Risk vs Reward - Why You Can't Win Without Risk
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What students do
- Read a grouped bar chart comparing typical return and risk across four places to invest
- Calculate the loss from a 50% drop on a single investment versus the same drop split across ten
- Sort types of investment risk into market, company, inflation, and volatility risk
- Recommend an investment mix based on a given time horizon and risk tolerance
What it covers
- The risk/reward tradeoff and why a safer choice always earns less
- Volatility as the everyday face of risk, from a savings account to crypto
- How time horizon and risk tolerance decide how much risk actually fits a person
- Diversification as a way to lower risk without giving up much return
Learning targets
- Explain the risk/reward tradeoff - why a higher possible reward always comes paired with higher risk, and why you cannot win without risk
- Explain what investment risk and volatility are and identify different types of investment risk
- Explain how your risk tolerance and time horizon decide how much investment risk fits you
- Explain how diversification lowers risk and describe an investment mix that fits your goals
From one teacher to another
One number does more convincing than I could in an hour: a 50% drop costs $500 if it's your only investment, but only $50 if that same money is split across ten. Students read the risk-versus-return chart across four real options and watch the reward climb slower than the risk does, then use Devin Carter's $1,000 and his 40-year time horizon to decide how much risk actually fits him. I don't want them dodging risk after this, I want them managing it on purpose.
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