I could hardly sleep the night before my next meeting with my mentor, imagining that each month brings new profits, so I arrived early to the coffee shop. He was already there with fresh brew for both of us. Before I could sit in my chair he said, “In case you’ve been imagining that each month will bring new profits, let me stress the importance that prices fluctuate in both directions.”
I plopped down at the table, a bit discouraged, slurped the hot coffee, and burned the top of my mouth.
With a reassuring smile, he asked, “Did you bring your journal today?”
I pulled it out of my bag and opened it up to review my notes from our last meeting. Then I nodded in his direction.
“You’re prepared to invest ten percent of your income,” he continued. “On April 1, you own 40.28 shares. However, the price of your registered investment company securities dropped. The market now values one share at to thirty-five dollars.”
I wrote in my journal: April 1: ABC $40.28 x $35 = $1,409.80. My heart sank as I subtracted that market value from the previous month’s balance of $1,812.60. My lip twitched as I realized my account lost $402.80 and I stammered, “My investment account lost over four hundred dollars last month!”
My mentor encouraged me, “Focus on investing at a discount.”
“Huh?!?” I said.
“Remember that you have five hundred dollars to invest this month.”
I did recall. Then I wrote in my journal: April 1: ABC $500.00 / $35.00 = 14.29 shares. Recovering emotionally I said, “I can buy four more shares than last month.”
“You’re catching on, Chris,” he smiled as our server refreshed his mug with more coffee. “Now you have 54.57 shares.”
My heart settled a bit.
“Furthermore, the 40.28 shares you held at the middle of last month distributed a dividend of a nickel per share.”
“What do you mean?” I said.
Pointing to my journal, he continued, “You invested money to buy 40.28 shares of a globally diversified fund that earned a net profit of five cents per share last quarter.”
I was shocked. Then wrote in my journal: April ABC Dividend, 40.28 shares x $0.05 = $2.01 income. Although the amount was by no means huge, it was exiting to know the mechanics by which I could automatically capitalize on my investment. Then I thought aloud, “Money earned money for me!”
My mentor laughed out loud, held his mug in the air, and made a toast, “Chris, you’ve become an investor!”
I picked up my mug and clanked it against his. Coffee spilled on my journal, and we laughed sipping together.
Chris Bryant is an American financial advisor.