Learning ObjectivesStudents will be able to:
| National Standards for Personal Financial Education Investing
|
Learning ObjectivesStudents will be able to:
| National Standards for Personal Financial Education Investing
|
Intro:
Use the space below to answer the prompt.
Hypothetical scenario: Your teacher rolls a 20-sided die. You have the opportunity to receive a specific amount of money if you correctly guess which number is rolled:
Guess the number exactly: $500
Guess even or odd: $50
Guess it will fall between 1 and 19: $5
Which option would you pick and why?
In the previous prompt, your decision was likely influenced by how much risk you were willing to take. Learning to manage your risk is an important part of creating an investing strategy that works for you. Watch this video to learn about effective risk management strategies for investing. Then, answer the questions.
Even though risk seems like a bad thing, why is that not always the case with investing?
Let’s take a closer look at the second strategy mentioned in the previous video to manage investment risk: diversification. Watch this video to learn about the difference between diversifying by asset class and diversifying across investments. Then answer the questions.
The video says “keep in mind that diversification does not mean you’re guaranteed to profit or that you’re protected against loss.” Why is it still a good idea to diversify your investments?
Continue exploring the strategy of diversification by taking a look at how it can affect the returns on your investment. Analyze the data and answer the questions on this worksheet to complete the Data Crunch.
Watch: Is Dollar-Cost Averaging Better Than Lump-Sum Investing?, before you complete the following activity.
The very first video you watched recommended focusing on three factors to minimize risk: time, diversification, and investing over time, also known as dollar cost averaging. In this activity, you’ll explore how dollar cost averaging can help minimize risk by taking a look at the numbers! Follow the directions on the worksheet to complete the activity.
Why were more shares purchased in March despite spending the same amount in both February and March?
Why did the portfolio value increase in April, even though fewer shares were purchased?
Exit TIcket:
All of the following are strategies to reduce risk EXCEPT…
Holding your investments for at least five years
Making sure your investments are diversified
Hiring an investment manager who you think can beat the market
Investing small amounts of money over longer periods of time
Leaving your investments in the stock market alone for at least five years is a good way to reduce risk because…
It allows your investments to earn more interest
It keeps you from reacting to dips in the market and selling at too low of a price
Fees are waived for investments held for over five years
You get a bonus from the company if you invest for five years
Which of the following is an example of diversification?
Putting the majority of your money into a savings account and investing the rest
Investing different amounts of money every month
Purchasing shares of stock in a variety of companies and industries
Using multiple investment managers to get different opinions
