How to use this quiz
Work through the 10 items across Research, Risk Assessment, and Financial Readiness. The Risk Assessment items are the ones most often under-checked — could you actually tolerate a 30-50% drop without panic-selling, does the timeline match the goal (money needed within 5 years generally shouldn't be in volatile assets), and is the position sized under 10-20% of your portfolio so a loss wouldn't be catastrophic. Don't check "compared to alternatives" unless you've actually looked at index funds, bonds, or CDs with comparable risk.
What your result means
70%+ means you've done the research, sized the position appropriately, and confirmed the timeline matches your goals. 40-69% typically flags gaps in risk assessment — often an unclear exit strategy, fees and taxes not fully accounted for, or the position being too large relative to your portfolio. Below 40% means the basics aren't covered yet; investing now means betting rather than allocating, and a single bad outcome could derail your finances.
When to trust it
This checklist evaluates your diligence, not the investment's actual merit. A thorough process can still lose money — historical returns don't predict future ones, and "understanding the investment" doesn't protect against market-wide downturns. For meaningful allocations, confirm specific numbers (expense ratios, capital gains rates, projected returns) against the prospectus or with a fee-only financial advisor. Never invest your emergency fund, no matter how thoroughly you've researched the opportunity.
Frequently Asked Questions
What makes an investment 'worth it'?
Three tests, all required: a return that compensates the risk (compare against a boring benchmark like an index fund — if the upside barely beats it, the risk isn't paying you), a time horizon you can actually wait out, and a downside you can afford. The quiz scores your situation against these; the biggest mistake it screens for is 'attractive return, unbearable worst case.'
Should I invest money I might need next year?
No. Anything you may need within ~3 years belongs in cash equivalents (high-yield savings, T-bills, money market), not investments. The reason isn't the average return — it's the sequence: a 25% drawdown in month ten forces you to sell at the bottom to get cash, turning a temporary decline into a permanent loss. Investing works when time absorbs volatility; short horizons can't.
How do I spot investment red flags?
Guaranteed high returns (the two words never honestly coexist), pressure to decide quickly, complexity you can't explain in two sentences, returns that depend on recruiting others, and unverifiable track records. Also treat FOMO framing ('everyone is getting in') as a negative signal. If you can't figure out how the investment makes money, the usual answer is that it makes money from you.