Word bank: basket · diversified · lottery-ticket · single-company

1. Diversification = don't put all your eggs in one .
2. It shrinks risk — not market-wide risk.
3. Many companies in one industry isn't truly .
4. It trades upside for protection from wipeouts.

1. Your money is split evenly across 25 companies. One of them goes out of business.

   1. About how much of your portfolio did you lose from that company?

   • A. About 4%
   • B. About 25%
   • C. All of it
   • D. About 50%

2. 2. A diversified portfolio can't lose value during a recession.

   True/False

3. 3. Which of these is the most diversified?

   • A. Five video game companies
   • B. One company you love
   • C. A fund holding hundreds of companies across many industries
   • D. Three companies in the same city

1. 1. $2,000 is split equally across 10 stocks. One drops 50% and the rest don't change. How much did the portfolio lose, in dollars and percent?

2. 2. Someone owns 15 different airline stocks. Are they diversified? Why or why not?

1. 1. Why might someone still choose to invest heavily in one company?

2. 2. Where else do people use diversification in everyday life?