Diversification

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Risk

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the chance of losing all or part of the value of an investment

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True or False: Risk can be reduced through diversification.

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True

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Diversification

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strategy in which you spread your investment dollars among different market

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Diversification is good because:

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It spreads the risk of investment

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Your financial return with a diversified investment portfolio will:

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Rise and fall, but have less risk than a small number of stocks and investments.

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"Putting all your eggs in one basket"

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Concentrated Risk

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Reagan wants to start investing. Her best friend just created a new jewelry line and she wants to invest all of it in the company. IS this a good investment strategy?

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No- If her best friend's business doesn't do well, Reagan will lose everything. She should only invest SOME of her money in her best friend's business.

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By purchasing stocks in an index fund, you are decreasing your financial risk

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True

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Stevie saved $2000 from her summer job babysitting. She wants to put $500 in a savings account, leave $500 in her checking account, invest $800 in an index fund, and invest the final $200 in Amazon stock. This is an example of:

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diversified risk

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Investing all your money in one company (select all that apply)

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is putting all your eggs in one basket