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New investor quiz

Before you invest your first dollar, see how much you already know.

New to investing and wondering how much you already know? This quick quiz helps you see where you stand and what to focus on next. It’s designed specifically for new investors who want to build confidence before diving deeper.

In just a few minutes, you’ll test your understanding of risk, diversification, account types, and long-term strategy. These fundamentals matter because they form the foundation for smart decisions and can help investors achieve better outcomes over time.

1. Which of the following best describes diversification?

A) Buying as many stocks as possible in one industry

B) Spreading investments across different asset classes and sectors

C) Holding cash to avoid market volatility

D) Trading frequently to capture gains

Open for answer

B) Spreading investments across different asset classes and sectors. Diversification helps reduce risk by ensuring your portfolio is not dependent on a single company, sector, or asset type. When investments respond differently to market changes, it can help smooth overall results.

2. True or false: Taxable brokerage accounts offer the same tax advantages as retirement accounts, such as an IRA.

Open for answer

False. Retirement accounts often offer tax benefits, such as tax-deferred growth or tax-free withdrawals, which can make a meaningful difference for long-term goals.

3. If you invest $1,000 and your investment grows by about 7% per year, roughly how much could it grow to after 10 years (ignoring taxes and fees)?1

A) $1,400

B) $1,700

C) $1,900

D) $2,100

Open for answer

D) $2,100. This illustrates the power of compounding. Over time, returns can compound, allowing steady growth to accumulate.

4. Which of the following helps determine your personal risk tolerance?

A) Current market trends

B) Past performance

C) Financial goals

D) How much money you have to invest

Open for answer

C). Risk tolerance is personal. Understanding risk tolerance helps you choose investments you can stick with through market ups and downs.

5. True or false: Investing for the long term can help reduce the impact of short-term market volatility and give compounding time to work.

Open for answer

True. Markets generally fluctuate in the short term, but staying invested longer can help smooth volatility and allows time to potentially work in your favor.

6. What is the primary role of an index fund in a beginner’s portfolio?

A) It seeks to consistently outperform the market

B) It seeks to pick only the best-performing stocks

C) It seeks to track the performance of a market benchmark

D) It seeks to eliminate market risk

Open for answer

C) It seeks to track the performance of a market benchmark. Index funds offer broad exposure at typically lower costs, making them a simple and efficient foundation for many new investors.

7. True or false: To start investing successfully, a portfolio should include asset allocation, tax-efficient investments, active rebalancing, and a complex strategy?

Open for answer

False. Successful investing doesn’t require complexity. Simple strategies are often easier to maintain and can be just as effective over time.

How did you do?

6–7 correct: You’re well prepared to start investing with confidence. Focus on building a simple, diversified portfolio and developing long-term habits.

4–5 correct: You’re on the right track. Review a few core topics, such as compounding, diversification, and index funds, to strengthen your foundation.

0–3 correct: Everyone starts somewhere. Building knowledge now can help you feel more confident later.

What to do next

Whether you’re just getting started or shoring up the basics, Fidelity Learn can help you turn knowledge into action. If you’re ready to build on what you learned, explore Investing for beginners. You’ll find short videos and easy-to-follow articles that break investing concepts into clear, manageable steps.

The bottom line

This quiz is designed to highlight what you know and where you can grow. Investing is a journey, and even small steps, like testing your knowledge and learning the fundamentals, can help set you on the path toward long-term success.

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More to explore

1. This hypothetical example assumes the following: (1) $1,000 investment made at the beginning of the year (2) An annual rate of return of 7%. (3) The ending values do not reflect taxes, fees, inflation, or withdrawals. If they did, amounts would be lower.

This example is for illustrative purposes only and does not represent the performance of any security. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for 7% annual rate of return also come with risk of loss.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Fidelity does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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