Investment IQ Test

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Many of the things you think you know about investing are part of a mythology designed to make you bounce around between investment products. Modern day "conventional wisdom" just isn't all that its cracked up to be. Concepts you worship are inaccurate; indices and averages you trust do not tell the complete story; the basic investment concepts still work --- but Wall Street won't tell you what they are.

It's time to determine your investment IQ, here's the deal:  

Just take the True-False test below and send me an email list of the statements you feel are generally TRUE --- where necessary, please include any rationale or explanatory remarks you feel would help me understand your answers. 

Once I've responded with your results, you can determine if you want to proceed with any of the KGIS workshops or more advanced programs.

Here we go:  Generally speaking, are the following statements mostly True or mostly False? Note: you'll do better if you research terms that you are unfamiliar with. Terms in "quotes" have very specific meanings in the Market Cycle Investment Management/Working Capital Model methodology.

1) The proper gauge of your Investment Portfolio Performance is the change in your market value vs. the S & P 500 or Dow Jones Industrial Averages over the course of a calendar year.

2) Mutual Funds are a safer route to long-term investment success than trying to create your own portfolio of individual equity securities.

3) You really don't need to worry about growing your "Base Income" until a year or so before you plan to retire. That's the time to begin designing a safe income portfolio.

4) The Day-Limit Order assures you of getting your trade executed no matter what happens during the trading day.

5) The Dow Jones Industrial Average is comprised of "investment grade" companies, and generally gives a clear indication of what is going on in the Stock Market.

6) In the long run, investing in the Stock Market will assure you of keeping up with inflation.

7) Annuities are perfect investments at retirement both for people of limited resources and for the wealthy, particularly Variable Annuities.

8) Technical Analysts can predict the future movements of the economy, individual securities, and the Stock Market with a very high degree of accuracy.

9) If you were to chart them, your total "Working Capital" line will almost always exceed the portfolio Market Value line.

10) There is no such thing as a freebie on Wall Street.

11) It is important that you take your tax losses regularly, particularly if you have held the losing position for less than one year.

12) Asset Allocation is a strategy used by investors to move assets from weak markets to strong ones in order to improve the growth of the investment portfolio's bottom line.

13) Sell your losers and let you profits run is the essence of sound Investment Management thinking.

14) Closed End Funds (CEFs) are not popular with Wall Street professionals because they are inherently more risky than normal, open-end, Mutual Funds.

15) It's smarter for income investors to buy short duration individual municipal and corporate bonds, even at a premium, because it assures them of less market value volatility in the income portion of your portfolio..

 16) DRIPs and Dollar Cost Averaging are recommended strategies because they are guaranteed to enhance the long term performance of a properly diversified portfolio.

17) There are fewer than 400 "Investment Grade Value Stocks" traded on the NYSE.

18) Closed End Muni-Bond Funds are a much maligned and little appreciated income generation machine in spite of the fact that they generally maintained their 6% or so tax free dividend yield during the recent financial crisis and outperformed the DJIA in market value growth during 2009.  

19) "Smart Cash" is an integral part of any Asset Allocation formula because it allows investors to time the market successfully. Professional market timers know precisely when to move into or out of cash in anticipation of the next major directional change in the market.

20) Buy and Hold continues to be the proper investment strategy for most individual investors.

21) It is a well known fact that there are certain Core Portfolio issues that belong in all investment portfolios if long term success is to be expected.

22) Every properly diversified portfolio will have up to 5% in each of these areas: miscellaneous speculative opportunities, gold or other commodities, small cap stocks, and global index funds.

23) Zero Coupon Bonds are an important part of the fixed income portion of the investment portfolio, especially when retirement is contemplated within five years or so.

24) These are the FOUR most Important elements of successful long-term investing:

• Diversify properly.
• Establish a target for taking profits.
• Buy high quality securities.
• Increase annual income.

25) Greed and Fear are important performance enhancing emotions; those who sell when others are greedy, and buy when panic rules the markets have a much better chance of investing successfully.

26) The second step in every stock purchase should be the establishment of a Stop Loss Order. Such an order assures you that your losses will be limited to a specific percentage of your purchase price.

27) "Investment Grade Value Stocks" will be the next red hot market sector.

28) Mark-to-market valuation of mortgages backed securities has proven to be good for investors.

29) Wrap Accounts provide investors with the opportunity to obtain private, personal, investment management by a well known professional at a reasonable cost.

30) The expression Managed by the Mob with regard to open-end mutual funds refers only to the direct impact of Wall Street and Washington on the movement of mutual fund prices.