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Lessons from Warren Buffett: Risk Management,
Diversification and Return-On-Investment
How Warren Buffett’s Knowledge of Financial Terms Led to Investment Success
Warren Buffet is one of the most successful
investors of all time.
One financial term that Warren understood well
was "risk management." He knew that investing
always comes with risks, but he also knew how to
manage those risks. This meant he carefully
analyzed his investments and made smart
decisions.
Warren also knew the importance of
"diversification." This meant he didn't put all his
eggs in one basket, so to speak. Instead, he
spread his investments across multiple stocks,
bonds, and other assets. This helped him to
reduce his overall risk and increase his chances of
success.
Another financial term that Warren understood well
was "return on investment." He always wanted to
make sure that he was getting a good return on his
investment. This meant he carefully analyzed the
financial statements of the companies he invested
in, and made sure they had a good track record of IDIOMS
making money.
Thanks to his knowledge of risk management,
diversification, and return on investment, Warren
became one of the most successful investors of all
time. His story shows us that understanding
financial vocabulary is key to making smart
investment decisions and achieving financial
success. So, if you want to become a successful
investor like Warren, it's important to study
financial vocabulary and understand these
important terms.
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CEFR – B1
VOCABULARY
Risk This refers to the process of
management identifying, assessing, and
controlling risks that may arise
during the investment process. In
other words, it involves taking
measures to minimize the potential
losses that may occur when
investing.
Diversification This is the practice of spreading
your investments across a variety
of different assets, such as stocks,
bonds, and other types of
securities. The goal of
diversification is to reduce the
overall risk of your portfolio,
because if one investment
performs poorly, the others may
still perform well.
Return on This is the profit or loss that an
investment investment generates over a
specific period of time, usually
expressed as a percentage of the
original investment. It's a measure
of how much money you make or
lose on an investment, and it's
important to carefully analyze the
financial statements of the
companies you invest in to make
sure you're getting a good return
on your investment.
Under his It means to have acquired or
belt achieved something. In this
context, it refers to Warren Buffet's
extensive knowledge and
experience in finance and
investing.
Risk It refers to the process of
management identifying, analyzing, and
mitigating risks associated with
investments. Warren's
understanding of risk management
means that he knew how to handle
the risks involved in investing.
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 Digital Media Studio CEFR – B1
Lessons from Warren Buffett: Risk Management,
Diversification and Return-On-Investment

Not put all your eggs in It's an idiom that means not to rely on a single source or put all your
one basket resources or investments in one place. Warren's practice of diversification
aligns with this concept, where he spreads his investments across different
assets to reduce overall risk.

Get cozy with It means to become familiar or comfortable with something. In this text, it
suggests that to achieve financial success, one needs to become familiar
with financial vocabulary and terms.

About The Story

1. What is risk management?
2. How did Warren Buffet manage the risks involved in investing?
3. What is diversification?
4. Why did Warren Buffet spread his investments across multiple stocks, bonds, and other assets?
5. What is return on investment?
6. Why did Warren Buffet analyze the financial statements of the companies he invested in?
7. How did Warren Buffet become one of the most successful investors of all time?
8. What is the importance of understanding financial vocabulary in making smart investment decisions?
9. What advice does the story give for becoming a successful investor like Warren Buffet?
10. What financial terms did Warren Buffet understand well?
11. Why did Warren Buffet spread his investments across multiple assets?

About You
1. Do you know anyone who has invested in stocks before?
2. What do you think are some risks of investing in the stock market?
3. Have you ever heard of the term "diversification" before? What do you think it means?
4. How do you think diversification can help reduce risk when investing?
5. Have you ever analyzed a company's financial statements before? What do you think is involved in this
process?
6. What do you think is meant by "return on investment"?
7. Why do you think it's important for investors to manage risk?
8. Do you think it's better to invest in one company or to diversify your investments across multiple
companies?
9. Have you ever made an investment decision before? What factors did you consider?
10. What financial terms do you think are important to understand when making investment decisions?
11. What do you think makes Warren Buffet such a successful investor?
12. Do you think you could become a successful investor like Warren Buffet? Why or why
not?

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