Test your knowledge

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

Keep studying!

Review your answers below to learn more.

A patient stock investor watches her _______ most of all.

Choose wisely. There is only one correct answer.

Companies

Stock prices

Neither of the above

Companies. A patient investor pays attention to the companies that issue the stock. Watching stock prices is less helpful.

Which of the following should you tune out?

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Whether company management owns stock or not

A prediction on television about where the market will be next year

Performance of a companys new product

A prediction on television about where the market will be next year. You should tune out the noise, which includes short-term predictions made by others concerning things that cant be predicted.

The stock of a company that is in great shape financially will always be priced accurately.

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True

False

False. Though that is the ideal, a stocks price is sometimes higher or lower than what is accurate (that is, what its book value is).

When owning a stock, you should evaluate its price relative to the price you paid for it.

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True

False

False. The price you paid for it isnt very relevant. What is relevant for evaluating a stocks price is the estimated value of future cash flows.

A good investor ______.

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Goes along with the crowd

Is willing to go against the crowd

Never goes along with the crowd

Is willing to go against the crowd. The crowd is often -- but not always -- wrong.

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