1. Lesson 8A: Managing Risk— Time and Diversification
Unit 8: Investing
Lesson 8A: Managing Risk—
Time and Diversification
©2017, Minnesota Council on Economic Education. Developed in partnership with the Federal Reserve Bank of St. Louis.

2. How can investors reduce risk?
Compelling Question
How can investors reduce risk?
Lesson 8A

3. Visual 8A.1: Risk and Return
Option A
Option B
Option C
One possible rate of return: 6%
Expected rate of return:
Three possible rates of return:
5%, 6%, 7%
(All equally likely to occur)
(Average of the three rates)
Five possible rates of return:
4%, 1%, 6%, 11%, 16%
(Average of the five rates)
Lesson 8A

4. Visual 8A.2: The Impact of Time on Risk
Option 1
Option 2
Five possible rates of return:
4%, 5%, 6%, 7%, 8%
(All equally likely to occur)
Expected rate of return: ____
Range (risk): ____
4%, 2%, 8%, 14%, 20%
Lesson 8A