Investwrite 2009 - Getting Started
Read the student background and the Question and then complete the following activities.
STUDENT BACKGROUND
Many adults like to give advice—lots of advice! They often say things like, “A penny saved is a penny earned,” or “Time is money.” Another piece of advice is “Don’t put all of your eggs in one basket”—and they are not talking about breakfast! Investing all of your money in one thing is like having just one basket of eggs, if the basket drops, all of your eggs will break. If you invest your money, you have different ways to save for the future. You can choose from the following asset classes: stocks, bonds and mutual funds. You also have many choices within each of these asset classes.
QUESTION
Why is “putting all of your eggs in one basket” a bad idea when you are saving and investing for your future? In other words, why is it a bad idea to invest your portfolio in only one asset class? How will you use the “eggs in a basket” advice as you plan ahead for your own financial future? Choose an investment in two of these three asset classes: stocks, bonds and mutual funds. (For example, choose a stock and a mutual fund, a stock and a bond, or a bond and a mutual fund). Explain why you would choose each one. Also, talk about why it’s important to invest in more than one.
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