Choose wisely. There is only one correct answer to each question.
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1.
Warren Buffett prefers to invest in companies that _______.
All of the above. Companies like this are very likely to produce higher cash flows over time.
2.
Warren Buffett, the world's most well-known investor, believes that one must have a high IQ to succeed at investing.
False. Buffett believes that one needs the right temperament and a successful framework, but not a high IQ.
3.
What does Warren Buffett think that diversification will do to your portfolio?
Lower returns and increase risk. Buffett does not accept the common view of diversification. Rather, he sees it being detrimental in a lot of cases.
4.
Warren Buffett has written that he _______ when he misses out on big returns in areas he doesn't understand.
Isn't bothered. Rather, he sticks to what he knows, despite new trends.
5.
All of the following statements about Warren Buffett are false except _______.
Buffett believes that stock market prices are sometimes much too high or too low. Buffett focuses on the intrinsic value of businesses, not stock prices and the behavior of "Mr. Market."
6.
A margin of safety is _______.
The difference between a company's estimated fair value and its stock price (where the price is lower than the fair value). Since no intrinsic value calculation is perfect, Buffett requires a satisfactory margin for error before he makes an investment.
7.
Warren Buffett believes that good managers are likely to turn around a bad business.
False. Buffett does not believe that good managers are likely to turn around a bad business.
