23 Fun Questions and Facts to Test Your Financial and Investing Knowledge

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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