Choose wisely. There is only one correct answer to each question.
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1.
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.
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.
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.
Which of the following should you tune out?
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.
5.
When owning a stock, you should evaluate its price relative to the price you paid for it.
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.
