1. Diversification & Risk – Day 1 Directions: Using information from the slideshow via the class wiki, complete the note-taker by answering questions, defining vocabulary words, and applying economic reasoning to some real-world scenarios. These notes will be collected at the end of class and you will be assessed on this information at a later date.

2. Warm-up: Economists generally warn people NOT to put all their eggs in one basket – hypothesize why?

3. If one places all of their savings in a single savings or investment account, such as a single company's stocks or bonds, and that company fails, they could lose everything, much like dropping the basket that holds all of your eggs.

4. Here are 2 vocabulary terms you MUST know and understand: 1) Portfolio a collection of financial investments held by an individual or financial organization 2) Diversification investing in various financial instruments in order to reduce risk

5. Please read AND familiarize yourself with the following forms of saving and investing on Handout 5. ·Checking accounts ·Savings accounts ·Certificates of Deposit ·U.S. Government Bonds ·Municipal Bonds and Special Purpose Bonds ·Corporate Bonds ·Mutual Funds ·Stocks ·Real Estate ·Collectibles ·Commodities

6. Using evidence and details from Handout 5, transfer the list of investments accordingly. Highest Risk - Highest Potential Return or Loss 4. 3. 5. 6. 7. 8. 9. 1. 2. 10. Lowest Risk - Lowest Potential Return or Loss The Pyramid of Risks and Reward

7. -investing only what you can afford to lose. -You already know the (negative) power of interest. Borrowing money to invest is NOT sound financial practice. -investing at your comfort level. -There’s no such thing as a quick buck. Becoming wealthy is a very calculated maneuvering of choices and it takes time. -investing according to your age. -Younger people have time on their side so they can stand to be a bit more risky than your grandparents. 3 main rules for investing. They include…

8. Diversification and Risk There’s 1 more investment plan you need to be familiar with. Mutual Funds  A mutual fund pools investors' money.  The fund puts its investors' money into the market on their behalf.  In effect, investors own small amounts of many different assets.  Mutual funds enable investors to avoid the risk that comes from owning any one asset. In other words, mutual funds make it easy to diversify. Given this information, where might Mutual Funds exist on the “Pyramid of Risks and Rewards” from before? Please insert it accordingly.

9. Diversification and Risk Investment Situations: How would you advise yourself given the situation? Please be specific in your explanation as this will help you later on both quizzes and the final assessment. You received $1,000 in gift money for your 8th-grade graduation. You have no need for this money anytime soon. You have $18,000 that you'll need for college next year. You inherited $10,000 from your great aunt that you would like to use as a down payment on a house you plan to buy next year.

10. Diversification and Risk Investment Situations: How would you advise yourself given the situation? Please be specific in your explanation as this will help you later on both quizzes and the final assessment. You received $1,000 in gift money for your 8th-grade graduation. You have no need for this money anytime soon. You have $18,000 that you'll need for college next year. You inherited $10,000 from your great aunt that you would like to use as a down payment on a house you plan to buy next year.

11. Diversification & Risk – Day 2 Directions: Apply your understanding of savings and investment you learned yesterday to the following scenarios. Feel free to reference your notes and discuss amongst your table partners.

13. checking account vs. certificate of deposit Back

14. savings account vs. U.S. government bond Back

15. certificate of deposit vs. U.S. government bond Back

16. U.S. government bond vs. municipal bond Back

17. municipal bond vs. special purpose bond Back

18. special purpose bond vs. corporate bond Back

19. corporate bond vs. growth mutual fund Back

20. growth mutual fund vs. blue chip stock Back

21. blue chip stock vs. real estate Back

22. real estate vs. gold and silver Back

23. art collection vs. income mutual fund Back

24. stuffed animal collection vs. gold and silver Back

25. gold and silver vs. savings account Back

26. income mutual fund vs. growth mutual fund Back

27. penny stock vs. blue chip stock Back

28. Please complete Handout 2 on your own or with the collaboration of a partner. You can rank each scenario separate from the others or in comparison to them – you choose!