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Student handout

Defend two asset allocations

Connect time horizon to capacity for short-run fluctuation and explain an allocation tradeoff.

Class period, optional

Class date

Use only the fictional scenario

Do not enter or write personal income, debts, account balances, policy details, names, or identifying information. This activity does not need a name or FinanceLearn account.

Scenario

Case A needs the money in three years. Case B will not use the money for 35 years. Both cases are fictional, have the same starting balance, and compare only broad stock and bond shares.

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Tasks and response space

  1. 1. Before using the tool, predict which case can usually tolerate more short-run fluctuation and explain why.

  2. 2. Use the allocation path to create one broad stock-and-bond mix for the three-year case. Record the mix and one risk.

  3. 3. Create a different mix for the 35-year case. Record the mix and one risk.

  4. 4. Defend why the two mixes differ without saying that age alone determines the answer.

  5. 5. Name one fact missing from both fictional cases that a real decision would require.

Extension

Keep both end points fixed, change only the bend of the path, and explain how the middle years move.

All six activities: classroom lessons.

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.