Portfolio Diversification

“Hook” – Raise your hand if you would like to be a
millionaire? Today, I am going to teach you how to become one - - and all of
you can do it!

a. Direct Instruction – 10 minutes

• Define Diversification (spreading risk) and explain the
  advantages and disadvantages
• Beyond diversification, asset allocation! (Stocks, bonds,
  and cash (home ownership, rental properties, gold, collectibles)
• Why pay yourself first?

b. Computer Assisted Learning – 15 minutes

• Students are to read the article ‘Beginners’ Guide to Asset
  Allocation, Diversification, and Rebalancing at www.sec.gov/investor/pubs/assetallocation.htm
• Students are to read the introductory paragraph through the
  paragraph ‘How to get started’

c. Inquiry Questioning – 5 minutes

• What is a time horizon? (Expected number of months, years,
  or decades you will be investing to achieve a particular financial goal.
• What is risk tolerance? (What you can stomach!)
• What is a stock? (Share of ownership in a company)
• What is a bond? 
  (A purchase of debt)

d. Computer-Assisted Learning – 15 minutes

• Go to www.dinkytown.net/java/RetirementPlan.html
  and have the students complete the retirement plan calculator based on the
  following numbers (age – 22; Income – List incomes based on education, students
  are to enter income based on these figures; Rate of Return – 8%; Percent of
  Income to Contribute – 15%; Rate of Inflation – 4%; Retirement Age – 60;
  Current Retirement Savings – 0; Rate of Return During Retirement – 6%; Expected
  Salary Increase – 4%; Percent of Income at Retirement – 90%
• Students are to print the outcome of their ‘Retirement
  Planner Results’ for 25 participation points

Salary based on
education levels per the College Board (Education Pays Update):

• Professional Degree - $95,700;

• Doctoral
  Degree - $79,400;
• Masters Degree - $59,500;
• Associate Degree - $37,600;
• Some
  College/No Degree - $35,700;
• HS Graduate - $30,800;
• Not a HS Graduate - $21,600