Majority of fund investors flunk test

NEW YORK -- If investors were graded on what they know about mutual funds, it seems that many would get an "F."

When the Vanguard Group and Money magazine recently gave 1,000 people a test on the basics of investing, the median score was a failing 40 percent. The results indicate that shareholders, while they say they want more information from fund companies, could use some brushing up on the fundamentals themselves.

Only 2 percent of those who took 2002 Investor Literacy test scored 90 or above.

The 20 questions were basic but still managed to stump most investors. The hardest question -- with only 16 percent getting it right -- asked investors about the purpose of an index mutual fund.

Seventy-five percent failed to understand how fund expense ratios work and nearly 70 percent didn't know how to best measure fund performance.

If you're wondering how you'd rate, the test is available on Vanguard's Web site (www.vanguard.com).