Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What type of position does a bearish investor take?

1. Expecting the market or a security to rise

2. Willing to invest in bonds only

3. Expecting the market or a security to fall

4. Aiming for long-term investments only

The correct answer is: Expecting the market or a security to fall

A bearish investor anticipates that the market or a specific security will decline in value. This perspective leads them to take positions that benefit from this expected decrease. For instance, they might sell securities they already own (short selling) or buy put options, which give them the right to sell at a predetermined price, thus profiting if the security's price drops. The essence of a bearish stance lies in the belief that the current market trend is negative, prompting them to position themselves in ways that leverage this forecast. This contrasts sharply with a bullish investor, who expects the market or a security to rise. The other options focus on different investment strategies or preferences. The first option describes a bullish outlook, while the second suggests a limited investment strategy focused solely on bonds, and the fourth indicates a preference for long-term investments. None of these align with the bearish investor's expectation of falling prices, which is why the correct response is centered on the prediction of a downturn.