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Stocks 103: Investing for the Long Run

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1.
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.
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.
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.
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.
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.