To Buy Stocks and Hold Them Is the Best Investment

question 8

Multiple Choice

To buy stocks and hold them is the best investment strategy if:

• A) you do not want to beat the market in the long run.
• B) your opportunity cost of researching stocks is high.
• C) you disagree with the efficient markets hypothesis but realize the value of diversification.
• D) you accept the current market hypothesis and the value of diversification.

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Definitions:

Past Consideration

A concept in contract law that refers to an act or benefit given prior to the promise being made, which therefore does not constitute valid consideration for a contract.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific period.

Promissory Estoppel

A legal principle that prevents a party from backing out of a promise which led the other party to take action or abstain from it, based on the promise.

Illusory Promise

A statement that appears to be a promise but does not actually bind the party making it to any action or performance, rendering it unenforceable as a contract.