The Investment Answer Quiz

Which of the following is NOT one of the five informed decisions that will allow investors to stack the investment odds in their favor?

• The Asset Allocation Decision
• The Rebalancing Decision
• The Active Versus Passive Decision
• The Set It and Forget It Decision

In a 20-year study ending in 2009, why did the average stock fund investor earn less than half the return of the S&P 500?

• The average stock fund investor made unemotional decisions with regard to investing
• The average stock fund investor was allocated too heavily to bonds
• The average stock fund investor let fear set in during market upturns
• The average stock fund investor bought stocks after prices had risen

According to economic historian Charles Kindleberger, "There is nothing so disturbing to one's well-being and judgement as to see ________."

• a zero bank balance
• wild market fluctuations
• a broker's fee sheet
• a friend get rich

How is a broker different from an independent, fee-only advisor?

• Fee-only advisors can only sell approved investment products
• Brokers will generally calculate their fees as a percentage of the money they manage
• Fee-only advisors do not use third-party custodians as the safe-keeper of investments
• Brokers are better compensated for selling certain investment products over others

What is considered to be the most important thing to consider when selecting an independent, fee-only advisor?

• Education
• Business structure
• Services offered
• All these factors are considered important

Although Wall Street and the media might have investors believe there is a "free lunch," in reality there are no high risk/low expected return investments.

• True
• False

In the investment world, the most widely used measure of risk is

• Return
• Alpha
• Beta
• Standard deviation

Which statement is true with regard to the dimesions of risk, size effect and value effect?

• Since 1926, large stocks have outperformed small stocks by 2% per year and large value stocks have outperformed large growth stocks by 1% per year
• Since 1926, small stocks have outperformed large stocks by 2% per year and large growth stocks have outperformed large value stocks by 1% per year
• Since 1926, large stocks have outperformed small stocks by 2% per year and large growth stocks have outperformed large value stocks by 1% per year
• Since 1926, small stocks have outperformed large stocks by 2% per year and large value stocks have outperformed large growth stocks by 1% per year

The primary driver of investment return is risk.

• True
• False

In a hypothetical portfolio, which allocation would have a higher expected return?

• 50% Equity/50% Fixed Income
• 60% Equity/40% Fixed Income
• 80% Equity/20% Fixed Income
• 100% Equity