What were the Five Year Plans?

Five-Year Plan, Soviet economic practice of planning to augment agricultural and industrial output by designated quotas for a limited period of usually five years. Nations other than the former USSR and the Soviet bloc members, especially developing countries, have adopted such plans for four, five, or more years. Joseph Stalin, in 1928, launched the first Five-Year Plan; it was designed to industrialize the USSR in the shortest possible time and, in the process, to expedite the collectivization of farms. The plan, put into action ruthlessly, aimed at making the USSR self-sufficient and emphasized heavy industry at the expense of consumer goods. It covered the period from 1928 to 1933, but was officially considered completed in 1932. The second Five-Year Plan (1933–37) continued and expanded the first. The third plan (1938–42) was interrupted by World War II. The fourth covered the years 1946–50, the fifth 1951–55. The sixth plan (1956–60) was discarded in 1957, primarily because it overcommitted available resources and could not be fulfilled. It was replaced by a Seven-Year Plan (1959–65), which fell far short of estimated increases in agricultural (especially wheat) production. The Seven-Year Plan was considered the start of a longer period (20 years) devoted to the establishment of the material and technical basis of a Communist society. The late 1960s and early 1970s saw increased emphasis placed on consumer goods, and the 9th Five-Year Plan (1971–75) for the first time gave priority to light industry rather than heavy industry. The agricultural sector still grew far less than projected in the 10th (1976–80) and 11th (1981–85) Five-Year Plans, and overall economic performance was poor. The 12th and final Five-Year Plan (1986–90) projected increases in consumer goods and energy savings, but the economy began to slide, shrinking by 4% in 1990. The dissolution of the Soviet Union made the formation of a 13th Five-Year Plan a moot point.

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answer: the risk-return relationship. generally, the higher the potential return of an investment, the higher the risk. there is no guarantee that you will actually get a higher return by accepting more risk. diversification enables you to reduce the risk of your portfolio without sacrificing potential returns.

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