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

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1.
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.
2.
In general, the more frequently you trade, _______.
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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.
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.
Investors have loads of tools at their disposal for analyzing the markets. Therefore, it is correct to say that _______.
Choose wisely. There is only one correct answer.
We still cannot consistently and accurately predict market movements. No one has yet predicted the market consistently and accurately; there are too many unknowns. Still, we continue to try.
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