Question

Which investor is making a common error? 1) an employee of a popular hardware store who invests only in that company’s stock 2) an employee of a popular software company who invests in many similar companies 3) someone who sells the slumping stock while they are still able to make a profit based on what they paid 4) someone who buys stock in both domestic and more risky international companies

Answer 1

Answer:

An employee of a popular hardware store who invests only in that company's stock

Explanation:

This investor is putting all his eggs into one basket. He is also magnifying his risk by investing in his employer. If his company was to file for bankruptcy, he would lose the value of his stocks as well as his job.

Answer 2

The investor who is making a general error would be:

1). 1) an employee of a popular hardware store who invests only in that company’s stock,

• The sole aim of an investor is to earn profit and in order to serve that purpose, he/she must be aware of the market circumstances every time along with the knowledge of stocks of the companies that could bring him/her profit.
• The one thumb rule of investing is 'not to invest everything in just one company' to prevent bankruptcy.
• In the given situation, the common error that the investor is making is that he is investing in only one company and the second that he invests in his employer's company which perpetuates the risk of losing his invested money, as well as, job(in case his company files against him).

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