Who out there thinks they are a MF expert?

[mickeyd]

Go ahead give it a whirl. It's not that difficult.

Think you have what it takes to be called a mutual fund expert? Try our version of the popular show "Who Wants to Be a Millionaire" and see how far you can make it. Unfortunately, there are no actual prizes, but a mutual fund expert shouldn't need prize money to make their million.

http://mutualfunds.about.com/cs/games/l/blwhowants.htm

 

[MasterBlaster]

Re: Who out there thinks they ar a MF expert?

Well I made a million dollars in funny money.

Those questions weren't all that hard really.

 

[newbie_fire]

One of the questions on the test left me thinking.......

The question was - which fund is most risky

Equity
Bear
Bond
Money Market

I picked equity. But the "correct" answer is Bear, which I disagree with. Bear funds dont go down as much (or up as much) as equity funds do, and that in my opinion should be considered less "risky".

The reasoning given was that if the markets go up, the bear fund will go down (YES we all know that, but that does not translate to them being riskier than equity funds) and ofcourse Bear funds do have equity in them

Thoughts?

 

[FIRE'd@51]

One of the questions on the test left me thinking.......

The question was - which fund is most risky

Equity
Bear
Bond
Money Market

I picked equity. But the "correct" answer is Bear, which I disagree with. Bear funds dont go down as much (or up as much) as equity funds do, and that in my opinion should be considered less "risky".

The reasoning given was that if the markets go up, the bear fund will go down (YES we all know that, but that does not translate to them being riskier than equity funds) and ofcourse Bear funds do have equity in them

Thoughts?

A bear fund contains short positions, so technically your loss is unlimited, as it would be with a short sale.

 

[justin]

I think this one is wrong:

"For $250,000...
If a fund goes down by 60%, what rate of return is needed to break even?

a) 60% b) 160%
c) 250% d) 120%"

And their answer:

250%

"If a fund goes down by 60%, you will need it to go back up 250% to recover your loses. This is a difficult concept, but here is a way for you to calculate it:

Subtract the loss % from 1 and get a number. Then take the inverse of the number to get the percentage gain needed. For example in this question you took: .60 -1 = .40 The inverse of .40 or 1/.40 to get 2.50 or 150%."

Their version of the correct answer is 250%. I calculated you'd need a 150% return to get back up to even after suffering from an initial 60% drop.

 

[FIRE'd@51]

I think this one is wrong:

"For $250,000...
If a fund goes down by 60%, what rate of return is needed to break even?

a) 60% b) 160%
c) 250% d) 120%"

And their answer:

250%

"If a fund goes down by 60%, you will need it to go back up 250% to recover your loses. This is a difficult concept, but here is a way for you to calculate it:

Subtract the loss % from 1 and get a number. Then take the inverse of the number to get the percentage gain needed. For example in this question you took: .60 -1 = .40 The inverse of .40 or 1/.40 to get 2.50 or 150%."

Their version of the correct answer is 250%. I calculated you'd need a 150% return to get back up to even after suffering from an initial 60% drop.

I noticed that one too. They (incorrectly) say the correct answer is 250%, then give an example that shows (correctly) that the answer is 150%, which is not among the choices.

 

[newbie_fire]

Justin, I also came up with 150% and since it was not in the choices, I picked 160%, which was "wrong"

 

[mickeyd]

$100,000 loses 60%= $40,000

$40,000X 250= $100,000

Does this work?

 

[justin]

$100,000 X.60= $40,000

$40,000 X 250= $100,000

It works for me Justin.

I agree 250% of 40000 is 100,000, but if you got a 250% return on 40k, then you'd end up with $140k total.

I guessed 250% correctly (since I figured they made the mistake that they made).

 

[Texas Proud]

I missed one of the tickers... but got all the others right...

 

[larry]

Got hung up on the 160%/250% also. Rest wasn't too difficult but i'm not hangin' out a shingle.

 

[JustCurious]

I made it to the million, but I used one lifeline on the riskiest fund question... I picked equity fund instead of bear fund....that one is definitely arguable.

 

[jazz4cash]

One of the questions on the test left me thinking.......

The question was - which fund is most risky

Equity
Bear
Bond
Money Market

I picked equity. But the "correct" answer is Bear, which I disagree with. Bear funds dont go down as much (or up as much) as equity funds do, and that in my opinion should be considered less "risky".

The reasoning given was that if the markets go up, the bear fund will go down (YES we all know that, but that does not translate to them being riskier than equity funds) and ofcourse Bear funds do have equity in them

Thoughts?

I agree with you...only one I got "wrong". I think a bear fund IS an equity fund, and I think unlimited losses are not only characteristic of short positions. Upon further review, I also agree 150% was correct also

 

[JustCurious]

The more I think about it, I think "bear fund" is probably the right answer. A bear fund is an equity fund, that's true. But, based on historical evidence, the stock market goes up 2/3 of the time, and goes down 1/3 of the time. And since bear funds are designed to go up when the market goes down, and vice versa, a bear fund would be expected to go DOWN 2/3 of the time, whereas an equity fund would be expected to go only go down 1/3 of the time. Thus, a bear fund would be more risky.

 

[soupcxan]

A bear fund contains short positions, so technically your loss is unlimited, as it would be with a short sale.

You are incorrect. With mutual funds, the most you can lose is your total investment. This is not the same as holding individual short positions where your potential loss is unlimited.

http://www.investorplace.com/free/rbpi93.htm?ak=5YX169
http://www.zealllc.com/2002/bearport.htm

 

[OAG]

Example given: Starting balance $250,000; Loss 60% or $150,000. New Balance $100,000 ($250,000 minus loss of $150,000). Balance MUST go up 250% (ie., 2.5 X $100,000 = $250,000) pr original starting balance. CORRECT ANSWER 250%.

Am I missing something?

 

[kumquat]

Example given: Starting balance $250,000; Loss 60% or $150,000. New Balance $100,000 ($250,000 minus loss of $150,000). Balance MUST go up 250% (ie., 2.5 X $100,000 = $250,000) pr original starting balance. CORRECT ANSWER 250%.

Am I missing something?

Yes

Using your example starting at new balance $100,000, balance must icrease by $150,000 (now original $100,000 + $150,000) to get to $250,000. $150,000 is 150% of balance ($100,000).

 

[FIRE'd@51]

Example given: Starting balance $250,000; Loss 60% or $150,000. New Balance $100,000 ($250,000 minus loss of $150,000). Balance MUST go up 250% (ie., 2.5 X $100,000 = $250,000) pr original starting balance. CORRECT ANSWER 250%.

Am I missing something?

If an investment doubles, it has gone up 100%. If it triples, 200%, etc. You always have to subtract 1 from the multiplier to get the percentage increase.

Example:

Start with $1000. If it doubles, you now have 2 x $1000 = $2000

Return is 2 - 1 = 1 => 100%


In your example:

Start with $100K

2.5 x $100K = $250K

Return is 2.5 - 1.0 = 1.5 => 150%

 

[FinanceDude]

While it was easy for most of us, I am sure the average person in the US would get most of it wrong. After all, most folks can't find Iraq on a map, don't know their Senator is, etc.

I think it did it in about 90 seconds..........

 

[Nords]

While it was easy for most of us, I am sure the average person in the US would get most of it wrong. After all, most folks can't find Iraq on a map, don't know their Senator is, etc.

I've often wondered what those poll results would be if each correct answer was rewarded with $20.

 

[preben]

As to bear funds are are many types out there, PSAFX from the Prudent Bear Family is in foreign bonds and gold+gold equities, certainly less risky than a equity fund.

I do agree that funds that go opposite of the given market is more risky - simply because the market goes up more often than down.

Cheers!