Choose wisely. There is only one correct answer to each question.
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1.
Which of the following activities is most likely to improve your investing skills?
Reading one of your companys annual reports. Reading annual reports will help you know more about your companies, which will make you a better investor. By constantly looking at unrealized capital gains, you may be anchoring on an irrelevant data point--the price you paid--concerning the future value of a stock.
2.
The stock of a company that is in great shape financially will always be priced accurately.
False. Though that is the ideal, a stocks price is sometimes higher or lower than what is accurate (that is, what its book value is).
3.
A patient stock investor watches her _______ most of all.
Companies. A patient investor pays attention to the companies that issue the stock. Watching stock prices is less helpful.
4.
When owning a stock, you should evaluate its price relative to the price you paid for it.
False. The price you paid for it isnt very relevant. What is relevant for evaluating a stocks price is the estimated value of future cash flows.
5.
Which of the following should you tune out?
A prediction on television about where the market will be next year. You should tune out the noise, which includes short-term predictions made by others concerning things that cant be predicted.