Stock Advisor Trainer 3

Question 1

A Stock Advisor trainer warns against 'chasing momentum.' What risk does this describe?

Accepted Answer

Buying after large run-ups and getting caught in a reversal

Answer

Chasing momentum means buying assets that have already surged, exposing investors to sharp pullbacks.

Question 2

What is the key difference between fundamental and technical analysis?

Accepted Answer

Fundamental studies business value; technical studies price patterns

Answer

Fundamental analysis evaluates financial health and intrinsic value, while technical analysis focuses on price and volume patterns.

Question 3

A trainee asks about a 'dividend aristocrat.' What defines one?

Accepted Answer

A company that has raised dividends for 25+ consecutive years

Answer

Dividend aristocrats are S&P 500 companies with at least 25 straight years of dividend increases.

Question 4

Why might a trainer caution against over-relying on past performance?

Accepted Answer

Past returns do not guarantee future results

Answer

Historical returns can reflect conditions that no longer apply, so they are not a reliable predictor of future outcomes.

Question 5

What does a high P/B (price-to-book) ratio often suggest?

Accepted Answer

The market expects strong future growth or values intangibles

Answer

A high price-to-book ratio typically reflects growth expectations or significant intangible assets not on the balance sheet.

Stock Advisor Practice Test