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Stocks 508: 20 Stock-Investing Tips

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1.
The future is unpredictable. But you can protect yourself against unpredictability by having a margin of safety built into a stock that you buy.
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True. A margin of safety -- for example, paying less for a stock than its book value -- can dampen the effect of the futures unpredictability.
2.
What sort of expectation should a stock investor have regarding success?
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Success should be something you are willing to wait for. Even though stocks have historically returned in the 10% range, you must still have patience when investing in them. If you expect to get rich quickly, you will most likely be disappointed, and you may find yourself drawn to speculating, which is very volatile.
3.
Being a stubborn investor will always pay off.
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False. Often, being stubborn will lead to losses. If youre holding a stock whose company is foundering, it may not be wise to hold onto it.
4.
All else equal, you should be most interested in buying _______.
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A wide-moat company with mediocre management. Remember, the economics of a business usually trumps the competence of management.
5.
Which of the following should you tune out?
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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.