to be temperamental, over-reacting to near-term news. If the market were perfectly efficient and correctly valued future cash flows at all times, stock prices would not be so volatile.
5.
What will drive the price of a company's stock the most over the long term?
The future profits and cash flow a company can generate. The future profits a company can generate will drive the price of its stock over the long term. Over the short term, any number of factors may influence a company's stock price.
