If you are considering to invest in bonds, watch this first. I’ll show you the basics of bonds, and also why I think it’s a silly investment. But even people like warren buffett and ray dalio think it is crazy to invest in bonds.
00:00 100 trillion dollars
Did you know that worldwide we have invested over 100 trillion dollars in bonds, that number is quite impressive if you think that there is only about 80 trillion dollars in stocks. Why is there is a huge difference. It seems as if bonds is the better investment.
00:53 why bonds?
It makes a lot of sense, when you think about it. When we invest in stocks, we put our money in, and we take it out. Every time we do that over and over again. Whereas bonds, is not an asset class in which you keep putting in and taking it out. Therefore, there is more money left in this asset class. Causing the total amount to be huge.
01:28 what is a bond?
To simply clarify, a bond is a debt security. You loan your money to the ones who issue a bond. And each bond has an end date, like 1-3-5-10-30 years. And each bond has an interest rate set, which is fixed. It is very transparent, when you plan to invest in a bond, it’s very clear how much interest rate you will get each year, and how many years of loan there still is.
01:59 government bonds
The first party that issues bonds, are governments. Municipalities and governments. The moment they need money for certain projects like infrastructure, football stadium or any government related projects.
04:19 corporate bonds
The second party that issues bonds for investors are corporations, whenever they don’t want to issue more shares, in which people will get ownership of the company, they issue bonds in which are just loans and you can support them by buying into these bonds.
05:51 why to invest in bonds
When you want transparancy in your returns for your investments. Then bonds are a great investment. But that’s about it. When you already know that you are going to invest for a longer time, why not invest in simple index funds that also give a clear return on the long term. Investment experts always say that you should invest in bonds as well, just to diversify your portfolio, and also invest more and more in bonds, the moment you near your retirement.
08:12 who would want to invest in bonds
The big question is, who would want to invest in bonds to make money? There is hardly any money to make, when your returns from bonds is just outpacing inflation, barely. And yet so many invest in bonds, just because they think spreading your investments is a good thing. And I totally agree with the latter, you should spread your investments, but should you be the one doing it in bonds, or elsewhere?
09:10 when do you retire, should you invest in bonds?
Did you know that warren buffett does not invest in bonds, because he believes it does not generate any money. And he himself doesn’t even invest in bonds, and yet he just turned 90 years old. So, if he is not retiring now, when should you be retiring? Or in other words, why should you be investing in bonds? Ray dalio is 71 and is not investing in bonds
11:11 when you know what you should be investing in
If you know what to invest in, you’ll know, bonds is most likely not for you or me…
11:37 are you going to be investing in bonds?
When you’re ready to buy some bonds, let me know ;) I’m curious why!