Font size
WorksheetsDiversification
Total questions: 11
Worksheet time: 6mins
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
Investing all your money in one company (select all that apply)
Can have a BIG payoff if the company profits
Can result in a SIGNIFICANT loss if the company doesn't do well
is putting all your eggs in one basket
is diversifying your risk
