Grades 6–8 · Lesson 4 · 50 minutes
Risk, reward, and diversification
Students compare concentrated and diversified portfolios and explain the risk-return tradeoff.
StockSt uses fictional currency and simulated shares for education only. This is not investment advice.
Warm-up
Pose the question, “Would you rather have a chance at a huge win with a big chance of loss, or steadier results with smaller swings?” Have students move to one side of the room to vote, then ask a few to defend their choice.
Mini-lesson
- Higher potential return often comes with higher risk.
- Diversification spreads exposure across different assets or categories.
- Diversification reduces the damage from one poor performer, but it does not eliminate loss. Make this last point explicit so students do not leave thinking a diversified portfolio is safe.
StockSt activity
- Group A builds a one-share portfolio.
- Group B builds a five-share portfolio across at least three categories.
- Run a market event cycle that includes both positive and negative news.
- Each group calculates its portfolio value change after the event cycle.
Discussion
Compare the groups on volatility, best performer, worst performer, and total portfolio change. Ask which group had the most dramatic swings and whether higher swings brought higher final results.
Exit ticket
Students answer, “Why might a diversified portfolio be less risky than owning only one share?”
Assessment
Portfolio comparison worksheet and written risk explanation.
Student Learn links
Assign these before or after class so students practice the same ideas.