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I use this lesson in my Personal Finance class. This lesson includes a PPT, class activity, and individual formative assessment. The class will construct an investment pyramid on the board to compare and contrast the risk level of various investments covered in this unit. Students will complete a formative assessment on investing and then create a portfolio applying investing knowledge based on a client’s needs.
Course Standard being covered: Explain how saving and investing contribute to financial well-being, building wealth, and helping meet personal financial goals. Compare and contrast saving and investment strategies, such as savings accounts, certificates of deposit, stocks, bonds, mutual funds, employer sponsored savings plans, physical assets, and commodities. Design a diversified saving and investment plan that includes strategies compatible with personal goals. Include time value of money and compound interest calculations in analysis.
• Identify risk and return potential based upon given investment vehicles.
• Differentiate between good and bad investment types.
• Create an investment portfolio based on the needs of a client and their investment philosophy.
The PPT will cover:
• Risk vs. return
• Real estate as an investment
• Speculative Investments: Futures/commodities, Precious metals, Collectibles, Viaticals, and Day trading
• Securities and Exchange Commission (SEC)
• Financial Risk Pyramid
Questions to ask during the presentation:
• How is investing different than saving?
• What is liquidity? What is an example of something liquid? Illiquid?
• What makes something a good or bad investment?
• What are examples of collectibles that you have seen?
• How would the liquidity of a precious metals mutual fund compare to purchasing actual gold coins?
o Which option would carry more risk? Why?
• What is the most important thing you have learned about investments?
• How is risk related to return? How is liquidity related to return?
• How does inflation factor into investing?
• How can you make money investing?
• How does investment philosophy change throughout your lifespan?
This activity assesses the student's ability to:
Explain the relationship between risk and return
Identify good and bad investment choices
Discuss investment philosophies
Create a portfolio of investments for a client based on an investment philosophy
For part 2 I usually cut up different ages and amounts of money and have students draw from a basket. As an extension advanced students can use the Internet to identify specify investments (stocks, mutual funds, index funds) that they would select for the portfolio. Also included is a modified version of this assignment for IEPs or ESLs.