Test your knowledge

Choose wisely. There is only one correct answer to each question.

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1.
If you want to succeed with a concentrated portfolio of stocks (say, fewer than 20), you should _______.
Choose wisely. There is only one correct answer.
All of the above. A concentrated portfolio will generally only work if you do all three of these things.
2.
Companies with wide economic moats tend to have _______.
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Long-term staying power. Their competitive advantages help to ensure that they will survive for a long time.
3.
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.
4.
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.
5.
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.