3.05 Managing Risk

Last updated 5 months ago

17 questions

Note from the author:

Instructions

3.05 Managing Risk

Last updated 5 months ago

17 questions

Note from the author:

Instructions

Intro: 
PROMPT:
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?

VIDEO: What is Investment Risk?
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?

In your own words, explain the three strategies the video suggests using to manage risk.
Time:_______ 
Diversification:_______ 
Invest over time:_______ 

VIDEO: What Is Diversification?
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.

Fill in the blanks: Diversification means choosing a _______ of _______  to help reduce _______.

The video describes two ways to diversify. Give an example for each one.
Diversify across asset classes (i.e. choosing the main parts of your portfolio)_______ 
Diversify within each asset class (e.g. choosing which stocks to buy)_______ 

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?

DATA CRUNCH: How Does Your Asset Mix Impact Your Returns? 📷10 min
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.

What is the average annual return if someone invested 100% in bonds?_______ 
What is the average annual return if someone invested 100% in stocks?_______ 
Calculate the range of potential annual returns if you invested 10% in bonds and 90% in stocks_______Calculate the range of potential annual returns if you invested 10% in stocks and 90% in bonds_______. What is the difference between the two ranges?_______ 
What might you say to someone whose reason for investing in 90% bonds and 10% stocks is that they want a 5.4% return on investment?_______ 
Use evidence from this graph to explain the value of investing in both stocks and bonds - not justone or the other._______ 

Watch:  Is Dollar-Cost Averaging Better Than Lump-Sum Investing?, before you complete the following activity.

CTIVITY: ANALYZE: Dollar Cost Averaging 📷25 min
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.

Exit TIcket: 

3.05 Managing Risk

3.05 Managing Risk

PROMPT:

Which option would you pick and why?

VIDEO: What is Investment Risk?

Even though risk seems like a bad thing, why is that not always the case with investing?

VIDEO: What Is Diversification?

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?

DATA CRUNCH: How Does Your Asset Mix Impact Your Returns? 📷10 min

CTIVITY: ANALYZE: Dollar Cost Averaging 📷25 min

PROMPT:

Which option would you pick and why?

VIDEO: What is Investment Risk?

Even though risk seems like a bad thing, why is that not always the case with investing?

VIDEO: What Is Diversification?

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?

DATA CRUNCH: How Does Your Asset Mix Impact Your Returns? 📷10 min

CTIVITY: ANALYZE: Dollar Cost Averaging 📷25 min

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?

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

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?

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

3.05 Managing Risk

3.05 Managing Risk

PROMPT:

Which option would you pick and why?

VIDEO: What is Investment Risk?

Even though risk seems like a bad thing, why is that not always the case with investing?

VIDEO: What Is Diversification?

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?

DATA CRUNCH: How Does Your Asset Mix Impact Your Returns? 📷10 min

CTIVITY: ANALYZE: Dollar Cost Averaging 📷25 min

PROMPT:

Which option would you pick and why?

VIDEO: What is Investment Risk?

Even though risk seems like a bad thing, why is that not always the case with investing?

VIDEO: What Is Diversification?

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?

DATA CRUNCH: How Does Your Asset Mix Impact Your Returns? 📷10 min

CTIVITY: ANALYZE: Dollar Cost Averaging 📷25 min

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?

All of the following are strategies to reduce risk EXCEPT…Holding your investments for at least five yearsMaking sure your investments are diversifiedHiring an investment manager who you think can beat the marketInvesting small amounts of money over longer periods of time

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?

All of the following are strategies to reduce risk EXCEPT…Holding your investments for at least five yearsMaking sure your investments are diversifiedHiring an investment manager who you think can beat the marketInvesting small amounts of money over longer periods of time

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

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