Test your financial IQ and knowledge with the 23 fun facts and questions below. Post your score at the end and compare financial knowledge with others.
Question: How much will $100,000 grow to in 30 years at a 5 and 8% annual return?
In 30 years, $100,000 will become $432,194 if invested at 5% but $1,006,266 if invested at 8%. That is 132% more. Your investment choices make a big difference!
Question: How much did the average investor earn between 1988 – 2008?
• While the S&P 500 Index earned an average annual return of 8.4% during 1988-2008 ($1 would have become $5), the average individual investor earned an annual return of just 1.9% ($1 would have become $1.50)
Question: How much money would an investor have lost if they missed the best 30 days of the year between February 1989 and February 2009?
$10,000 invested in the S&P 500 Index in February 1989 would have become $29,382 in February 2009. If an investor had missed the best 30 days of daily return, it would have become $6,531 (77% less). If an investor had missed the best 10 days, it would have become $15,123 (48% less)
Question: If you delay saving and investing until you are 40, rather than 30, how much less money will you have when your 65?
Assuming an annual return of 7% per year, if you invest $10,000 per year from age 30 to age 40 ($100,000 invested), you would have $809,844 at age 65. If you invest $10,000 per year from 40 years old to 65 years old ($250,000 invested), you would have $690,564 at 65 years old. This is 15% less!
Question: When can the combination of two investments generate greater returns than the 2 individual investments alone?
If you have two investments, one with annual returns of 0%, 5% and 15% (20.8% over 3 years) and the second one with annual returns of 30%, -30%, and 30% (18.3% over 3 years), an annual 60%/40% combination of the two investments will have a 3-year return of 23.3%, better than each of the two investments standing alone
Question: During what years and periods, did bonds perform better than stocks?
From 1929 to 1949 (20 years) and from 1968 to 2009 (41 years), $1 invested in bonds was a better investment than in stocks
Question: From 1926 – 2008, by how much did large company stocks outperform bonds and T-bills?
From 1926 to 2008, large company stocks had a 9.6% annual return vs. 5.7% for government long bonds and 3.7% for Treasury bills
Question: Over a 10-year investing period, what is the probability that stocks have a negative absolute return?
Over any 10-year rolling period from 1969 to 2008, stocks had only a 1% probability of a negative absolute return (vs. 37% for gold or commodities)
Since 1890, what has been the real return on housing prices?
Housing price increases since 1890 have been close to 0% factoring in the effects of inflation. Housing prices adjusted for inflation were also flat between 1945 and 2000
Question: Between 1983 and 2003, the US stock market return was 13%, what was the average investors return?
The US stock market return was 13% but the average investor had a 7.9% return which was 5.1% less. The average equity fund return was 10.3%. This highlights why you need a good financial advisor
Question: How much would $1 invested in 1926 have grown to if invested in large caps, bonds, gold, or cash?
$1 invested in small cap stocks in 1926 would have become $9,550 in 2008 vs. $2,045 in large caps, $99 in bonds, $41 in gold and $20 left in cash
Question: How much would $1 invested in French bonds in 1900 be worth in 200?
$1 invested in French bonds in 1900 would have become $0.8 in 2008 vs. $30 in French Equities (adjusted for inflation)
Question: When were the last times US large-cap stocks total return was negative over a 10-year period?
The last two occurences US large-cap stocks total return was negative over a 10-year period was in 1938 and 2008
Question: Was was the probability of a negative return for the S&P 500 over any 1-year period between 1985 and 2008?
From 1985 to 2008, the probability of a negative return for the S&P 500 over any 1-year period was 20%
Question: How much do you need saved today to reach $1 million if inflation grows at 3% per year?
With 3% inflation, $1M in 30 years is equivalent to $412,000 today
Question: In what year is social security’s costs expected to exceed revenues?
By 2017, social security costs may exceed revenues
Question: What was the average inflation rate between 1967 and 1984?
From 1967 to 1984, the average inflation rate was close to 7% (vs. close to 3% average for the past 100 years)
Question: What was the unemployment rate in 1895, 1930’s, and 2009?
US unemployment rate in 1895 was approximately 18% and 25% in the 1930’s (vs. 10% expected peak in 2009-2010). In June 2009, the U-6 unemployment rate (headline unemployed around 9.4% plus marginally employed) is above 15%
Question: What was the top marginal US tax rate in the 1950’s – 60’s?
The top marginal US tax rate was 93% in the 1950’s – 1960’s. It was 70% in the 1970’s, 50% in early 1980’s and 35% from 2003 to 2009
Question: What was the US savings rate from 1960 – 1980?
The US savings rate was between 8% and 12% from 1960 to 1980. It was below 2% in 2007
Question: What was the median household income in 2007?
In 2007, the median household income was around $50,000. The top 10% had income above $140,000
Question: What was the 2007 median household net worth?
In 2007, the median household net worth was around $120,000. The top 10% had a net worth above $900,000
What was the real GDP contraction during the Great depression?
The 2008-2009 recession is very different from the Great Depression. During 1929-1933, the real GDP contraction was -29% (vs. -4% in 2009), unemployment rate was 25% (vs. 10% in 2009), consumer prices went down 25% (vs. down 2.8% in 2008), money supply was down 33% (vs. up 12% in 2009) and the budget deficit was 2.6% vs. 10.1%
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