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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.
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.
4.
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.
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