"Learn to Invest" Investor Quiz

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Are you up to speed on investment basics and investing strategies? Test yourself. Sometimes it's time you learn to invest. Answer true or false to the following questions, the correct answers follow. Your first investment lesson also follows the quiz.

1. Stocks and bonds are both equity investments.

2. Bonds are poor investments when interest rates are rising.

3. High and rising interest rates are usually good for the stock market.

4. The three basic types of mutual funds are growth funds, income funds, and stock funds.

5. Most Americans invest most of their 401 (k) assets in mutual funds.

6. Stock funds are riskier than bond funds and pay higher dividends.

7. Portfolio rebalance and dollar cost averaging are sound investing strategies for average investors.

8. Money market funds invest in stocks, bonds, and short-term debt.

9. Real estate investing usually involves financial leverage which acts to enhance safey.

10. You can indirectly have an investment in gold by owning shares in a specialty mutual fund.

Tally your score. Only questions two, five, seven, and ten are true. If you only missed one or two answers, you know some investment basics. Even so, you probably need to learn to invest using proven investing strategies. If you missed three or four you need to learn investment basics and investing strategies. If you missed five or more you need to get busy and learn to invest.

Here's a brief explanation of the correct answer to each question. Consider this your first investor lesson.

Question # 1: Stocks are equity investments, representing ownership. Bonds represent debt.
Question # 2: When interest rates go up, bond prices or values ​​go down, and bond owners lose money.
Question # 3: High and rising interest rates have a negative effect on corporate profits. This tends to send stock prices down.
Question # 4: The three basic types of mutual funds are money market funds, bond funds, and stock funds. Balanced funds may be considered the fourth basic type, and they invest in stocks, bonds, and money market securities.

Question # 5: Mutual funds are the lion's share of the investment options offered in typical 401 (k) plans. Most 401 (k) investors allocate most of their plan assets to them.
Question # 6: Bond funds pay higher dividends.
Question # 7: Portfolio rebalance and dollar cost averaging are valuable investing tools or strategies for average investors.
Question # 8: Money market funds invest in high-quality short term debt, money market securities.
Question # 9: Financial leverage means borrowing money, which is typical in real estate investing. This increases potential returns, but increases risk to the investor.
Question # 10: By owning shares in a special mutual fund, a gold fund, you can profit as the price of gold rises.

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