Chapter 4 Guard Your Money from Loss

It was a cold winter morning. Elias sat at his small kitchen table, looking at his laptop screen. His heart sank. His investments had gone down. A few months ago, he had $8,000. Now, he had just over $5,000. He felt a knot in his stomach. How had this happened?

At first, everything went well. After talking to Mr. Henderson, Elias opened an account and put his money in index funds. This was a safe way to invest. But then, Elias noticed something. Some companies in the index fund were doing very well. Their stock prices were going up fast.

“If these companies are doing so well,” Elias thought, “why not put my money in them? I could make even more money!”

So, he took most of his money out of the index fund and bought individual stocks. At first, it was exciting. The stocks he picked went up. He felt smart. But then, everything changed. The market dropped. The stocks fell overnight.

The night before, Elias had over $15,000—almost double his savings. The next morning, he had only $5,000 left.

Elias sighed and closed his laptop. He needed advice. He put on his coat and went to the town square. He knew Mr. Henderson often walked there in the morning.

When Elias arrived, he saw Mr. Henderson sitting on a bench. The old man was feeding breadcrumbs to pigeons. He looked up and smiled when he saw Elias.

“Elias! Good to see you,” Mr. Henderson said. “You look like something is bothering you.”

Elias sat down heavily. “I made a mistake with my investments.”

Mr. Henderson raised an eyebrow. “Oh? Tell me what happened.”

Elias explained everything. He told Mr. Henderson how he had started with index funds, then moved his money to individual stocks, and lost a lot of money. When he finished, he looked at Mr. Henderson, expecting him to be disappointed.

But Mr. Henderson just nodded. “I see. Elias, you have learned an important lesson. Investing is not about making quick money. It is about patience and discipline.”

Elias frowned. “But those stocks were doing so well at first. I thought I was making a smart choice.”

Mr. Henderson shook his head. “That is the problem, Elias. When prices go up fast, people think they will keep going up. But the market does not work like that. Individual stocks are risky. They go up and down quickly. That is why it is important to guard your money from loss.”

Elias looked down at his hands. “I guess I was greedy. I wanted to get rich fast.”

“It is a common mistake,” Mr. Henderson said kindly. “But remember, the goal is not to get rich fast. The goal is to grow your money over time. The best way to do that is to invest in things that are steady and safe.”

“Like what?” Elias asked.

Mr. Henderson smiled. “Like the S&P 500. It includes 500 of the biggest companies in the country. When you invest in the S&P 500, your money is spread across many companies. If one company does badly, the others help balance it out. It is much safer than putting all your money in a few stocks.”

Elias nodded slowly. “So, I should have stayed with the index funds?”

“Exactly,” Mr. Henderson said. “Index funds are a great choice. They let you invest in many companies at the same time. They are simple, low-cost, and they spread your money across different businesses. This reduces risk.”

Elias sighed. “I wish I had known that before.”

“Well, now you do,” Mr. Henderson said. “And remember, investing takes time. The market goes up and down, but over many years, it usually grows. The key is to be patient and not panic.”

Elias thought for a moment. “So, what should I do now?”

Mr. Henderson leaned back. “First, take a deep breath. You have not lost everything. You have learned a valuable lesson. Second, go back to the basics. Move your money back into index funds or ETFs. These are like baskets of stocks that help reduce risk. Third, be patient. Do not try to guess when the market will go up or down. Just let your money grow over time.”

Elias felt relieved. “Okay. I will do that. And… thank you, Mr. Henderson. I really needed this advice.”

Mr. Henderson patted him on the shoulder. “You are welcome, Elias. Remember, building wealth is a journey, not a race. Stay on the right path, and you will succeed.”

As Elias walked home, he felt determined. He had made mistakes, but he had also learned an important lesson. From now on, he would guard his money from loss. He would invest wisely and patiently. And with Mr. Henderson’s guidance, he knew he was on the right track.