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QuizMultiple Choice

Investment Strategies

Question 1 • * HSA 26-27 Economics

Which investor is making a common error?

Answer
A
an employee of a popular hardware store who invests only in that company’s stock
B
an employee of a popular software company who invests in many similar companies
C
someone who sells the slumping stock while they are still able to make a profit based on what they paid
D
someone who buys stock in both domestic and more risky international companies

Explanation

Investing only in the stock of the company you work for concentrates your financial risk: if the company struggles, both your job and your investment may suffer. Diversifying across different kinds of investments can reduce that risk. So the employee who invests only in the hardware store’s stock is making a common investing error.

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