about_us

The InvestSense Challenge

Investors often suffer unnecessary investment losses due to lack of accurate information and/or misperceptions about investment markets, investment products and investment professionals. The InvestSense Challenge was created to increase investor awareness of some of the leading reasons that investors suffer such losses and to suggest steps that investors can use to protect against such losses.

1. True of false?

Stockbrokers, investment advisers and other financial consultants are required to always put their customers' interests ahead of their own and to disclose fully and completely any actual or potential conflicts of interest.

2. Which of the following statements is true about variable annuities?

A. If you annuitize a variable annuity in order to receive a lifetime stream of income, you must give up control of the money in the annuity and, upon your death, the insurance company that issued the variable annuity, not your heirs, receives the balance in the annuity.

B. Variable annuity issuers often base their annual fee for the guaranteed death benefit on the accumulated value of the variable annuity, even though the guaranteed death benefit in most variable annuities only obligates the issuer to repay the annuity owner's designated beneficiaries an amount equal to the owner's actual capital contributions.

A. Only Statement A
B. Only Statement B
C. Both Statements A & B

3. The projected return/risk profile of your actual investment portfolio is

A. annual return less than 12%, annual standard deviation greater than 12%.
B. annual return greater than 12%, annual standard deviation less than 12%.
C. annual return and annual standard deviation both greater than 12%.
D. not known.

4. From December 1,1988 to November 30, 2008, the annual compounded "real" return of the stock market, as measured by the S&P 500 Index, was

A. 3.13%
B. 6.11%
C. 14.27%

5. True or false?

Asset allocation explains 93.6% of the investment returns of an investment portfolio.

6. A 'break-even" analysis allows an investor to compare the effect of fees and taxes on available investments. Assume that we have two investments, each with an annual return of 10%, one being a mutual fund (annual expense ratio of 0.20%) and the other being a variable annuity (annual expense ratio of 2.4%). The break-even point for the annuity, the point at which the annuity provides a greater after-tax, after-fees return than the mutual fund, would be approximately

A. 12 years
B. 25 years
C. 34 years
D. 50 years

Answers

This web site and the information herein is for informational purposes only and is not designed or intended to provide legal, investment or other professional advice since such advice always requires consideration of individual circumstances. If legal, investment or other professional assistance is needed, the services of an attorney or other professional advisor should be sought.