A month or so went by before my mentor and I met again at the coffee shop near the civic center. He asked me, “Chris, have you paid yourself ten percent of all you earned for the past month?”
I answered proudly, “Yes. I thought about what you said to me, and it seemed reasonable. So, I decided to give it a try. Each time I was paid last month I took ten percent from each paycheck and saved it. While it seems strange, I wasn’t any shorter on funds than the month before. I noticed little difference and managed to get along without it. I was tempted to spend it, but I refrained.
“That’s wise, Chris,” he answered with a big beaming smile, “and what have you done with the money?”
“I opened a savings account at the financial institution I work for and deposited the money into it.” I replied.
“Well, done.” He said holding thumbs up. “Now let’s discuss activities to help you earn more money."
"Okay!" I said, eager to learn.
"First, understand the capital markets operate with reference to equity and debt. Publicly traded companies issue stocks and bonds to investors.”
I was amazed that I understood what he was talking about, but remained silent and listened.
“It’s an economic principle that one of the broad markets is always rising while others are falling. Investors who hold securities in broad asset classes have the opportunity to earn a profit in at least asset classes during any business day. Few people understand this – and confuse diversifying investments with diluting. They think remaining in one investment or one market is safe. The truth is when the value of one of the broad markets is falling, the value of another is rising. Loss in one asset class receives compensation by the gain in another. Also, falling markets offer the opportunity to buy more for less.”
My mentor paused for a moment to sip his coffee before continuing.
Chris Bryant is an American financial advisor.