Choose wisely. There is only one correct answer to each question.
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1.
Say you are considering two different companies to invest in. One is very risky and the other has only average risk. Which of the two would require a bigger margin of safety?
The very risky one. Given the bigger risk of loss, a bigger margin of safety will do more to protect you.
2.
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.
3.
If you want to succeed with a concentrated portfolio of stocks (say, fewer than 20), you should _______.
All of the above. A concentrated portfolio will generally only work if you do all three of these things.
4.
Fat-pitch strategy argues that you should be comfortable holding cash instead of being invested in stocks when the market is already rising.
True. Fat-pitch strategy argues that it is an advantage to forego buying strong companies when their prices are rising and instead wait with your cash in hand for when their stock prices dip.
5.
An argument against trading wide-moat company stocks often is that they are already rising in value over time, so it's more advantageous to hold them for the long term.
True. A buy-and-hold strategy works well because the odds are that the underlying value will continue increasing over time.
