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Stocks 104: Stocks: What Matters and What Doesn't

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1.
To be a successful stock investor, you need _______.
Choose wisely. There is only one correct answer.
Patience and the ability to think about future trends. Remember that successful stock investing is like chess, where thought, patience, and the ability to peer into the future are rewarded. Stock investing is not about trading.
2.
What will drive the price of a company's stock the most over the long term?
Choose wisely. There is only one correct answer.
The future profits and cash flow a company can generate. The future profits a company can generate will drive the price of its stock over the long term. Over the short term, any number of factors may influence a company's stock price.
3.
Which of the following is the most important driver of a company's future profits?
Choose wisely. There is only one correct answer.
Its competitive positioning. Competitive positioning will ultimately drive future profits, which in turn will drive the company's stock price.
4.
The stock market tends to _______.
Choose wisely. There is only one correct answer.
Be temperamental, over-reacting to near-term news. "Mr. Market" tends to be temperamental, over-reacting to near-term news. If the market were perfectly efficient and correctly valued future cash flows at all times, stock prices would not be so volatile.
5.
A stock investor should learn to think most like a _______.
Choose wisely. There is only one correct answer.
Business owner. Given that buying and owning stocks is ultimately about owning businesses, it is wisest to think like a business owner, and that means learning how businesses work.
DONE