Choose wisely. There is only one correct answer to each question.
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1.
According to fat-pitch strategy, the purpose of holding cash instead of being invested in stocks is that you are _______.
Waiting for the stock prices of strong companies to drop. According to fat-pitch theory, fat-pitch investments are likely to provide strong growth and absolute returns over time. Thus, you can afford to wait until the prices dip.
2.
Which of the following is not a reason that investors should refrain from trading often?
Once a stock is purchased, it should never be sold. Although it's possible that you could purchase a stock that will never need to be sold, there are occasions that investors should sell stocks. The other two answers are both reasons that investors should not trade very often.
3.
Companies with wide economic moats tend to have _______.
Long-term staying power. Their competitive advantages help to ensure that they will survive for a long time.
4.
Buying the stocks of wide-moat companies provides an automatic margin of safety because _______.
The companies' stock prices will likely appreciate in value anyway. Given the competitive advantages of wide-moat companies, their stock prices will likely rise, eventually catching up to your fair value estimate of them.
5.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then you should buy only wide-moat companies.
True. Companies with wide moats will increase in intrinsic value over time. Therefore, a small portfolio will generally succeed.
