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Stocks 103: Investing for the Long Run

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1.
Who stands to reap the highest gains from the growth of a company?
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Stockholders. Bondholders will always get limited returns. Stockholders, however, can get returns that are potentially unlimited.
2.
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.
3.
Stocks are such winning investments that they have had the highest long-term returns of any type of investment.
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True. It is true, in fact.
4.
Stockholders have more exposure to the potential growth of a company than bondholders do.
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True. This is due to the fact that their returns are not fixed and can increase vastly.
5.
Well-known stocks like General Motors _______.
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Can underperform the stock market. Just because a stock is well known does not mean it's a good investment. General Motors has often underperformed the stock market during the last 40 years.