Stocks Beginner: Growth Stocks

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1.
On average, an economic downturn affects a growth stock more than it affects the stock of other companies.
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False. An economic downturn affects a growth stock less than the stock of other companies.
2.
An investor with a long investment horizon may decide to invest in growth stocks.
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True. Younger investors may purchase growth stocks, expecting to hold them for a long period and take advantage of their ability to provide above-average returns over time.
3.
A big disadvantage of growth stocks is their inability to guarantee your principal.
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True. A big disadvantage of growth stocks is a greater risk of loss of principal.
4.
Growth stock is issued by companies that ______.
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Demonstrate earnings growth potential. Growth stock is issued by companies that have reported higher-than-average earnings growth and expect to continue to demonstrate high profit growth.
5.
Which of the following is most likely to issue a growth stock?
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A software manufacturer. Computer, software, and Internet companies generally offer higher potential for growth than do companies based on older manufacturing processes.