Stock Advisor For Beginners 2 — Questions and Answers
Question 1: What does it mean to own a share of stock?
- You own a small fractional piece of the company (Correct answer)
- You have lent money to the company
- You are guaranteed a fixed annual payment
- You control all company decisions
Correct answer: You own a small fractional piece of the company
A share represents partial ownership (equity) in a company.
Question 2: What is a dividend?
- A portion of profits paid to shareholders (Correct answer)
- A fee charged by a broker
- The price of a single share
- A tax on stock sales
Correct answer: A portion of profits paid to shareholders
Dividends are payments companies distribute to shareholders from earnings.
Question 3: Which type of account is commonly used to buy stocks?
- A brokerage account (Correct answer)
- A checking account
- A mortgage account
- A utility account
Correct answer: A brokerage account
Stocks are bought and held through a brokerage account.
Question 4: What is a stock ticker symbol?
- A short code identifying a publicly traded company (Correct answer)
- The daily high price
- A type of dividend
- A government ID for investors
Correct answer: A short code identifying a publicly traded company
Ticker symbols are abbreviations used to identify stocks on exchanges.
Question 5: What is diversification?
- Spreading investments across many assets to reduce risk (Correct answer)
- Putting all money in one stock
- Selling whenever prices drop
- Borrowing to buy more shares
Correct answer: Spreading investments across many assets to reduce risk
Diversification lowers risk by avoiding overexposure to a single investment.
Question 6: What does 'bull market' generally mean?
- A period of rising stock prices (Correct answer)
- A market that is closed
- A period of falling prices
- A market with no trading
Correct answer: A period of rising stock prices
A bull market describes an extended period of rising prices and optimism.
Question 7: Why might a beginner choose an index fund?
- It offers instant diversification at low cost (Correct answer)
- It guarantees no losses
- It avoids all fees
- It only holds one company
Correct answer: It offers instant diversification at low cost
Index funds track a broad market index, giving low-cost diversification.
Stock Advisor For Beginners 2
What does it mean to own a share of stock?