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What’s Your Stock Market IQ? Take This Test

By Anne Kates SmithSenior Editor Kiplinger's Personal Finance If market interest rates fall, which means new bonds will be issued with lower yields, the prices of outstanding bonds will rise. Now imagine that rates fall and new In fact, the opposite might be the case. If the high yield reflects an overly generous dividend, you have to ask yourself whether the company has the cash to sustain it.

Look for a positive free cash flow, which means a The stock market anticipates the economy, not the other way around, typically by six to nine months. Stocks in the utilities and tech sectors rece Dollar-cost averaging can lower the average cost of shares because you are spreading out your purchases, hopefully buying more when prices are lower and fewer when prices are high.

If you invest all of your money at once, rather than at regular intervals, you might get unlucky and buy the stock at o Investors feel the pain of a loss about twice as much as they feel the pleasure of the same-size gain, say market behavior psychologists. This loss aversion can contribute to a number of investing mistakes. Investors who fear a loss, and especially those who have recently suffered one, can be reluct Toggle navigation Menu Subscribers Log In. Sections Close Menu Wealth Creation Investing Retirement Taxes Your Money Your Business Magazine Contents.

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Quiz Test Your Investing IQ. You call yourself a savvy investor? Here are 10 questions designed to test your market mettle. If you get a few wrong, no worries; we hope you learn something along the way. Stocks Bonds Real estate Gold.

Stocks Sinceaccording to Tassazione stock option italia, stocks have returned an average annual True If market interest rates fall, which means new bonds will be issued with lower yields, the prices of outstanding bonds will rise.

Naturally, your bond will command a premium price in the secondary market. So while the yield esignal stock trading free world your bond remains fixed for the life of the security, the market will adjust the price you can get for it to reflect current market rates.

True False In fact, the opposite stock market iq quiz be the case. Look for a positive free cash flow, which means a company has invested what it needs to maintain its business and has money left over to spend on dividends.

A spiking yield likely indicates a sinking stock price. Since World War II, there have been 11 bear markets and 21 corrections.

True False The stock market anticipates the economy, not the other way around, typically by six to nine months. The Great Recession began in Decemberaccording to the National Bureau of Economic Research, the official arbiter of recessions and expansions. But stocks had already peaked in October.

Market timing Dollar-cost averaging Hedging your bet Direct deposit All of them.

Market timing Dollar-cost averaging Dollar-cost averaging can lower the average cost of shares because you are spreading out your purchases, hopefully buying more when prices are lower and fewer when prices are high. If you invest all of your money at once, rather than at regular intervals, you might get unlucky and buy the stock at or near its peak price.

The strategy also helps curb harmful behavioral inclinations.

Investing at intervals erases that fixed reference point, making it easier to keep your cool. True False Investors feel the pain of a loss about twice as much as they feel the pleasure of the same-size gain, say market behavior psychologists. Investors who fear a loss, and especially those who have recently suffered one, can be reluctant to take risks that are entirely appropriate. For example, many investors shunned the stock market after the financial crisis, missing out on significant gains.

What's Your Investing IQ?

Loss aversion can also cause an investor to sell what should be a long-term holding too soon, after a short-term hiccup. Conversely, an investor might hold on to a losing investment too long, reluctant to lock in the loss. Quiz Test Your Investing IQ Results. Next Quiz Do You Need a Financial Planner?

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