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Beginner Investing IQ Quiz: How Savvy an Investor Are You?

How much do you know about investing? Can you spot the difference between a 401k and an IRA? Do you understand what a bond is? You may know less than you think. Take our beginner’s investing IQ quiz to find out.

What's Your Investing IQ?Take this investing IQ quiz to find out just how much you know about investing your money in everything from 401(k)s to ETFs.

Get investment advice (including videos) after every question.

At the end of the quiz, you’ll find out if you should stick to letting someone else manage your investments, or if you’re ready to start buying and selling stocks, bonds and other investments on your own.

The quiz

1. There’s a key difference between saving money and investing it. Savings allow you to access money quickly when you need it, and may earn a small rate of return. Money you invest can sometimes be accessed if you need it before a certain date, but there are often fees involved with doing so. Investments, however, yield larger returns on your deposits. There’s also risk involved — good investments can make you wealthier, but poor investment choices (and market fluctuations) can result in a loss of money.

Which of the following is a type of investment, not a savings vehicle?

a. Money Market Account

b. ETF

c. Certificate of Deposit

Click to view answer.

2. Let’s say you’re lucky enough to work for a company that offers a 401k (if you don’t work for such a company right now, you should still learn about them for future jobs). Who determines what type of investments (mutual funds, bonds, etc.) your money will be invested in?

a. You

b. The company you work for

c. The third-party company that does the investing, i.e. Fidelity

Click to view answer.

3. If you don’t work for a company with a 401K, you can still invest in your future with an IRA, an individual retirement arrangement. IRAs function much like 401ks (except that you don’t need any employer to sponsor them). With an IRA, you have more investment options, but you can’t withdraw money early, as you sometimes can with a 401k.

The government will only allow you to put a certain amount of pre-tax money into either investment each year. Which one of the following can you contribute the most amount of your pre-tax income towards annually?

a. a 401k

b. an IRA

c. a Roth IRA

Click to view answer.

4. A bond is a(n) _______________ issued by a company or the government to the buyer.

a. Share of a company or government project

b. IOU

c. Option

Click to view answer.

5.  Young investors often say they can’t invest any money because they don’t have any to spare once they pay for housing, food, a car and other debts like student loans.

One way to budget for investing is to control your overhead, or the monthly bills you must pay. For instance, your rent or mortgage should never account for more than ____ of your take-home pay.

a. one quarter

b. one half

c. one third

Click to view answer.

Results

If you got none wrong, you are an investing genius. Call MENSA. You may be ready to start investing your own money, without relying on a company’s 401k or an ETF. That said, keep reading Money Under 30 for advice and news.

If you got one – two wrong, you are above average when it comes to investing. But remember that laws are always changing, and investing evolves as technology evolves. So keep reading Money Under 30 for advice and news.

If you got three or more wrong, start hitting the books before you invest too much money without understanding what you’re doing. Keep reading Money Under 30 for advice and news.

How did you do on our investing IQ quiz? What investing topics would you like to learn more about

About Patty Lamberti

Patty Lamberti is a freelance writer and Professional-in-Residence at Loyola University Chicago, where she teaches journalism and oversees the graduate program in digital media storytelling. If she doesn't know something about money, you can trust she'll track down the right people to find out. You can learn more about her at www.pattylamberti.com. And if you have any story ideas, or questions about money etiquette that you'd like her or an expert to answer, email her at moneymannersqs@gmail.com.