Pop Quiz: Test Your Investment Knowledge

I know, it’s too early for a quiz. But it’ll be fun! =) Vanguard has a quiz on investment knowledge with 20 questions. The questions are pretty good overall, some good questions that probe common misconceptions. I scored 95%. I know, I’m hot stuff. That’s pretty good – according to Vanguard:

“Some 1,000 investors completed the 20-question 2002 Vanguard/Money Investor Literacy Test in May and achieved a mean score of 40%, which is a modest improvement over the 37% score on a similar test administered by Vanguard in 2000.”

Yeesh, 40%? If you score that low, I’d recommend either more coffee or go read Random Walk Down Wall Street or Informed Investor. Which one did I miss?

19. Generally, a portfolio that has 80% of its assets invested in stocks would be best suited for:

(a) An 18-year-old using the assets to pay for college expenses pver the next 4 years.
(b) A 35-year-old investing for retirement.
(c) A 75-year-old investing for income and capital preservation.
(d) None of the above.
(e) Don’t know.

I picked (d) none of the above. My feeling is that asset allocation is completely dependent on both your time horizon and risk tolerance. You can’t just tell every 35-year old investing for retirement to put 80% of his money in stocks. But I guess I can see how (b) is the “best” answer. Also, the quiz seems old, as many questions refer to 2002.