Hello all SI members,
Vanguard gave this test. I invite all to take this quiz and e-mail your answers to keyodo@aol.com .
I will compile the totals and report how well we did in comparison to previous participants. Consider this a warm-up for Brinker's final.
Test Your Knowledge of Mutual Fund Investing
1. What is the most important benefit you get from creating a
diversified portfolio that includes stock, bond, and money market funds?
a) A guarantee that your portfolio won't suffer if the stock market
falls.
b) Higher returns than you get with a portfolio that isn't diversified.
c) The ability to balance both risk and return in achieving your
financial goals.
d) All of the above.
2. As you approach your investment goal, which one of the following
statements is generally most appropriate?
a) You should be willing to assume more risk with your investments.
b) You should be willing to assume less risk with your investments.
c) You can stop monitoring your investments.
3. The process of deciding how your investment dollars will be split
among various classes of financial assets such as stocks, bonds, and
cash reserves is best described as:
a) Dollar-cost averaging.
b) Asset allocation.
c) Standard deviation.
d) Investing.
4. Generally, during retirement, investors should have a portion of
their portfolio in stock mutual funds because:
a) They always provide excellent dividend income.
b) Their returns usually outpace inflation over time.
c) Historical returns show that stocks outperform bonds over the long
term.
d) Both b and c.
5. Which of the following usually increases the overall risk level in
your portfolio?
a) Shifting your asset mix from bonds to stocks.
b) Shifting your asset mix from stocks to bonds.
c) Shifting your asset mix from stocks to money markets.
d) None of the above.
6. Which one of the following types of funds would probably hold the
largest proportion of U.S. Treasury bills?
a) Long-term bond fund.
b) Ginnie Mae fund.
c) Growth and income fund.
d) Money market fund.
7. Which type of investment has historically provided the best
protection against inflation?
a) Stocks.
b) Bonds.
c) Cash reserves.
d) None of the above.
8. Generally, a portfolio that has 80% of its assets invested in growth
stocks would be best suited for:
a) A college fund for a 15-year-old.
b) An individual retirement account for a 35-year-old.
c) An income-producing portfolio for an 86-year-old.
d) None of the above.
9. In general, which one of the following types of mutual funds is
likely to decline the most when the overall stock market falls?
a) Aggressive growth fund.
b) Growth and income fund.
c) Bond fund.
d) Money market fund.
10. "Emerging market" is the term used to describe each year's
best-performing foreign stock market.
a) True.
b) False.
11. If interest rates declined, the price of a bond would:
a) Increase.
b) Decrease.
c) Stay about the same.
d) It is impossible to predict.
12. Compared with the price of a short-term bond, the price of a
long-term bond:
a) Will fluctuate more in response to changes in interest rates.
b) Will fluctuate less in response to changes in interest rates.
c) Will not react at all to changes in interest rates.
13. All else being equal, the lower a bond fund's credit quality, the
higher its yield.
a) True.
b) False.
14. 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.
15. If an investor is in the 31% or higher federal tax bracket, which
one of the following types of funds usually provides the most after-tax
income?
a) Treasury bond funds.
b) Money market funds.
c) Municipal bond funds.
16. Index (or passively managed) funds:
a) Seek to match the investment returns of a specified stock or bond
benchmark.
b) Try to beat the investment return of a specified stock or bond
benchmark.
c) Limit themselves to the stocks in the Standard & Poor's 500 Stock
Index.
17. If I want to change the mix of stocks, bonds, and cash reserves in
my portfolio, I can do this by:
a) Changing how I direct my future investments.
b) Transferring assets between funds in my portfolio.
c) Both of the above.
d) None of the above.
18. A fund's after-tax return may be influenced by:
a) The fund's pretax return.
b) Turnover of the fund's holdings.
c) The distribution of capital gains.
d) All of the above.
19. In general, for long-term investors, once you select your asset
allocation you should stick with it unless your risk tolerance,
investing time horizon, or financial situation has changed.
a) True.
b) False.
20. A market index is a:
a) Gauge that measures the potential fluctuation in your stock fund
account.
b) Representative group of securities that serves as a barometer for
market activity.
c) Stock fund management style that selects stocks based on an analysis
of markets and individual companies.
|
