Lesson 2.16

Diversification

Unit: Unit 2: Me, My Goals, My Money
Topic: 2.4 The Gilded Age Market
Grade: 6 to 8 (written at grade 7; see Differentiation for the grade 6 support and grade 8 stretch)
Days: 1 class period of 40 minutes
Room: classroom

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For this lessonHandout Three Portfolios and a Shock Slides Diversification

Standards

NYS module line

IGLR 4. Financial Readiness e)Determine ways for saving money

CTE theme line

CTE FCL 2. Saving, Investing, and Sharing c)Explore different savings and investment tools and methods

NYS FACS learning standard

NYS FACS Learning Standard 3 (Intermediate)Key Idea: Students will understand and be able to manage personal resources of talent, time, energy, and money and make effective decisions in order to balance their obligations to work, family, and self.
Performance Indicator: Students understand the resources available to them, make informed decisions about the use of those resources, and know some ways to expand resources.

CDOS

CDOS Standard 3aThinking Skills

National FCS 3.0

National FCS 3.0 3.3.4Compare different ways to save and invest.

Enduring understanding and essential question

Big idea: Spreading money across different kinds of companies, and the bank, means no single panic can take it all. You give up some of the best case to protect yourself from the worst case.
Essential question: Would you rather have a chance at the most money or a promise of not losing most of it?

Objectives

By the end of this lesson, students will be able to:

(Low) Given the phrase "do not put all your eggs in one basket," explain what diversification means for a portfolio in one sentence.
(Mid) Given three sample 1882 portfolios of $1,000 and the Panic of 1893 prices from the kit, compute each portfolio's value after the panic and rank them by loss.
(High) Given their own portfolio pie from the ledger, decide whether to rebalance, make the trades or the hold in Round 5, and justify the decision in the journal using the paper exercise as evidence.

Vocabulary

Tier 2 (general academic): spread, shock, balance, protect
Tier 3 (FACS): diversification, allocation, portfolio pie, rebalance, risk level. See the unit vocabulary list for the Spanish column.

Materials and setup

Handout 02.14 - The Gilded Age Market Kit.md (teacher): page 2 for the Round 5 prices, page 3 for the Round 5 dispatch
Handout 02.19 - Paper Ledger.md (student), in the FACS folder
Handout 02.16 - Three Portfolios and a Shock.md, one per student
Calculators, one per pair
Twelve eggs (plastic) and three small baskets, or three paper cups and twelve paper eggs, for the hook
Investor Journal in the folder
Slides: Slides 02.16 - Diversification
Exit cards
Setup notes: the price table on the board shows Rounds 0 to 4 filled in and Round 5 empty. The handout uses only prices the class has already lived through (1882, 1893 and 1901), so nothing on it gives away a future round. Do not mention the boom or the crash that are coming. Bring the hand count from Lesson 2.14 Day 2 ("more than half in one company").

Pre-assessment

The hand count from Lesson 2.14 Day 2 tells you how many portfolios are one big slice. The do now today is the numbers version of the same question; most students will get the arithmetic right and still not change anything, which is why the paper exercise comes before Round 5.

Do now and hook (Time: 3 min)

On the board: "All $1,000 in one company. It drops 50 percent. What is your total now? Now: $1,000 split evenly across five holdings, and only one of them drops 50 percent. What is your total?"

Debrief: 500 versus 900. Then the hook: hold up the basket with all twelve eggs and drop it (or tip it) onto the desk. Then the three baskets with four each and drop one. "Same eggs. Different morning."

Procedure

Step	Teacher will	Students will	Time
1. Direct instruction: eggs, baskets, and the pie	Slides 3 to 5. Define diversification: money spread across companies with different risk levels, and the bank, so they do not all fall on the same news. Point at the board: in 1873 the railroads fell by almost half and oil and gas rose, because people still needed light. Show two pies: one slice of 90 percent, and six slices. Then the trade-off, said plainly: the six-slice pie will never win the leaderboard in a boom, and it will never be at the bottom in a panic. The word for changing the slices back toward your plan is rebalancing: sell a little of what grew, buy a little of what fell, so the pie looks the way you want it.	Copy the definition and sketch the two pies on the journal's My notes page.	7 min
2. Learning activity: Three Portfolios and a Shock	Hand out the handout. Three investors, $1,000 each, bought in 1882 at the Round 2 prices: A put it all in the two riskiest lines (ELEC and RAIL), B put most of it in the bank and the rest in GAS, C spread it across the bank and all four companies. The shock is the Panic of 1893, the Round 3 prices the class lived through two days ago. Students compute each portfolio's value after the panic and the loss. Then Part 2: the same three portfolios, never sold, at the 1901 prices from Round 4. Compute again. Debrief with the two rankings on the board: A loses the most in the panic and gains the most by 1901; B barely moves either way; C is in the middle both times. Ask the essential question.	Work in pairs with a calculator. Fill the two tables. Rank the portfolios twice. Answer the two questions at the bottom: which portfolio would you want in a panic, and which in a recovery.	12 min
3. Round 5, 1911: my own pie	Say: "Sketch your pie from your Round 4 holdings on the ledger. If one slice is bigger than half, decide: rebalance, or hold and say why." Write the Round 5 column on the board: RAIL 65, OIL 60, GAS 32, ELEC 55, STEEL 45, and two new lines, AUTO 20 and RADIO 6. Students pay the bank interest and work out their totals. Read the Round 5 dispatch aloud and put its question to the room: the government broke up the biggest monopoly in the country and its owners got richer; why? Four minutes of trading. Circulate; ask at the desk what the biggest slice is. Say nothing about the next two rounds.	Sketch the pie on Entry 5. Pay the interest. Fill the Round 5 column. Listen. Rebalance or hold. Log every trade.	10 min
4. Investor Journal, Entry 5	Prompt: what I did, why (use the word rebalance or hold), what happened, plus: my biggest slice is ___ percent and I am comfortable or not comfortable with that because ___.	Write Entry 5 with the total in dollars.	4 min
Closure	See Closure.		4 min

Totals 40 minutes: 3 + 7 + 12 + 10 + 4 + 4.

Questions to ask

Monitor understanding:

What does Portfolio B's total do in the panic? By 1901? Why so little either time?
Portfolio C lost $224 in the panic. Is that good or bad? Compared to what?
What is your biggest slice right now?

Deepen learning:

If you knew a panic was coming next round, what would you do today? If you knew a boom was coming? What if you do not know, which is the real situation?
Why do adults saving for retirement usually hold something like Portfolio C and not A?
Is a person's whole life diversified? What does it mean to have all your eggs in one basket outside of money?

Check for understanding

Step 2: clipboard yes or no per pair on "Portfolio A after the panic equals $480," "ranks all three both times," and "answers the panic question with a portfolio letter and a reason." A "got it" answer sounds like: "C in a panic, because it only lost $224 and A lost $520."

Closure (Time: 4 min)

Exit card: "Diversification in one sentence, in your own words. Then: my biggest slice is ___ percent." Three students read the sentence aloud. Sort into "got it" (the sentence names spreading across different risk levels) and "needs more" (the sentence says only "buy more stuff"). The "needs more" pile gets a two-minute desk visit at the start of Lesson 2.17 Day 1.

Differentiation and supports

ELL: the eggs and baskets are the definition, no words needed; the handout tables have the arithmetic set up as "shares times price = ___" so the operation is given; the pie is a drawing; sentence starter for the journal: "My biggest slice is ___. I will rebalance / hold because ___" in Spanish on the journal template.
IEP and 504 (general): calculators for all; Portfolio C's six lines can be split between partners (three each) and added together; a printed pie template with slices to color instead of drawn; extended time by finishing Part 2 at the start of Lesson 2.17.
Grade 6 support: the handout uses Portfolios A and B only, then C is done as a class on the board; the bank interest is given as a number, not computed.
Grade 8 stretch: the student writes Portfolio D, a 1882 pie of their own design, and computes it through 1893 and 1901; then computes the percent loss and gain for each portfolio (a preview of Lesson 2.18).
UDL checkpoint used: multiple means of representation (physical eggs, drawn pies, a numeric table) and multiple means of engagement (the student's own ledger is the last problem on the sheet).
No-kitchen or no-machine alternative: not needed; the market runs on paper and a board. The pie is sketched from the ledger, and rebalancing trades are logged at the Round 5 prices.

Assessment

Objective	Standards met	Learning task	Assessment (formative or summative; tool)
1. Explain diversification	FCL 2. c); National FCS 3.3.4	Do now; exit card	Formative; exit card sorted got it or needs more
2. Compute and rank three portfolios after the panic	FCL 2. c); CDOS 3a Thinking Skills; Std 3 PI B	Handout, Step 2	Formative; handout checked against the teacher key, six totals and two rankings
3. Decide to rebalance or hold and justify it	IGLR 4. e); Std 3 PI B	Round 5 and Entry 5	Formative now; summative on Rubric 02 criterion 2 (analysis and decision making), where "uses diversification as a reason" is a Meets descriptor

Homework

None. Optional: draw the pie you would want if this were real money you were saving for something ten years away.

Connections

Math: percent of a quantity (grade 6 and 7 ratios and proportions) is the whole handout; the math teacher can use the three portfolios as a warm-up the same week. Social studies: the Panic of 1893 and the breakup of Standard Oil are on the board today; a class that has held a share through both has something to bring to the history room.

Sources

NYS Middle Level CTE FACS Content Module 01, Individual Growth and Life Readiness, line 4. e).
NYS Middle Level CTE Theme Module 03, Financial and Consumer Literacy, line 2. c).
NYS FACS Standard 3, Intermediate; CDOS 3a Thinking Skills; National FCS 3.0 competency 3.3.4, all per 02 Standards/STANDARDS CROSSWALK.md.
My own materials: Handout 02.14 - The Gilded Age Market Kit.md (the 1882, 1893, 1901 and 1911 prices on page 2 and the Round 5 dispatch on page 3) and Handout 02.19 - Paper Ledger.md.

Teacher notes

If the period runs short, skip Part 2 (the 1901 prices) and do it as the Day 1 do now in Lesson 2.17 before the Round 6 prices go up. Never cut Round 5; students need to have made the rebalance-or-hold decision before the boom, or the boom and the crash teach nothing.
Common mistake: students hear "diversify" and buy one share of everything, leaving 90 percent in the original company. Ask at the desk: "What is the biggest slice now?" The pie sketch catches it.
AUTO at $20 and RADIO at $6 join the board today and look cheap. Let students buy them. Do not say what happens to RADIO; the price table on page 2 is yours, not theirs.
The boom is Round 6 tomorrow and the crash is Round 7 the day after. Some students will leave today with 80 percent in one company after this lesson. Let them. Their Investor Report is going to be the most honest one in the class.