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How investing works

Lesson 20 · Written for kid, teen, and little

Risk and reward

Higher potential reward usually involves higher risk. Order them.

The idea

Every investment trades risk for reward. Safe things like a savings account grow slowly but rarely drop. Wild things like crypto can shoot up — or crash hard. Higher possible reward almost always comes with higher risk, so the smart move is matching the risk to how long you can wait. ⚖️

A

Words to know

9

Risk

The chance an investment loses value — wilder things have more risk.

Volatility

How much a price swings up and down; high volatility means big, fast moves.

Index fund

A fund designed to follow an index. Its holdings depend on that index; a broad stock index fund can spread money across many companies.

Bond / Bond ETF

Bonds are loans to issuers. BND tracks a broad index of taxable investment-grade bonds denominated in U.S. dollars; it does not hold every bond.

HYSA

A high-yield savings account — a bank account that pays more interest than a normal one.

Treasury bills

Super-safe short-term loans you make to the US government.

VTI

A fund that holds almost the entire US stock market in one basket.

AAPL

The ticker (short code) for Apple stock.

Altcoin

Any cryptocurrency other than Bitcoin — usually smaller and riskier.

Try it — no accountPut it in order

Order these from LOWEST risk to HIGHEST risk using the up and down arrows. (An index fund is one basket holding hundreds of companies.)

Use the up and down arrows to arrange them from safest to wildest.

    In the full lesson

    1. 1Put it in order

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