Choose wisely. There is only one correct answer to each question.
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1.
Which of the following activities is most likely to improve your investing skills?
Reading one of your companys annual reports. Reading annual reports will help you know more about your companies, which will make you a better investor. By constantly looking at unrealized capital gains, you may be anchoring on an irrelevant data point--the price you paid--concerning the future value of a stock.
2.
What sort of expectation should a stock investor have regarding success?
Success should be something you are willing to wait for. Even though stocks have historically returned in the 10% range, you must still have patience when investing in them. If you expect to get rich quickly, you will most likely be disappointed, and you may find yourself drawn to speculating, which is very volatile.
3.
The future is unpredictable. But you can protect yourself against unpredictability by having a margin of safety built into a stock that you buy.
True. A margin of safety -- for example, paying less for a stock than its book value -- can dampen the effect of the futures unpredictability.
4.
A patient stock investor watches her _______ most of all.
Companies. A patient investor pays attention to the companies that issue the stock. Watching stock prices is less helpful.
5.
All else equal, you should be most interested in buying _______.
A wide-moat company with mediocre management. Remember, the economics of a business usually trumps the competence of management.
