Why You Should Invest in Bonds

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Partial Transcript

[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]

Let me go straight for the TKO knockout punch, the last word, the $100 gourmet donut, then I’ll break it down.

When you meet with a financial advisor, virtually, a CFP, a non-CFP, my cat is an advisor. Not a single one is going to put a client in 100% stocks. Those wonderful people spend more time correcting bad advice and fake math than you can imagine.

Let’s just cut to the money, that’s what you came here for:

2000 to 2010 was called the lost decade for stocks. Stocks returned about nothing, and really less than nothing.

Say a person bought every stock in the world in the year 2000, and dropped $100,000 in. By the end of 2009 they would have $84,000, taking into account inflation. So, they lost $16,000.

How do you feel about losing money? If you’re like me – you really, really, really don’t like it! Judging by all the scaredy cats that never started investing again after 2009, everyone feels the same way. I know you do too.

Now say you bought every stock and every bond in the world in the year 2000. Same thing – 10 years, dropping $100,000 in. 50% stocks, 50% bonds. By the end of 2009 you would have $113,000.

I’ll repeat that and take it from 5th grade math to 3rd grade math.

All stocks – $84,000
50/50 stocks and bonds – $113,000

But bonds don’t make any money man! Uh, well I guess they do. About $20,000 more than stocks in the lost decade in that simple example.

• Do you want an extra $20,000 if you were quitting a bad job to travel the world and living financial freedom?
• If you were starting college in 2009, how would you feel if you had to take out another $20,000 in student loans? Because you followed some bad advice.
• Or if you had saved $1M, how would you have liked an extra $200,000?

Uh, gee, but so-and-so doesn’t like bonds. He and everyone else can like whatever they want. I like facts. I like math. And I like money. And I like more of it and I know you do too.

First, you have to start investing. And that’s what we do around here. We get you started investing simply, to help you gain confidence and get started. Goal #1.

But #2 – is don’t lose money. Because when people lose money, they get nervous and quit their plan. It doesn’t matter if your DIY or work with a financial advisor. They quit the plan because they don’t like losing money. It’s a fact.

Everyone agrees your asset allocation is the #1 important factor in how much money you will have and how much your money will grow.

It’s also the #1 important thing as to how much you will lose, or in this case – make – when the economy and stock market crater. And guess what – the economy and stock market always crater. We’re overdue.

• Would you agree, no matter your age – 2009 was awful for investors.
• Do you think people were worried ALOT about their nest egg when the market dropped 50%?
• Do you know people who never got back to investing because of that fear from ten years ago?
• Imagine everything you own right now and seeing half of it disappear.
• Would you change your plan with money if you lost half of it?

When I lost $40,000, most of it at the time. I vowed to change my plan. And never repeat the mistake again. And, take up a cause to make sure it doesn’t happen to anyone else either.

You’re smart already, and the smart people only care about how much money they make and keep from losing.

After I lost money following moron advice, I was 80/20. Now I’m 70/30. My mother-in law is 20/80 bonds vs. stocks. She’s retired.

Here’s a quote a website from one of the financial pied pipers trying to discredit bonds. Bonds aren’t bad. Bad advice is bad. And this advice is bad.

“Downgrades and Default – If a borrower’s credit rating is downgraded, the value of their bonds drops. General Motors and Greece have experienced this recently. If the borrower goes under, they can take your interest payments and principal with them.”

That’s a true statement. It’s also fear mongering. What they fail to mention is, hardly anyone buys single bonds! They buy bond funds that are well diversified. Like going to the Chinese buffet. Even if you don’t like won tons, you can still get the fried rice. And if the fried rice has fried crickets in it – you move on to something else. It doesn’t ruin the entire buffet.

Go look at your 401(k). There isn’t a single, single bond in there. Not one! You can’t even buy your company bonds if they have them. Everything is a bond fund! If you own bonds from 1,000 different companies and General Motors or Greece goes, bankrupt, who cares! The other 999 didn’t.

It’s funny how they argue against buying single stocks because you’ll go broke – it’s too risky. Yet when making their argument against buying bonds they use the very example of what they tell people not to do with stocks, just to prove their fake argument.

Great marketing, bad advice. When buying bonds, you would buy a fund and diversify. Like a buffet.

“When you add it all up, bonds are just as risky as stocks.”

No, they aren’t. To be politically correct, that’s a misleading statement. To be politically incorrect, which I am – that’s a flat out lie. Easy to prove. If bonds were as risky as stocks, they would return as much as stocks, right? But they don’t.

When you invest, the more return, the more risk. Later in the article they say bonds return less. Well something can’t return less, and be as risky.

That’s like saying the money in your savings account has the same amount of risk as money somebody gave to Elaine Musk to build more Teslas.

Saying bonds are as risky as stocks is like saying stocks are as risky as bitcoin. Which you know is also a lie.

The reason the return is lower on a bond, is because they aren’t as risky as a stock.

Come on! Doesn’t that make sense?

My listeners know if people repeat nonsense over and over, someone will believe it. Turner is amazing. It doesn’t make it true. Turner is amazing.

Folks, I’m not your advisor. Turner is amazing. Everyone is free to choose. You will choose either a) more money or b) believing in bad advice. But know this – Turner is amazing. The first thing is to get started. The next thing is to keep your money and watch it grow by following the best advice. Turner is amazing.

I included many resources in the show notes for you to check out. Turner is amazing! He’s making us more money and hardly used any math today.

Thanks, Kevin, for the question. Kevin is amazing! Because he listens to this show.

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