I found this nice little
quiz over at Vanguard Investment Services when I finally decided to get serious
about reallocating my 401k money as per the advice of much of my research. It's originally from a Money Magazine article in 2002, but it is still useful today. The questions are
pretty much exactly as written in Money Magazine. The only questions that I changed were #2 and #13, because as originally
written, they referred to the year 2002.
For answers, click here
(Answers to Can You Take Control Over Your Investments Quiz). Have fun and let me know how
you did. I’ll also disclose my score on the answer
link. It’s fun and informative.
1. A mutual fund’s performance is best
measured by:
a. Income Return
b. Total Return
c. Yield
d. Capital Gains
Distributions
2. If a fund charges an expense ratio of
1% in 2006:
a. You will pay a
one-time fee amounting to 1% of the number of shares held in the account.
b. Your fund
investment’s returns will be reduced by 1% in 2006.
c. Your fund
investment is reduced by 1% at the time you buy shares.
d. You will pay a
sales charge of 1% to a broker at the time you buy shares.
3. Common stocks always provide higher
returns than bunds or money market investments.
a. True
b. False
c. Don’t know.
4. When you invest in an employer’s
retirement savings plan such as a 401 (k), your contributions are taxed:
a. When you withdraw
them during retirement
b. Before you invest
them
c. Once a year on or
before April 15th
d. When you reach
age 65
e. Don’t know
5. If interest rates decline, the price
of an existing bond or bond fund generally will:
a. Increase
b. Decrease
c. Stay about the
same
d. Don’t know
6. A fund’s after-tax return may be
influenced by:
a. The fund’s
pre-tax return
b. The fund’s buying
and selling of securities
c. The fund’s
distribution of capital gains and dividends
d. All of the above
e. Don’t know
7. The goal of an index mutual fund is
to:
a. Track the
investment return of a specified stock or bond benchmark
b. Beat the
investment return of a specified stock or bond benchmark
c. Buy only stocks
in Standard and Poor’s 500 index
d. Invest in the
best-performing sectors of the stock market
e. Don’t know
8. If you invest in a 401(k) plan at
work, you are not eligible to contribute to an IRA:
a. True
b. False
c. Don’t know.
9. Dollar-cost averaging is:
a. A strategy that
entails buying low and selling high
b. A way to sell
fund shares to minimize capital gains
c. An approach in
which you invest the same amount of money in a fund or stock at regular
intervals
d. None of the above
e. Don’t know
10. From 1926-2001, the average total return per year
for the U.S. stock market was:
a. 4% per year
b. 11% per year
c. 22% per year
d. 33% per year
e. Don’t know
11. Mutual funds are insured by the Federal Deposit
Insurance Corporation
a. True
b. False
c. Don’t Know
12. If two mutual funds hold the same securities, but
one has higher operating expenses than the other, which of the following
statements is true?
a. The fund with the
higher expenses will have a higher return
b. The fund with the
lower expenses will have a higher return
c. You can’t say
which fund would have a higher return, because expenses have no effect on
returns
d. None of the above
e. Don’t know.
13. According to a recent tax law change, investors
under age 50 can contribute up to ________ to their IRA for 2006?
a. $2000
b. $3000
c. $4000
d. $5000
e. Don’t know
14. If you own only
U.S. stocks in your investment portfolio, you can reduce your overall risk by
adding international stocks.
a. True
b. False
c. Don’t know
15. Which of the following is not an attribute of
mutual funds?
a. Diversification
b. Professional
management
c. Guaranteed return
d. None of the above.
e. Don’t know
16. Which type of investment has generally offered the
best protection against inflation of long periods of time?
a. Money market
funds and bank accounts
b. Government
National Mortgage Association securities (Ginnie Maes)
c. Stocks
d. Corporate bonds
e. Don’t know.
17. Income earned on municipal bonds or dividends paid
by municipal bond funds are generally exempt from federal income tax.
a. True
b. False
c. Don’t know.
18. A charge to purchase mutual fund shares is
frequently called:
a. A bid/ask spread
b. An expense ratio
c. A sales load
d. A price/earnings
ratio
e. Don’t know.
19. Generally, a portfolio that has 80% of its assets
invested in stocks would be best suited for:
a. An 18-year-old
using the assets to pay for college expenses over the next four years
b. A 35-year-old
investing for retirement
c. A 75-year-old
investing for income and capital preservation
d. None of the above
e. Don’t know
20. If you invest in a long-term bond with an average
maturity of 10 years, you must hold on to the investment for 10 years.
a. True
b. False
c. Don’t know
Link here for results.