The IQ (Irreverent Questions) Test

Successful investing requires equal parts cunning and courage. You have to devise a solid strategy and then see it through. And during the inevitable rough times that come with a gyrating market, a little humor will help. So in that spirit of fun, we present an unscientific quiz designed to help separate the savvy investor from the sucker.

1. You’re in line at Starbucks for your morning cup of coffee. You say to yourself:

a) “First Frappuccino, then supermarket ice cream--these people are geniuses. I’ve got to buy some stock in this outfit.”

b) “The whole coffee thing is so five minutes ago. And what about the liability issue if scientists ever link this stuff to cancer and people start suing? I’m going to short this stock.”

c) “I think I’m going to order a tall latte and one of those biscotti things.”

2. Match the investor profile with the appropriate investment choice:

1) Retired civil servant

2) Yoga instructor

3) Baldwin brother

a) Neuberger & Berman Socially Responsible fund

b) Acting lessons

c) Vanguard Growth & Income fund

*

3. You would summarize the Benjamin Graham philosophy as:

a) “It’s all about tech, baby.”

b) “Stick with a disciplined strategy of buying good companies at advantageous prices.”

c) “Honey-baked crackers make the perfect midday snack.”

*

4. As you’re driving to work, you hear on the radio that your company’s stock plunged 15% in the first hour of trading on a disappointing earnings report. You:

a) Nearly swerve off freeway trying to get through to Fidelity on the cellular to shove your 401(k) money into the global fund.

b) Nonchalantly switch over to the jazz station, knowing enough about your company to be confident that this performance lag will be temporary, and that this dip just means that through dollar-cost-averaging, you’ll accumulate more company stock than you would have otherwise.

c) Call Dionne Warwick seeking guidance.

*

5. You’re at a party and this guy starts telling you about his job for a start-up that makes a device to keep birds away from rooftops. You ask:

a) “How does the technology work?”

b) “How does it work? Is there any competition? Has the company gone public yet, and if so, what’s the ticker symbol?”

c) “Which way is the guacamole?”

*

6. Your only niece is about to turn a year old. Her parents think stock is something you make soup with, and you want to get her a gift that will lead to a lifetime of profitable investing. In her name you buy:

a) One share of Gymboree, the kiddie clothing, toy and play-program company.

b) $100 worth of the SteinRoe Young Investors mutual fund.

c) One three-month palladium futures contract.

*

7. You’re watching “Wall Street Week.” As they chat on Louis Rukeyser’s sofa, one of the experts mentions a tantalizing micro-cap. You:

a. Page your full-service broker at the Laker game right after the show, making sure your market order for a round lot goes through first thing Monday.

b. Jump on the Internet right after the show, researching the company’s fundamentals, earnings prospects and message boards.

c. Replay your videotape after the show, looking for nuances.

*

8. The philosophy that made legendary investor Warren Buffett a multibillionaire could best be summed up as:

a. “The ideal holding period is forever.”

b. “You gotta dance with who brung ya.”

c. “This Happy Meal is on you, right?”

*

9. Your small-company value mutual fund has been a big winner since its debut five years ago, racking up 34% annualized gains. You read in the quarterly newsletter that the manager, who launched the fund and oversaw its growth from $100 million to more than $8 billion in assets, is leaving to set up her own shop. The successor is an in-house no-name with a Harvard MBA. You:

a. Call the 800 number and redeem all your shares with the idea of investing everything in the manager’s new fund.

b. Stand pat, giving the new guy at least a year.

c. Write the manager a heartfelt letter pleading with her to stay.

10. Which of the following best describes your own stock-picking technique?

a. “I only buy on dips.”

b. “I only buy companies with cute ticker symbols.”

c. “I only buy companies whose debt-to-equity ratio is less than the square root of their three-to-five-year projected price-to-earnings ratio divided by the sum of their trailing four-quarter revenue growth and dividend yield.”

*

Bonus question:

True or false: Despite the inevitable swings, you’re assured of making about 10.5% a year in the stock market--as long as you’re patient.

Answers

1. a) 9 points. You’re thinking like an investor. b) 10. You’re thinking like a contrarian. c) 0. Your priorities are all mixed up.

2. Take 10 if you nailed it: 1c, 2a, 3b

3. a) 2 points. As with “Play it again, Sam,” the quote has been embellished over the years. b) 10. At the end of the day, value is king. c) 0. He was a Funyuns man.

4. a) 3 points. Even in tax-protected accounts, excessive trading can be dangerous to your financial health. b) 8. Good thinking--so long as your company doesn’t pull an L.A. Gear and languish too long. c) 0. She’s so predictable, always trying to steer everyone into long-term muni bonds.

5. a) 5 points. Good start. b) 10. You party animal. c) 0. You should always ask as soon as you arrive.

6. a) 0. It’s a good company, but there’s no dividend reinvestment plan, so even if you use a deep discounter, the $8 commission is nearly one-third the stock’s recent cost of $27. Why don’t you just show the kid how to light all her money on fire? b) 10. It’s tough to beat a good no-load mutual fund. c) 3. Everyone knows six-month contracts are the way to go, unless you’re talking heating oil.

7. a) 1 point. At least you watch PBS. b) 10. Never take anything at face value. c) 0. This isn’t the Kennedy assassination. Watch the show and get on with your life.

8. a) 10 points. Unless, of course, you’re holding garbage. b) 3. Actually, that was legendary football coach Bum Phillips. c) 7. Close, but no Big Mac.

9. a) 10 points. Great manager plus new fund equals winning combination. b) 2. The big asset base will make hers a tough act to follow. c) 0. You can’t put a price on your dignity.

10. a) 10 points. Duh. b) 6. You just might be on to something. Look at cleverly managed Men’s Wearhouse (SUIT) and Southwest Airlines (LUV), for example. c) 0. Say what?

Bonus. False. Take 10 if you knew that past performance is not a guarantee of future results, 0 if you’ve been reading too many periodicals and too few prospectuses.

Scoring:

90 or more points: You should quit your job and launch your own financial Web site.

50-89: You should keep investing, but it wouldn’t kill you to read a Peter Lynch book and brush up.

49 or fewer: You should come talk to us at the conference. We have a penny stock for you.