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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
Present slidesWorksheet + keyStudent lesson

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)

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.

45-minute agenda

  1. 0–5 min

    Warm-up

    Post: “If an investment you owned dropped 20% in a month, what would you do? Be honest.”

  2. 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.

  3. 17–22 min

    Worked example

    Walk through “Same drop, different outcomes” on the slides. Pause before the result and ask students to predict it.

  4. 22–32 min

    Ride the Roller Coaster

    Format: whole class · 10 minutes

    1. 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%.
    2. After each year, students decide: hold, or sell and move to cash (0%). Selling is permanent for this game.
    3. Track two results on the board: someone who held for all 10 years, and someone who sold after the −25% year.
    4. 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.

  5. 32–37 min

    Check for understanding

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

    1. What does a short time horizon suggest? — B. Keep it in lower-risk savings, since there's little time to recover from a drop
    2. Which reaction usually causes the most damage? — C. Panic-selling everything to stop the pain
    3. Because the stock market has grown over long periods historically, it's guaranteed to grow over any 5-year period. — False
  6. 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?
  7. 42–45 min

    Exit ticket

    Prompt: What is a time horizon, and how should it affect how much risk you take?

    Answer: When you'll need the money. Short horizon → less risk; long horizon → you can handle more swings.

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.