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Answers to the 2025 Investor IQ Test. by Natalie Pace.
 
If you score 21 correct answers or higher in our 2025 Investor IQ Test, then you’re in great shape! If you score 18, then you are C-level. Below 18 correct indicates that you are in real need of a basic course in life math. (Even Ph.D.s and math geniuses might not know the basics of Wall Street… We have a lot of well-educated professionals and financial executives who attend our retreats!) So, consider joining us at our next Investor Educational Retreat. There you will learn the life math that will save you thousands annually, earn money while you sleep, activate a much richer life, and lead to generational wealth. The sooner you get this information, the faster your life transforms.
 
Our time-proven 21st Century strategies are enthusiastically recommended by Nobel Prize-winning economist Gary Becker, former TD AMERITRADE chairman and CEO Joe Moglia, McArthur Genius Award winning economist Kevin Murphy and thousands of Main Street investors. They earned gains in the Great Recession and the Dot Com Recession, and outperformed the bull markets in between. Best of all, these strategies are as easy as a pie chart. Email [email protected] or call 310-430-2397, if you’d like to see more testimonials, if you have questions, or if you’d like to register to attend one of our online courses.
 
1. What are the most important questions you should ask your Certified Financial Advisor before hiring him/her?

"How much of my portfolio should I keep safe?" This question will help you to determine whether you are dealing with a trusted professional who is looking after your best interest, or a salesman who is looking to make a quick buck. The industry standard answer to this question is, "A percentage equal to your age.” As stocks are trading at elevated prices and bonds are carrying duration and credit risk, which can make them illiquid and negative-yielding, it would be even better if s/he adds, “But given elevated equity valuations and leverage concerns, we might consider overweighting into safety."
If they just sidestep this question and redirect you to a risk tolerance questionnaire, that is a red flag. If they tell you not to worry because things always work out in the end, that it a sure sign that you are adopting the Buy & Hope plan, which wipes investors out in recessions – something that is never ideal, but can be devastating as we get closer to retirement.  

One more important thing. Since many long-term bonds lost more than stocks in 2022 and have continued their downward trajectory, we need to know what’s safe in a Debt World, rather than just rely upon bonds, annuities or money market funds. These “safe havens” are highly leveraged, subject to credit risk, vulnerable to capital loss and can be illiquid to boot. Now is the time to clearly know exactly what we own and why. You can learn more about why so many “safe” investments are losing money in our blog.

Consider getting an unbiased 2nd opinion on your current wealth plan, if you’re unsure just how safe, protected, hot and diversified you are. Call 310-430-2397 or email [email protected] for pricing and details.  

2. What are 3 red flags that your financial plan is at greater risk of losses than you are being told?

• Simply ask for a performance chart of your plan compared to the S&P500 for the last 5 & 10 years. (Most brokerages provide this information upon request, and many include performance on their brokerage statements.) 2021 was a super performer for stocks. Long-term government bonds (-26%) lost even more than stocks (-19.44%) in 2022. 2023 and 2024 were also gangbuster years for equities, with gains of 24.23% and 23.31%, respectively. Conservative portfolios missed out on the stock performance, and might have lost value, due to the weakness in bonds. Buy & Hold investors typically lose half or more in recessions and then take years to crawl back to even. It took the NASDAQ Composite Index 15 years to recover from the -78% losses of the Dot Com Recession.
• If you have more than just a few pages of holdings in your financial plan, your gains might be negatively impacted by fees and commissions. You are not as diversified as you believe, as pages and pages of holdings can still just be the same type of holdings over and over again. You’re likely more at risk than you know, even if you’ve assured that you are well-protected and diversified.
• If your returns over the last decade are lagging the S&P500, your plan needs reviewing to understand why this is the case. The Dow Jones Industrial Average performed at half the speed, and both indices were far below the performance of the Magnificent 7 companies. (Something you’ll learn more about in my books and Financial Freedom Retreats.) https://www.nataliepace.com/#/
  
  

3. How much of your nest egg should you keep safe?

A percentage equal to your age. Consider overweighting more into safety when assets are overpriced, the economy is weak, or you are nervous. Again, in today’s Debt World, it is important to know what’s safe. Long-term bonds are losing value and are illiquid, which makes them substantially riskier than most investors realize. (Our safe side isn’t supposed to lose money!) Money market funds can have liquidity fees, are vulnerable to capital loss and are not FDIC-insured. Annuities are more vulnerable than most investors know because insurance companies are carrying a great deal of risk and leverage, can have hidden fees and terms that mute performance, and annuities are not federally insured. Additionally, you lose up to 9% of your money when you purchase the annuity! (So much for the sales pitch that you can’t lose.)  

4. What's safe?

In 2025, consider short-term, creditworthy FDIC-insured CDs, Treasury Bills or bonds.  Rolling, short-term maturity dates ensure that we have access and liquidity in case another investment opportunity arises, and protects us from duration risk. Read the fine print. Be cautious about extending duration beyond a few years. Factor in the credit risk.

Hard assets will hold their value better than paper assets in a Debt World. So, the mantra “safe, income-producing hard assets that you purchase for a good price” is another good option. Real estate is at an all-time high in the U.S., so it will likely be difficult to purchase for a good price in 2025, unless we are looking into a 3-generation family plan (which is a great idea). There are some hard assets that offer the best ROI by reducing our monthly expenses (for life), which we cover at the Financial Freedom Retreat, and in our blogs and videoconferences.

You don’t want to be all in on hard assets because you also need liquidity and cash flow. You don’t want paper losses because they reduce your net worth and FICO score, and you might actually need that money.

We spend one full day on What’s Safe at the Investor Educational Retreats. Educate yourself now on the best income-producing hard assets that are right for you, so that when prices are more attractive, you know what you want and have the means to take action and close the deal. Call 310-430-2397 to learn more.

Everyone is hoping that interest rates will go down in 2025 and 2026. However, the landscape has gotten a little trickier, with the possibility that tariffs will bring back the inflation problem. The Fed Fund rate is projected to go down to 3.9% in 2025, 3.4% in 2026 and 3.1% in 2027 (as of Dec. 18,2024). Incoming data often changes these projections.
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5. What is the average return of stocks over the last 10 and 30 years?

Large cap stocks earned 13.1% annualized over the last decade and 10.92% over the 30-year period (source: Morningstar). Small cap stocks performed at 7.08% and 9.02%, respectively.

​Having expensive stocks, unaffordable real estate, and higher interest rates than we’ve had in 15 years, as debt soars to all-time highs and credit is still tight, has increased the potential for volatility on Wall Street. Economists worry that tariffs will bring back inflation and supply chain disruptions, which could negatively impact Wall Street. There have been wild rides over the past five years. This is likely to continue as the hot and fast Wall Street whales seek to gobble up incremental gains.

18. How many companies are in the Dow Jones Industrial Average?
30 companies. Many are household brands. Most have been around for over half a century, and many are carrying far more debt than the value of the company. As I mentioned previously, the DJIA is underperforming the S&P500 by almost half.

Leverage has begun to concern economists. Over 50% of the S&P500 corporate bonds are at the lowest rung of investment grade or at junk bond status. This includes a lot of banks, brokerages, financial services and insurance companies. If you don’t understand how much debt corporations are holding, you can learn how to use this valuable tool to increase the performance of your nest egg on the 2nd day of the Investor Educational Retreat.

Click to access the names of the 30 companies. The Dow Jones Industrial Average was launched in 1896.
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19. Which index has performed better over the last 5 years, the Dow Jones Industrial Average or the NASDAQ Composite Index?
 
As you can see in the chart below, the NASDAQ has outperformed both the S&P500 and the DJIA. The S&P500 is a better performance choice than the DJIA. At the same time, the DJIA tends to be less volatile than the NASDAQ Composite Index.