Lesson 5: Managing Risk

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.

1. Time

2. Diversification

3. Invest over time

Fill in the blanks: Diversification means choosing a ________________________________ to help reduce ________________.

The video describes two ways to diversify. Give an example of diversify across asset classes

The video describes two ways to diversify. Give an example of diversify within each asset class

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?

What is the average annual return if someone invested 100% in bonds?

What is the average annual return if someone invested 100% in stocks?

Compare the range of potential annual returns if you…

1. Invested 10% in bonds and 90% in stocks:

2. Invested 10% in stocks and 90% in bonds:

What might you say to someone whose reason for investing in 90% stocks and 10% bonds is that they want a 9.9% return on investment?

Question 1

Leon is 50 years old and plans to contribute $19,500 to his retirement account this year. How much of that should Leon invest in stocks?

Question 2

Marco is 23 years old. He puts $5,500 in his new retirement account. How much of Marco's $5,500 should he invest in stocks?

Question 3

Question 4

Question 5

Use the Rule of 100 instead of the Rule of 110. How much of Talia's $12,750 investment should go toward stocks if she is 62.

Part III: 5.

Part III: 6.

Part IV: BONUS