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Stocks 103: Investing for the Long Run

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1.
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.
2.
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.
3.
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.
4.
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.
5.
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.