ARTICLE: What is a Fund?
In the same way that you’d likely buy a box of donuts with a variety of flavors, it’s a good strategy to invest in a variety of stocks so that you can minimize risk. While you can individually pick stocks and manage them yourself, most people buy shares of funds that have a collection of stocks. Read through this article, starting from How Do Funds Work? to learn about funds. Then, answer the questions on the worksheet. 

VIDEO: What is Active and Passive Investing?
In the previous article we learned that some funds are actively managed by a fund manager while other funds are not. Watch this video to learn about the difference between active investing and passive investing. Then, answer the questions on the worksheet.

ACTIVITY: Let’s Make a Mutual Fund
Let’s take a closer look at how funds work and why they are a more diversified approach to investing when compared to picking individual stocks. The objective of this activity is to illustrate the power of diversification when it comes to stocks. Each student receives a card representing one publicly traded company and its returns over the past year. In various rounds, students compare their performance and simulate forming small and large mutual funds.

LEARNING TARGETS:

• I can understand what a fund is and how investing in one can create a more diversified investment portfolio.
• I can explain the difference between active investing and passive investing.
• I can arrange companies to create a diversified mutual fund.