Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
Investors have loads of tools at their disposal for analyzing the markets. Therefore, it is correct to say that _______.
We still cannot consistently and accurately predict market movements. No one has yet predicted the market consistently and accurately; there are too many unknowns. Still, we continue to try.
4.
As a stock investor, what should you pay the most attention to?
A company's competitive positioning. You should pay the most attention to a company's competitive positioning, which in turn will determine future profits.
5.
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.
