Lesson plan · Investing · Lesson 6
Risk and Time Horizon
Volatility, and matching investments to when you'll need the money.
- 45 minutes
- Grades 9–12
- Intermediate
- Activity: whole class
Objectives
Students will be able to:
- Define volatility, time horizon, and risk tolerance
- Match types of investments to time horizons
- Explain why panic-selling locks in losses
Materials
- Slide deck and a projector
- Worksheet (one per student)
- Exit ticket slips (bottom of the worksheet)
Standards
- National Standards for Personal Financial Education (2021)
- InvestingManaging Risk
- Texas TEKS §113.76 Personal Financial Literacy and Economics
- (8) The student understands the importance of saving and investing in creating wealth and building assets.
Topic-level alignment by FLC. How we map standards
Key vocabulary
- Volatility
- How much an investment's value swings up and down. Stocks are more volatile than bonds, and bonds more than savings accounts.
- Time horizon
- How long until you need the money. It's one of the most important factors in how much risk makes sense.
- Risk tolerance
- How much volatility you can handle, financially and emotionally. If a 30% drop would make you panic and sell, that's important to know before you invest.
Background reading
The official sources this lesson is based on.
45-minute agenda
0–5 min
Warm-up
Post: “If an investment you owned dropped 20% in a month, what would you do? Be honest.”
5–17 min
Direct instruction
Present the lesson slides. Make sure students leave with these points:
- Time horizon = when you'll need the money.
- Short horizon → lower risk. Long horizon → can handle more swings.
- Markets drop sometimes, sharply. It's normal, not rare.
- Panic-selling locks in losses.
Use the “See it” slide (Time horizon and risk: common guidelines) to make the idea visual.
17–22 min
Worked example
Walk through “Same drop, different outcomes” on the slides. Pause before the result and ask students to predict it.
22–32 min
Ride the Roller Coaster
Format: whole class · 10 minutes
- Everyone starts with $1,000 invested. Reveal made-up yearly returns one at a time: 12%, -18%, 22%, 8%, -25%, 30%, 10%, -5%, 15%, 12%.
- After each year, students decide: hold, or sell and move to cash (0%). Selling is permanent for this game.
- Track two results on the board: someone who held for all 10 years, and someone who sold after the −25% year.
- Discuss how the seller felt at the time and how the result compares.
What to look for: Holding all 10 years ends at about $1,588. Selling after the −25% year (year 5) locks in about $908. These returns are made up for the game, not a prediction.
32–37 min
Check for understanding
Use the question slides — or run them as a Four Corners game. Questions:
- What does a short time horizon suggest?
- Which reaction usually causes the most damage?
- Because the stock market has grown over long periods historically, it's guaranteed to grow over any 5-year period.
37–42 min
Discussion
- How would you feel if an investment dropped 30%? What would you do?
- Why is it hard to stay calm when you see your investments losing money?
42–45 min
Exit ticket
Prompt: What is a time horizon, and how should it affect how much risk you take?
Differentiation
Common misconception
“A 20% loss and a 20% gain cancel out.” A loss needs a bigger gain to recover.
Support
Have students track the game on a pre-made table with one row per year.
Extension
Calculate the gain needed to recover from a 25% loss and from a 50% loss. (33% and 100%.)
Homework or make-up work
Students can complete the full interactive lesson — including its knowledge check — at learnwithflc.org/courses/investing/risk-and-time-horizon. No account needed; progress saves on their device.