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

2. The Pyramid of Risks and Reward
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

3. The Pyramid of Risks and Reward
Diversification and Risk
The Pyramid of Risks and Reward
Highest Risk - Highest Potential Return or Loss
4. government bonds
3. certificates of deposit
5. corporate bonds
6. mutual funds
7. stocks
8. real estate
9. collectibles
1. cash and checking accounts
2. savings accounts
10. commodities
Lowest Risk - Lowest Potential Return or Loss

5. certificate of deposit
checking account
vs.
certificate of deposit
Back

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

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

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

9. municipal bond
vs.
special purpose bond
Back

10. special purpose bond
vs.
corporate bond
Back

11. corporate bond
vs.
growth mutual fund
Back

12. growth mutual fund
vs.
blue chip stock
Back

13. blue chip stock
vs.
real estate
Back

14. real estate
vs.
gold and silver
Back

15. art collection
vs.
income mutual fund
Back

16. stuffed animal collection
vs.
gold and silver
Back

17. gold and silver
vs.
savings account
Back

18. income mutual fund
vs.
growth mutual fund
Back

19. penny stock
vs.
blue chip stock
Back

20. 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!