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Stocks 103: Investing for the Long Run

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1.
The average yearly difference between the high and low of the typical stock is between _______.
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30% and 50%. The average yearly difference between the high and low of a typical stock is between 30% and 50%. In other words, over the short term, a stock can be quite volatile.
2.
If you were investing for your retirement that is more than 10 years away, based on historical returns in the 20th century, what percentage of the time would you have been better off by investing only in stocks versus a combination of stocks, bonds, and cash?
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100%. Stocks have returned more than bonds and cash after any 10-year period. This has held true even if you had the misfortune of investing at only the market peaks.
3.
A very promising company is seeking investors. It is paying a 7% interest rate on its bonds, and it is also selling stock. Historically and statistically speaking, which would be the best bet for an investor?
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The stock. Although we cannot predict the future, the stock would statistically be the best bet. Still, it is best to study the company's financials before investing.
4.
As you hold a stock for year after year, the variation on its expected return typically _______.
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Decreases. For statistical reasons, this is normal over time, and it is one of the benefits of investing over the long term.
5.
The average yearly difference between the high and low of any given typical stock is about 40%.
Choose wisely. There is only one correct answer.
True. Yes, it is this high.