Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
A stock investor should learn to think most like a _______.
Business owner. Given that buying and owning stocks is ultimately about owning businesses, it is wisest to think like a business owner, and that means learning how businesses work.
3.
Investors who trade frequently will, on the average, end up with higher tax burdens to pay, as opposed to not trading often.
True. Generally, the more you trade, the more gains you make, and the more likely they will be of the short-term variety, which are taxed at higher rates than long-term gains.
4.
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.
5.
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.
