5.6 Bonds, Allocation, Diversification

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MATH CONNECTION - Evaluating Asset Classes

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5.6 Bonds, Allocation, Diversification

5.6 Bonds, Allocation, Diversification

Describe the range of emotions you experienced as you played the game.

How did your strategy evolve over each round? What factors influenced your strategy?

This image is referred to as the “bond see-saw.” What does it show about the relationship between a bond’s price and the overall interest rates of the market?

Explain in your own words why that relationship exists.

What is meant by “asset allocation?”

After allocating assets, what’s the next level of diversifying you should do within asset classes?

How can bond funds help with portfolio diversification more than individual bonds?

What is one way investing in a bond fund is like investing in an individual bond?

What is one way investing in a bond fund is like investing in the stock market?

What does the “Annual” column of the chart measure?

What does it mean when an asset class has “Best” and “Worst” percentages that are spread very far apart?

Look at the annual return for Small Cap Stocks in 2010. If the 2010 return is LOWER than it was in 2009, why is Small Cap Stock higher on the list in 2010?

What are the three common assets considered in asset allocation?Stocks, bonds, and bond fundsStocks, bond funds, and mutual fundsStocks, real estate, and cryptocurrencyStocks, bonds, and cash

The annual interest rate of a bond is called the ______ rate.Face valueCouponMaturityDiscount

Describe the range of emotions you experienced as you played the game.

How did your strategy evolve over each round? What factors influenced your strategy?

What did you learn about yourself and your tolerance for risk with this game?

This game illustrates some of the ups and downs of stock market trends. Depending on how big or little they are, it might make you nervous about putting money into the market. What kind of investment trend might make you feel better about your investment portfolio?

What does the term coupon mean (when related to bonds)?The timeframe of the bondThe annual interest rate paid on a bondThe face value of the bond d. The discounted rate of the bond when purchased

Which is the highest bond rating?AAABBBCCCDDD

Why would someone invest in a bond with a low rating?Lower rated bonds typically have a higher couponLower rated bonds typically have a lower couponLower rated bonds are typically less expensiveLower rated bonds are typically more expensive

What is a bond fund?A bond issued by a corporation to raise funds for a variety of reasonsA bond that does not pay interest but is sold at a discountA mutual fund that invests in a variety of bondsA mutual fund that mimics a particular market index

True or False: Bonds have less risk than stocks, but more risk than a savings account.

This image is referred to as the “bond see-saw.” What does it show about the relationship between a bond’s price and the overall interest rates of the market?

Explain in your own words why that relationship exists.

What is meant by “asset allocation?”

After allocating assets, what’s the next level of diversifying you should do within asset classes?

How can bond funds help with portfolio diversification more than individual bonds?

What is one way investing in a bond fund is like investing in an individual bond?

What is one way investing in a bond fund is like investing in the stock market?

What does the “Annual” column of the chart measure?

What does it mean when an asset class has “Best” and “Worst” percentages that are spread very far apart?

As an investor, you want to buy low and sell high. But, when an asset class has a bad year, such as International Stocks in 2014, why might it be hard to “hold on” without selling?

Look at the annual return for Small Cap Stocks in 2010. If the 2010 return is LOWER than it was in 2009, why is Small Cap Stock higher on the list in 2010?

Let’s look at cash first. It never has a negative year. Does that make Cash Equivalents a good investment? Why or why not?

Do you personally think investing in an asset class is enough to minimize risk and create a winning strategy? Justify your answer.

What are the three common assets considered in asset allocation?Stocks, bonds, and bond fundsStocks, bond funds, and mutual fundsStocks, real estate, and cryptocurrencyStocks, bonds, and cash

The annual interest rate of a bond is called the ______ rate.Face valueCouponMaturityDiscount

What did you learn about yourself and your tolerance for risk with this game?

This game illustrates some of the ups and downs of stock market trends. Depending on how big or little they are, it might make you nervous about putting money into the market. What kind of investment trend might make you feel better about your investment portfolio?

What does the term coupon mean (when related to bonds)?The timeframe of the bondThe annual interest rate paid on a bondThe face value of the bond d. The discounted rate of the bond when purchased

Which is the highest bond rating?AAABBBCCCDDD

Why would someone invest in a bond with a low rating?Lower rated bonds typically have a higher couponLower rated bonds typically have a lower couponLower rated bonds are typically less expensiveLower rated bonds are typically more expensive

What is a bond fund?A bond issued by a corporation to raise funds for a variety of reasonsA bond that does not pay interest but is sold at a discountA mutual fund that invests in a variety of bondsA mutual fund that mimics a particular market index

True or False: Bonds have less risk than stocks, but more risk than a savings account.

Do you personally think investing in an asset class is enough to minimize risk and create a winning strategy? Justify your answer.

What are the three common assets considered in asset allocation?
Stocks, bonds, and bond funds
Stocks, bond funds, and mutual funds
Stocks, real estate, and cryptocurrency
Stocks, bonds, and cash

The annual interest rate of a bond is called the ______ rate.
Face value
Coupon
Maturity
Discount

What does the term coupon mean (when related to bonds)?
The timeframe of the bond
The annual interest rate paid on a bond
The face value of the bond
d. The discounted rate of the bond when purchased

Which is the highest bond rating?
AAA
BBB
CCC
DDD

Why would someone invest in a bond with a low rating?
Lower rated bonds typically have a higher coupon
Lower rated bonds typically have a lower coupon
Lower rated bonds are typically less expensive
Lower rated bonds are typically more expensive

What is a bond fund?
A bond issued by a corporation to raise funds for a variety of reasons
A bond that does not pay interest but is sold at a discount
A mutual fund that invests in a variety of bonds
A mutual fund that mimics a particular market index

What are the three common assets considered in asset allocation?
Stocks, bonds, and bond funds
Stocks, bond funds, and mutual funds
Stocks, real estate, and cryptocurrency
Stocks, bonds, and cash

The annual interest rate of a bond is called the ______ rate.
Face value
Coupon
Maturity
Discount

What does the term coupon mean (when related to bonds)?
The timeframe of the bond
The annual interest rate paid on a bond
The face value of the bond
d. The discounted rate of the bond when purchased

Which is the highest bond rating?
AAA
BBB
CCC
DDD

Why would someone invest in a bond with a low rating?
Lower rated bonds typically have a higher coupon
Lower rated bonds typically have a lower coupon
Lower rated bonds are typically less expensive
Lower rated bonds are typically more expensive

What is a bond fund?
A bond issued by a corporation to raise funds for a variety of reasons
A bond that does not pay interest but is sold at a discount
A mutual fund that invests in a variety of bonds
A mutual fund that mimics a particular market index