Earn Rewards: Sign up now and earn a special reward after your first deposit. See offer details

<title>Dismiss</title>

Betterment

Save, invest, retire

GET — On the App Store

View
<title>Dismiss</title>

Quiz: Do You Understand Diversification?

Research shows most people don’t understand how much diversifying their investments impacts their performance. We’ve created a quiz for you to see how much you know about investment diversification.

Articles by Dan Egan
By Dan Egan Managing Director of Behavioral Finance & Investing, Betterment Published Oct. 22, 2015
Published Oct. 22, 2015
1 min read
  • Academic research has shown that investors don’t understand diversification's impact on volatility and expected returns.

  • As a result, many investors are dissatisfied with a diversified portfolio, or aren’t properly diversified.

  • Take our quiz to find out if you know how diversification improves performance.

Do you understand what diversification does for your portfolio?

Research shows that most people don’t. A University of Colorado Boulder study found that 90% of people who took a survey on diversification answered at least half of the questions incorrectly.

We want to give you an opportunity to show what you know, so we created the quiz below. Once you take it, we’ll show you how you’ve done compared to other people.

Don’t feel bad if you don’t get a perfect score; the concept of diversification is confusing, and most people get at least one or two questions wrong. While people generally know diversification is a good thing, they’re often not sure exactly how or why.

If you’d like to read more on the research, read the original paper.

More from Betterment:

Recommended Content

View All Resources

401(k) Plan Fiduciary: How You Can Mitigate Your Risk

Fiduciary responsibilities can seem daunting and time-consuming. Learn the ins and outs of your responsibilities and which ones you can delegate.

Jon Stein on “How I Built This:” Reflecting On Our Story

Jon Stein joins NPR’s Guy Raz for an episode of “How I Built This” to look back at how Betterment started, what mistakes were made, and how they turned into learnings for the robo-advisor we are today.

Assessing a Portfolio’s Diversification

Guidance on diversification to help you make portfolio changes, knowing the potential impact to the future performance of your investments.

How would you like to get started?

Manage spending with Checking

Checking with a Visa® debit card for your daily spending.

Save cash and earn interest

Grow your cash savings for general use for upcoming expenses.

Invest for a long-term goal

Build wealth or plan for your next big purchase.

Invest for retirement

Set up traditional, Roth, or SEP IRAs to save for the golden years.

See details and disclosure for Betterment's articles and FAQs.