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Mar 24, 201401:40 PMTaking Stock

with Nathan Brinkman

How well do you understand the financial basics?

(page 1 of 2)

Working with a trusted financial professional is one of the best ways to help improve your overall financial situation, but it’s not the only thing you can do. Educating yourself about personal finance concepts can help you better understand your adviser’s recommendations, and result in more productive and potentially more prosperous financial planning discussions. Take this brief quiz to see how well you understand a few of the basics.

1. How much should you set aside in liquid, low-risk savings in case of emergencies?
a. One to three months’ worth of expenses
b. Three to six months’ worth of expenses
c. Six to twelve months’ worth of expenses
d. It depends

2. Diversification can eliminate risk from your portfolio.
a. True
b. False

3. Which of the following is a key benefit of a 401(k) plan?
a. You can withdraw money at any time for needs such as the purchase of a new car.
b. The plan allows you to avoid paying taxes on a portion of your compensation.
c. You may be eligible for an employer match, which is like earning a guaranteed return on your investment dollars.
d. None of the above

4. All of the money you have in a bank account is protected and guaranteed.
a. True
b. False

5. Which of the following is typically the best way to pursue your long-term goals?
a. Investing as conservatively as possible to minimize the chance of loss
b. Investing equal amounts in stocks, bonds, and cash investments
c. Investing 100% of your money in stocks
d. Not enough information to decide

(Answers on next page)

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