Quiz: Do You Understand Diversification?
We’ve created a quiz for you to see how much you know about investment diversification.
By Dan Egan
Managing Director of Behavioral Finance & Investing, Betterment |
Published: October 22, 2015
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
Long-Term Returns Have a Cost, and It’s Well Worth the Price
We’re investors in the stock market because it has a long, time-tested history of generating big returns for those patient enough to let compound interest work its magic.
The Difference Between Vanguard and Betterment
I’ve been asked a lot in the last few months in the transition from my old role at Vanguard to my new role as Chief Growth Officer at Betterment – what’s the difference between the two companies?
Our Team of Experts
Our executive investing committee includes experts from a range of backgrounds. We make strategic decisions based on a systematic, evidence-based approach.
How would you like to get started?
Your first step toward a smarter investing future starts here.
Create a Betterment account
Go ahead and join the smart, modern way to invest.
See what we can do for you
Tell us a bit about yourself, and we'll show you the benefits of investing with us.
Get a free investing checkup
Help us get a sense of your investing approach and see how you could improve.
Transfer a 401(k) or an IRA
Move an existing retirement account into a Betterment IRA.
Download the mobile app
Enjoy the Betterment experience anywhere on the go.