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Stocks 101: Stocks versus Other Investments

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1.
Which of the following investments are the most volatile in their pricing?
Choose wisely. There is only one correct answer.
Stocks. Stocks are the most volatile. Over the long term, stocks have a higher return than bonds or savings accounts. But this volatility means that over the short term, other types of investments may significantly outperform stocks.
2.
Over the long term, which investments provide the lowest real (inflation adjusted) returns?
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Savings accounts. Savings accounts provide the lowest real (or inflation adjusted) returns over the long term.
3.
When you buy a stock, you are _______.
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Buying an ownership interest in a company. When you buy a stock, you are buying an ownership interest in a company. Bonds are loans from companies and the government.
4.
Which of the following skills sets is NOT needed to be a successful investor?
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Advanced statistics. Understanding advanced statistics is not needed to be a successful stock investor. The vast majority of people have all the basic skills required.
5.
If you buy a stock, it will definitely increase in value over time.
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False. Though stocks on the whole have increased in value substantially over the decades, we should not say that a given stock will definitely increase in value over time. Some stocks simply don't.