401K ProAdvisor InvestTestSM
Do you understand the market and financial industry well enough to manage your own 401K investments? Take the InvestTest to find out. Answers and scoring are below.
- If you heard that the “Stock Market” was down 21% over the last year, without knowing more, which fund would most likely have lost about 21% over the same period?
A. International Stock fund
B. Corporate Bond fund
C. Balanced fund
D. S&P 500 index fund
- If you made a change in your 401k allocation at 5:00 PM to buy a fund and sell a fund, when would the transactions take place?
A. Approximately one minute later – 5:01 PM
B. The next business day – 12:01 AM
C. The next day when the market opens – 9:30 AM
D. The next day when the market closes – 4:00 PM
- Investing in bonds carries interest rate risk. If rates rise, generally this would mean what for bonds?
A. Bond values would go down
B. Bond values would go up
C. Bond values have nothing to do with interest rate direction
D. Existing bonds in mutual funds would pay higher yields
- What are examples of a 7% total return?
A. 3% annual dividend and 4% capital gain
B. Total gain of 7%
C. 1% capital loss and 8% dividend
D. All of the above
- All things being equal, which is most true about fund investment expenses?
A. They reduce performance in index funds
B. The fund pays the expenses so they have no affect on investment performance
C. No-load funds and index funds do not have expenses
- Which of the following is a reliable indicator of good future performance in a mutual fund:
A. A 5 star rating from Morningstar
B. If the fund is an index fund
C. None of the above
- Place the following investments in order of risk, from lowest risk to highest risk:
A. Investment grade corporate bond fund, high yield bond fund, treasury bond fund
B. Treasury money market, long term corporate bond, short term corporate bond fund
C. Treasury money market, treasury bond fund, corporate bond fund
- Place the following investments in order of risk, from lowest risk to highest risk:
A. Russell 2000, Russell 1000, S&P 500
B. EAFE, S&P 500, Russell 1000
C. Barclays Aggregate Bond, S&P 500, Russell 2000
- Which group of investments is most diversified?
A. Total market index of 5000 stocks
B. International stocks, mid cap stocks, small cap stocks
C. Small cap stocks, mid cap stocks, large cap stock
D. Corporate bonds, government bonds, large cap stocks
- If an investment dropped 30% in one year, what return would be necessary to get back even the next year?
A. 43%
B. 30%
C. 15%
D. None of the Above
SCORING:
2 points for each correct answer, 20 points total
ANSWERS:
- D
- D
- A
- D
- A
- C
- C
- C
- D
- A
RESULTS SUMMARY
18 - 20 points – Congratulations! You have a strong understanding of investment concepts and should feel comfortable setting your own allocation. You still may want to see advice and recommendations from a financial advisor. Don’t forget to review your incorrect answers, if any, and contact us if you have any questions.
14 - 17 points – You may require some additional assistance to make educated allocation choices from all the investment options available to you. Consider selecting models or other allocation funds for at least a portion of your selections. You should also consider consulting a financial advisor for general advice and assistance with more complex investment strategies. Don’t forget to review your incorrect answers, and contact us if you have any questions.
11 points or less – You will most likely require assistance to make successful investment allocations, or else you may make uninformed decisions that will impact your overall returns. Seek the help of a financial advisor when possible or use models or other broad based allocation funds when available. Don’t forget to review your incorrect answers, and contact us if you have any questions.
Note: Russell and S&P 500 indices are registered trademarks of their respective companies.
