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.
The stock of a company that is in great shape financially will always be priced accurately.
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).
3.
If a company you are investing in reports a nice big surprise, what can you expect?
There will be more surprises. Its not a sure thing, but you can expect more surprises, as there is likely to be a trend going on.
4.
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.
5.
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.
