What’s Your Investing Level? A 10-Question Quiz

Ten quick questions, from the very basics to risk and leverage. Answer honestly, and skip a guess if you don’t know. You’ll get your rung on the ladder and a short reading list that starts where you are.

1What does owning a share in a company mean?

2Where is money you’ll need in the next year usually best kept?

3What is an index fund?

A fund whose manager picks the best sharesA fund that tracks a market index, such as the FTSE 100 or S&P 500A savings account with a fixed rateA list of shares to buy this monthI don’t know

4In the UK, what does a Stocks and Shares ISA do?

Guarantees you won’t lose moneyLets your investments grow free of UK tax on gains and incomePays a fixed interest rateLets you borrow to investI don’t know

5Two funds hold the same shares. Fund A charges 0.1% a year and Fund B charges 1% a year. After 20 years, which is likely to be worth more?

6What does diversification mean?

Buying only the shares that have risen mostSpreading money across many investments so one failure can’t do too much damageMoving all your money into cash when markets fallUsing several brokers for the same shareI don’t know

8A strategy wins only 40% of its trades. Can it still make money?

No, it needs to win more than halfYes, if its average win is big enough compared with its average lossOnly in a bull marketOnly with leverageI don’t know

10A backtest tried 200 different settings and kept the best one. What’s the biggest worry?

The best setting may only have worked by luck (overfitting)The test was too short to loadBacktests always understate returnsThere’s nothing to worry aboutI don’t know

What’s your investing level?