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Financial Literacy Club

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Investing · Lesson 6

Risk and Time Horizon

Part A. Vocabulary

Write the letter of the matching definition on each line.

  1. 1. Volatility
  2. 2. Time horizon
  3. 3. Risk tolerance
  • A. How long until you need the money. It's one of the most important factors in how much risk makes sense.
  • B. How much an investment's value swings up and down. Stocks are more volatile than bonds, and bonds more than savings accounts.
  • C. 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.

Part B. Guided notes

Fill in each blank using the word bank.

Word bank: handle · horizon · losses · sometimes

  1. Time = when you'll need the money.
  2. Short horizon → lower risk. Long horizon → can more swings.
  3. Markets drop , sharply. It's normal, not rare.
  4. Panic-selling locks in .

Part C. Check your understanding

Circle the best answer.

  1. You're saving for a car you'll buy in 18 months.

    1. What does a short time horizon suggest?

    • A. Invest aggressively to grow it faster
    • B. Keep it in lower-risk savings, since there's little time to recover from a drop
    • C. Put it all in one stock
    • D. Time horizon doesn't matter

  2. Your long-term investments drop 25% in a scary month. You don't need the money for 30 years.

    2. Which reaction usually causes the most damage?

    • A. Staying the course
    • B. Reviewing your plan calmly
    • C. Panic-selling everything to stop the pain
    • D. Continuing regular contributions

  3. 3. Because the stock market has grown over long periods historically, it's guaranteed to grow over any 5-year period.

    True/False

Part D. Apply it

Show your work.

  1. 1. An investment falls 20% and then rises 20%. Are you back where you started? Show it with $1,000.

  2. 2. You need money in one year for a car. Is a stock fund or a savings account a better fit? Why?

Part E. Think about it

Answer in complete sentences.

  1. 1. How would you feel if an investment dropped 30%? What would you do?

  2. 2. Why is it hard to stay calm when you see your investments losing money?

Exit ticket

Name

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