Diversification

45-minute agenda

1. 0–5 min

   Warm-up

   Post: ““Don't put all your eggs in one basket.” What could go wrong with one basket? Now apply that idea to money.”

2. 5–17 min

   Direct instruction

   Present the lesson slides. Make sure students leave with these points:

   • Diversification = don't put all your eggs in one basket.
   • It shrinks single-company risk — not market-wide risk.
   • Many companies in one industry isn't truly diversified.
   • It trades lottery-ticket upside for protection from wipeouts.

   Use the “See it” slide (Portfolio loss when one company drops 50%) to make the idea visual.

3. 17–22 min

   Worked example

   Walk through “One basket vs. twenty” on the slides. Pause before the result and ask students to predict it.

4. 22–32 min

   Basket Challenge

   Format: small groups · 10 minutes

   1. Each group gets $1,000 to invest one of three ways: all in 1 company, equally in 5 companies in the same industry, or equally in 20 companies across many industries.
   2. Reveal events one at a time: (1) one company in each basket drops 50%; (2) the whole tech industry falls 30% (the 5-company basket is all tech; 4 of the 20 are tech); (3) the whole market falls 20%.
   3. Groups calculate their loss after each event (treat each event separately).
   4. Discuss which risks diversification reduced and which it didn't.

   What to look for: Event 1: 1 company −$500; 5 companies −$100; 20 companies −$25. Event 2: 1 company (if tech) −$300; 5 companies −$300; 20 companies −$60. Event 3: every basket −$200. Diversification shrinks single-company and single-industry losses, but not market-wide drops.

5. 32–37 min

   Check for understanding

   Use the question slides — or run them as a Four Corners game. Answers:

   1. About how much of your portfolio did you lose from that company? — A. About 4%
   2. A diversified portfolio can't lose value during a recession. — False
   3. Which of these is the most diversified? — C. A fund holding hundreds of companies across many industries
6. 37–42 min

   Discussion

   • Why might someone still choose to invest heavily in one company?
   • Where else do people use diversification in everyday life?
7. 42–45 min

   Exit ticket

   Prompt: What kind of risk can diversification not remove?

   Answer: Market-wide risk — when most investments fall together.