Last year, Joban graduated from high school and received several

Last year, Joban graduated from high school and received several thousand dollars from an uncle as a graduation gift. Joban is now in his first year of college. He just heard of a guy in his dorm who invested in a software company and made a huge profit in a few months. Joban likes the idea of making some money fast and is considering investing his graduation gift money in the a company that has its business based on servicing the internet. Joban’s roommate, Shawn, just finished a personal finance course and is concerned that Joban has run up a large credit card bill and has trouble balancing his monthly budget. Money that Joban receives from his job he tends to spend. In addition, Joban really does not know much about investing or how people actually make money by investing. Shawn has asked you to help him by giving him some advice so that he can talk to Joban about his investment plans. With respect to the trade-off between return and risk, what should Shawn explain to Joban? Shawn will urge Joban to invest for the long-term using a diversified approach. However, Joban will probably react with some scepticism. Explain to Shawn why he is correct. How should Joban allocate his assets given his life stage?

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