Understanding Stock Market Investing

What do investors purchase when they buy a stock?

• A loan to the company

• A bond issued by the company

• A fixed interest rate

• A partial share of ownership in the company

What does the market price of a share represent?

• The company's future potential

• What buyers and sellers believe the stock is worth

• The company's total assets

• The company's actual profits

What is the goal of 'beating the market'?

• Avoiding any market losses

• Earning a return that exceeds the S&P 500 index

• Growing money at a faster rate than inflation

• Investing in only the largest companies

How do active investors aim to exploit market inefficiencies?

• By holding a diverse selection of stocks

• By avoiding short-term market fluctuations

• By investing in index funds

• By buying stocks they think are priced low

What is the main belief of passive investors?

• Stock picking is essential for success

• Over time, market inefficiencies balance out

• Short-term market fluctuations are predictable

• Markets are always efficient