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Tuesday, June 7, 2011
This is a 10-question quiz produced by John Mowen, a social psychologist and emeritus regents professor in the Spears School of Business at Oklahoma State University.
IMHO, some of the questions are excellent - some not so much so. For example, an emotional, superstitious, thrill seeker should stay away from stocks and hire a professional to manage their money.
On the other hand, puts and calls can be used to "gamble" in the market; but they also can be used to hedge a portfolio.
Also, I would rephrase the question on whether a stock has been held "...for less than a day." A few years ago, I read the morning Washington Post and noticed a company I had never heard of was testifying in front of Congress on bomb detection devices which it produced for airports. This was a subject that the country was hyped up about and I figured this would, in effect, be free publicity for the company. I looked it up, thought the company had good financials, and was reasonably priced. I bought 1,000 shares and went off to my morning dentist appointment. On my return I saw the stock had moved from around $4, where I picked it up, to around $7. I sold. This is rare for me but, hey, if the market gives a gift I will take it. Even investors don't look a gift horse in the mouth (what a great expression!).
All-in-all the quiz is valuable in that it will get investors thinking about an important question. I answered the quiz as if I was a gambler to see the resulting advice/commentary. It said that gambling with a small portion of assets wouldn't be overly harmful. I would be careful here - gambling can be like smoking. Some people can smoke a couple of cigarettes a month - others can't. Smoke a couple and the next thing you know you're at a pack a day!