Diversification

Risk

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

• being able to accurately predict how a company will do on the stock market

• different types of markets, sectors and industries

True or False: Risk can be reduced through diversification.

• True

• False

Diversification

• an individual and their tolerance for risk

• strategy in which you spread your investment dollars among different market

• a financial website

Diversification is good because:

• It focuses investments on a single stock to take advantage of growth potential

• Index funds have higher fees than individual stocks

• Interest rates rise and fall

• It spreads the risk of investment

Your financial return with a diversified investment portfolio will:

• Be the same amount every year

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

• Fall if a single company in your portfolio goes out of business

• Beat absolutely every other investor

Select all thebenefits of an INDEX FUND

• Index funds are well diversified

• Index funds have low fees

• A group of stocks are already bundled together for you so less research is needed

• Index funds have high fees

"Putting all your eggs in one basket"

• Concentrated Risk

• Diversified Risk

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?

• Yes-she should support her best friend

• Yes-Her best friend is a natural born leader and the compay will definitely create significant profits

• No- Never mix business with friends and family

• 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

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

• True

• False

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:

• concentrated risk

• diversified risk