Dive deeper into investing conversations with young people. This lesson lets them explore different scenarios to learn how to build a diversified portfolio to help meet financial goals.
Learning objectives you’ll cover
What risk has to do with it
Risk is the possibility of losing some or all of an investment. How much risk someone is willing to accept is called risk tolerance. Factors such as age and income, as well as economic and life changes, can affect risk tolerance.
Pay attention to the investment mix
Kids learn the importance of “rebalancing” or adjusting a portfolio over time to make sure it still fits their financial goals, time horizon, and risk tolerance.
Why mixing it up makes sense
The prices of stocks go up and down for different reasons. So, it’s important to own different types of companies versus one stock or industry. To help with this concept, terms such as “portfolio” and “international stocks” are discussed.
Investing for the long-term is reinforced. Kids discover how building a well-diversified portfolio—and adjusting the mix over time—can help grow investments and reduce investment risk.
Explore this lesson
View lesson pages and activities here or download the full Student Workbook. Remember to check the Teaching Guide to know the vocabulary and takeaways for this lesson as well as questions to ask when reviewing concepts with young people.
All materials are free downloadable PDFs, so you easily use what works for you.
Diversification is broken into two lessons:
Investment Choices, Part A
Nikki is 25 years old and wants to do more investing. Read the advice her financial advisor gives her about diversification and the risk of investing all your money in a single company.
Nikki does more research on diversification and decides to talk to her sister, April, who loves helping Nikki with her financial education. Follow their discussion on how to manage investment risk through diversification.