Test your knowledge

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1.
Which of the following is not a reason that investors should refrain from trading often?
Choose wisely. There is only one correct answer.
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.
2.
Buying the stocks of wide-moat companies provides an automatic margin of safety because _______.
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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.
3.
"Fat pitch" companies normally have _______.
Choose wisely. There is only one correct answer.
All of the above. Looking for these characteristics will help you identify fat-pitch opportunities.
4.
Is it a detriment to fat-pitch investors to hold cash when the market is rising?
Choose wisely. There is only one correct answer.
No. It may be difficult to patiently sit on cash when the stock market is rising and you feel as if you're missing out on the fun. However, holding cash is akin to holding an option for when the market provides opportunities to buy at lower prices.
5.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then your stocks should be held _______.
Choose wisely. There is only one correct answer.
At least 3 years. It may take this long (or longer) for the market to recognize the value of a company.