Ever heard the saying "don't put all your eggs in one basket"? This wisdom perfectly captures today's investing lesson!
If you carry all your eggs in one basket and drop it, you lose everything. But spread them across multiple baskets - you're much safer.
Engagement Message
How might this apply to investing your money?
In investing, diversification means spreading your money across different investments instead of putting it all in one place.
Remember our lessons on stocks and bonds? Instead of buying just one company's stock, you might buy stocks from 10 different companies.
Engagement Message
Why do you think spreading investments might be safer?
Here's the magic: when one investment goes down, others might go up or stay stable. This helps smooth out your overall returns.
Imagine owning Apple stock and Tesla stock. If Apple has a bad month but Tesla has a good month, they might balance each other out.
Engagement Message
Can you think of two companies that might perform differently during the same time period?
You can diversify in several ways. You might mix different types of investments - some stocks AND some bonds, as we learned in previous sessions.
You could also buy stocks from different industries - technology, healthcare, food companies, and banks all perform differently.
Engagement Message
What's one industry that might do well when another struggles?
Here's a real example: During the 2020 pandemic, travel company stocks plummeted, but video conferencing stocks soared.
An investor with both types would have lost less money than someone who only owned travel stocks.
This shows how diversification can protect you from unexpected events.
Engagement Message
Can you think of another time when one industry struggled while a different one thrived?
