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The Ultimate Investment Diversification Quiz
by Staff
Your friends and associates may consider you an astute investor and they could be correct. Are you doing everything possible to maximize your return and to protect your assets? Determine how much you know about diversification by taking this quiz.

Investing is:

  • a terrific way to make a lot of money
  • like a game of roulette
  • a high-risk pastime

Spreading your money over several types of investments is referred to as:

  • portfolio management
  • strategic allocation
  • diversification

What is the most attractive attribute of Investment diversification?

  • Investment diversification is a safe way to grow your money.
  • Investment diversification is a strategy reserved for rookie investors.
  • Investment diversification is ideal for people that have little time to manage investments.

Why does diversification work well to help you earn a good return on investment?

  • Diversification works because you tend to watch your investments carefully and can respond to losses faster.
  • Diversification works because some of the investments in your portfolio have guaranteed rates of return.
  • Diversification works because it takes a long-term position on investing.

What is one key to understanding and working with investment diversification?

  • The return on your investment will be high if you divest of losers quickly.
  • You should not worry if some assets do poorly in any given year.
  • You must analyze the performance of each asset on a weekly basis.

How many classes of investment assets are there?

  • two
  • three
  • four

What is a good lesson to learn when it comes to investing?

  • High risk equals huge profit.
  • Buying and selling often reaps big dividends.
  • No risk equals zero growth.

Which is the riskiest investment group among the three asset classes?

  • stocks
  • bonds
  • cash

When referring to stocks, what does the term market capitalization mean?

  • total dollar value of a company’s outstanding stock
  • total amount of cash held in reserve by a company
  • amount by which assets exceed liability for a given company

What dollar amount is assigned by most brokerage firms to categorize a company as small cap?

  • less than $250 million in market capitalization
  • less than $500 million in market capitalization
  • less than $1 billion in market capitalization

What dollar amount is assigned by most brokerage firms to categorize a company as large cap?

  • more than $5 billion in market capitalization
  • more than $10 billion in market capitalization
  • more than $15 billion in market capitalization

Although bonds are less risky than stocks, they:

  • are assessed yearly management fees
  • have maturity dates at least five years after issue
  • offer lower returns on investment

What is the most attractive feature of cash investments?

  • You can withdraw the money from a cash investment account any time you want without penalty.
  • You can move money freely between different cash investment accounts.
  • You have your money in a highly secure account with very little risk.

To what does the term allocation of investments refer?

  • the process of rebalancing your investment portfolio.
  • the process of reinvesting dividends earned on your investments.
  • the process of allocating amounts of money to invest in each asset class.

What other major factor must comes in to play when you are allocating your investment dollars?

  • your net income
  • your stage in life
  • your experience

How do some experts say that you should reallocate your investments as you approach retirement age?

  • 90 percent to stocks and 10 percent to bonds
  • 80 percent to stocks and 20 percent to bonds
  • 60 percent to stocks and 40 percent to bonds

Is it enough to diversify your investments across investment classes?

  • Diversifying your investments across investment classes is the best strategy.
  • Diversifying your investments across investment classes is not good enough.
  • Simply diversifying your investments across investment classes is extremely risky.

True diversification means:

  • putting your money in as many differing sectors of the economy as is possible
  • investing your money in several companies with similar products
  • putting a significant portion of your investment dollars into several mutual funds

What is a good tool to use that can help you to diversify your assets within a given class?

  • pie chart
  • bar chart
  • style chart

At first glance, the logic of rebalancing your portfolio every year seems:

  • too simple
  • illogical
  • very risky