MA.912.FL.4.5

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Compare different ways that portfolios can be diversified in investments.

Clarifications

Clarification 1: Instruction includes diversifying a portfolio with different types of stock and diversifying a portfolio by including both stocks and bonds.
General Information
Subject Area: Mathematics (B.E.S.T.)
Grade: 912
Strand: Financial Literacy
Standard: Describe the advantages and disadvantages of financial and investment plans, including insurances.
Date Adopted or Revised: 08/20
Status: State Board Approved

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Purpose and Instructional Strategies

In Math for Data and Financial Literacy, students explore options to make money through investments, including portfolios. 
  • Instruction ensures student understanding of what stocks and bonds are and the advantages/disadvantages of both. With this information, students should be able to understand what it means to diversify a portfolio and create a sample. Instruction focuses on the best stocks and bonds to invest in to ensure a profit was made, while building knowledge around risks and rewards (MTR.7.1). 
  • Students should understand the stock market and the different types of stocks available through the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). When learning about the stock market, students should understand how shares are associated with different companies. When investing, this means that the investor is part-owner of the company, while the company gets most of the capital. The investor may earn money in two ways: when trading stocks in the market or earning dividends from the company’s profit. It is important for students to understand that some stocks are riskier than others and could result in a loss. 
  • Students should understand the basics of a bond and the different options available, corporate and government. Investing in a bond means one is lending the government or corporation money. Instruction includes the risks involved with purchasing bonds and help students identify the face value, maturity and coupon rate of a bond. 
  • Instruction includes the different levels of diversification: advanced, intermediate and basic. Instruction includes the differences between stocks and bonds and how they support one’s portfolio. Along with understanding the differences, students should be able to determine which a better option is for themselves based on a variety of factors, specifically risk versus reward. 
    • For example, what types of stocks should be in one’s portfolio and why? What is the ideal combination of stocks and bonds for a diversified portfolio? Is it necessary to have both in a portfolio?

 

Common Misconceptions or Errors

  • Students may not diversify their portfolio to have a balance of both stocks and bonds. Be cautious of students who may only include all stocks or all bonds. It is important for students to understand risks associated with stocks.

 

Instructional Tasks

Instructional Task 1 (MTR.4.1) 
  • Beth is starting her portfolio and has $40,000 to invest. Identify at least 3 stocks or bonds that she should include in her portfolio. Explain why these would be the best option for her.
 

Instructional Items

Instructional Item 1 
  • Alex is looking to diversity his portfolio. Select which level of diversification (basic, intermediate or advanced) would minimize his risk and explain why.

*The strategies, tasks and items included in the B1G-M are examples and should not be considered comprehensive.

Related Courses

This benchmark is part of these courses.
1200388: Mathematics for Data and Financial Literacy Honors (Specifically in versions: 2022 and beyond (current))
1200384: Mathematics for Data and Financial Literacy (Specifically in versions: 2022 and beyond (current))
7912120: Access Mathematics for Data and Financial Literacy (Specifically in versions: 2022 - 2023, 2023 and beyond (current))

Related Access Points

Alternate version of this benchmark for students with significant cognitive disabilities.
MA.912.FL.4.AP.5: List an advantage of diversifying investments.

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