Does investing make sense?
Objective:
Learners take a critical look at financial decisions and develop an understanding of the opportunities and risks of investments. They learn to make well-founded decisions and analyze different perspectives.
Content and methods:
Using a fictitious person and their financial situation, learners develop the basics of investing. They analyze the advantages and disadvantages, deal with myths and facts and reflect on their own attitudes to the topic. This is done through text analyses and decision-making tasks..
Competencies:
- Financial literacy and decision-making skills
- Critical thinking and argumentation
- Information analysis and evaluation
Target group and level:
From grade 10
62 other teachers use this template
Target group and level
From grade 10
Subjects
Does investing make sense?
Introduction
Today you will get to know the financial situation of a stranger and analyze their finances - with a special focus on the topic of investing.
Maik the Social Worker
📝 Task
📌 Is investing always the best choice? Read the following texts on the advantages and disadvantages of investing and make a well-founded decision at the end as to whether the person should invest.
Investing: A Path to Long-Term Wealth Building
Investing refers to the act of allocating money into various asset classes with the aim of achieving financial gains over time. This can involve purchasing stocks, bonds, real estate, or even stakes in small businesses. The primary goal of investing is to grow one's wealth, thereby achieving financial security.
Key terms in the world of investing include stocks, bonds, and diversification. Stocks represent shares in a company that individuals can purchase. As the company grows and earns profits, the value of its stocks typically increases, allowing investors to sell them at a profit. Bonds are debt securities issued by corporations or governments, where the investor lends money to the issuer and receives regular interest payments along with the repayment of the principal amount at the end of the term. Diversification is the strategy of spreading investments across various asset classes to minimize risk.
People choose to invest for several reasons. One major motivation is the desire for financial independence. Through smart investments, individuals can generate passive income, enabling them to work less or retire earlier. Additionally, investing can help people save for significant expenses such as purchasing a home or funding their children's education.
Investing is beneficial because it offers the potential to increase one's wealth. Unlike saving money in a bank account, where low interest rates and inflation can erode its value, investments provide opportunities for higher returns. Furthermore, investors can benefit from compounding effects, where earnings are reinvested, allowing wealth to grow exponentially.
However, investing also comes with disadvantages and risks. Asset values can fluctuate, posing the risk of financial loss. Stocks, in particular, can experience significant price volatility, which might unsettle inexperienced investors. Additionally, the time commitment required for research and managing investments should not be underestimated. To mitigate risks, it's advisable to stay informed, diversify investments, and maintain a long-term investment horizon.
📌 The person still has some concerns about investing. Help them find out what is true and what is not.
📝Select the correct answer from the options provided.
📝 Task
Myths about investments
In the world of investments, there are numerous myths and widespread assumptions that unsettle inexperienced investors in particular and influence their decisions. These are often based on misunderstandings or outdated ideas.
A common misconception is that investing is only suitable for people with high incomes or wealth. This assumption prevents many with average or low incomes from investing their money wisely.
The idea that the stock market is too volatile and risky for young people is also widespread. As a result, many young adults miss out on the opportunity to enter the market early and benefit from the compound interest effect in the long term.
A recognized principle in the financial world is that diversification is an effective means of minimizing risk. By spreading capital across different asset classes and instruments, the overall volatility of a portfolio can be reduced.
Another common argument is that it makes more sense to reduce debt before starting to invest. This approach is based on the consideration that the interest on debt could exceed potential investment gains.
Many investors also believe that you should only invest in companies whose products or services you know or use yourself. However, this strategy - often referred to as “invest in what you know” - can lead to a portfolio that is too one-sided.
Such myths can have a significant impact on investment decisions. That's why it's crucial to be fully informed, consider different perspectives and make informed decisions based on reliable facts.