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

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1.
As a stock investor, what should you pay the most attention to?
Choose wisely. There is only one correct answer.
A company's competitive positioning. You should pay the most attention to a company's competitive positioning, which in turn will determine future profits.
2.
Investors who trade frequently will, on the average, end up with higher tax burdens to pay, as opposed to not trading often.
Choose wisely. There is only one correct answer.
True. Generally, the more you trade, the more gains you make, and the more likely they will be of the short-term variety, which are taxed at higher rates than long-term gains.
3.
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.
4.
In general, the more frequently you trade, _______.
Choose wisely. There is only one correct answer.
The higher your tax bill. The more frequently you trade, the higher your tax bill. This is because capital gains will be realized more often. Trading activity is actually inversely correlated to returns. The more you trade, the more commissions you will incur.
5.
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.
DONE