SIE (Securities Industry Essentials) Practice Exam

Which of the following best describes a bullish investor?

1. The investor is short a stock

2. The investor is long a stock

3. The investor expects the market to fall

4. The investor prefers bonds over stocks

The correct answer is: The investor is long a stock

A bullish investor is someone who believes that the price of a particular security, market sector, or the market as a whole will rise. This optimism leads them to take a long position in stocks, meaning they buy shares with the expectation that their value will increase over time. By going long, a bullish investor can benefit from price appreciation, thus maximizing potential returns when the market or specific stocks perform well. In contrast, being short a stock implies a bearish outlook, as the investor is betting that the stock's price will decline. Expecting the market to fall also reflects a bearish sentiment, which contradicts the characteristics of a bullish investor. Lastly, preferring bonds over stocks often indicates a more cautious or risk-averse approach, which is not aligned with a bullish strategy that seeks growth through stock appreciation. Therefore, the description of a bullish investor is best captured by the long position in stocks.