Personal Financial Literacy Module 4 DBA Practice Test

Investors should be cautious about relying solely on media speculation because such speculation often lacks substantiated evidence and can be based on rumors or incomplete information. This approach can lead to poor investment decisions, as it may cause investors to react emotionally or impulsively rather than using rational analysis. Media speculation can create volatility in stock prices, making it difficult to assess a company's true value.

In contrast, researching the company provides a more thorough understanding of its financial health, business model, and market conditions, which are crucial factors for sound investment decisions. Additionally, investing based on historical performance and comparing stock prices are fundamental strategies that can help investors analyze trends and make informed predictions about future performance. Relying on speculative news does not establish a strong basis for these informed decisions, highlighting the importance of using verified information and analysis in investment strategies.