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Why Nobody Swipes Right on Bonds (But Everyone Marries Them) · Triple Da Money

0:00
SPEAKER_01: Okay, real talk.
0:01
SPEAKER_01: Nobody under 30 has ever said the word bond unless it was following James.
0:06
SPEAKER_00: Everybody knows what a stock is.
0:08
SPEAKER_00: Stocks are hot.
0:09
SPEAKER_00: Stocks are the guy that pull up in the fancy cars.
0:12
SPEAKER_01: And bonds are what?
0:14
SPEAKER_01: The guy that remembers your birthday?
0:16
SPEAKER_00: Bonds are the guy your mom likes.
0:20
SPEAKER_02: Both of these are compliments.
0:22
SPEAKER_02: You just don't know it yet.
0:24
SPEAKER_02: Here's the deal.
0:25
SPEAKER_02: Bonds sound scary and boring, but neither of these things are true.
0:30
SPEAKER_02: They're actually one of the most important tools you'll ever use not to be broke.
0:35
SPEAKER_01: So today we're explaining it through dating because apparently that's the only language my brother speaks.
0:41
SPEAKER_01: It's the only language anyone speaks.
0:44
SPEAKER_02: Stick around, because by the end of this episode, you'll find out why the boring guy your mom likes may be the best choice in the market.
0:52
SPEAKER_02: Simplest version: a bond is a loan.
0:55
SPEAKER_02: You give a company or the government your money for a set amount of time.
1:00
SPEAKER_02: In exchange, they'll promise you two things.
1:03
SPEAKER_02: They'll pay you back a little bit extra every year just for the privilege of using your cash.
1:08
SPEAKER_02: And at the end, they'll hand back every dollar you gave them.
1:12
SPEAKER_01: So I'm the bank?
1:14
SPEAKER_02: You're the bank, they're the borrower.
1:17
SPEAKER_00: And I'm a stock.
1:18
SPEAKER_00: Which means what?
1:19
SPEAKER_02: You're not lending anybody anything.
1:22
SPEAKER_02: You're buying a tiny piece of a company.
1:25
SPEAKER_02: If the company does great, you do great.
1:28
SPEAKER_02: And if it does terrible, you lose money right alongside it.
1:32
SPEAKER_02: No promises, no guarantees.
1:34
SPEAKER_01: So I get my money back no matter what, but he might just not.
1:40
SPEAKER_01: I also might make more than you'll ever make.
1:42
SPEAKER_01: Might.
1:43
SPEAKER_02: That's the whole difference, actually.
1:45
SPEAKER_02: Bonds are calmer, usually less risk and a steadier payout.
1:49
SPEAKER_02: Stocks can swing way high, but they can also swing way lower.
1:54
SPEAKER_02: Neither one of these is better.
1:56
SPEAKER_02: They're just different personalities.
1:58
SPEAKER_00: And I'm the personality that gets invited to parties.
2:02
SPEAKER_01: And I'm the personality that gets invited back to Thanksgiving.
2:06
SPEAKER_02: Okay, so we have to make a decision here, but let's make it a little more fun.
2:10
SPEAKER_02: You guys both like my friend Julie, right?
2:12
SPEAKER_02: So pitch to Julie why you're the best investment.
2:16
SPEAKER_00: Julie, baby, with me.
2:18
SPEAKER_00: The highs, they're incredible.
2:20
SPEAKER_00: Some years, I'm up huge.
2:23
SPEAKER_00: Sure, some years I might embarrass you in front of your friends, but that ceiling, it's unlimited.
2:30
SPEAKER_01: Julie, with me, you know exactly what you'll be getting year after year.
2:35
SPEAKER_01: I show up, I text you back, I pay you exactly when I say I will.
2:40
SPEAKER_01: I will never once make you cry in a group chat.
2:43
SPEAKER_02: See, this is the actual decision every investor makes.
2:47
SPEAKER_02: Do I want to take a risk on the guy who could take me somewhere amazing, but could also take me somewhere absolutely terrible?
2:53
SPEAKER_02: Or do I want the guy who's reliable every time forever?
2:58
SPEAKER_00: That guy sounds boring.
3:00
SPEAKER_02: He's also how you don't end up crying over your 401k at 26.
3:05
SPEAKER_02: Most smart people would date both of you.
3:08
SPEAKER_02: Mostly stocks because you're the growth, but also some bonds to make sure the whole thing doesn't fall apart the one year the market has a bad breakup.
3:16
SPEAKER_01: I'm not the backup plan, I'm the foundation.
3:19
SPEAKER_00: You're the guy that nobody swipes right on first.
3:22
SPEAKER_01: I'm the guy people marry.
3:24
SPEAKER_02: Here's where it gets interesting.
3:25
SPEAKER_02: Even a bond's value can move around.
3:28
SPEAKER_02: And it's not because the bond changed, it's because everything around the bond changed.
3:33
SPEAKER_01: What do you mean, changed?
3:35
SPEAKER_02: Picture this.
3:35
SPEAKER_02: You give someone your number at a party, and at the time, you were the coolest guy in the room.
3:40
SPEAKER_01: Objectively.
3:42
SPEAKER_02: Then, three weeks later, three new guys.
3:45
SPEAKER_02: They're hotter, they play basketball, they have more money, they're taller, they show up to the party.
3:51
SPEAKER_02: This is the same as interest rates going up in the market.
3:54
SPEAKER_01: So I'm less special even though I didn't change at all?
3:57
SPEAKER_02: Exactly.
3:57
SPEAKER_02: That's what happens when interest rates go up even after you've locked in a bond.
4:01
SPEAKER_02: Brand new bonds start offering better deals than yours.
4:05
SPEAKER_02: So if you tried to sell yours early, you'd have to knock down the price to compete.
4:09
SPEAKER_02: And if interest rates go down, then you're the only guy in an all-girls school.
4:14
SPEAKER_02: The good rate from everybody else's deal got worse.
4:17
SPEAKER_02: Suddenly, you're extremely in demand.
4:20
SPEAKER_01: So I go up and down just depending on whoever's in the market, not be depending on if I got worse.
4:26
SPEAKER_02: Right.
4:27
SPEAKER_02: And there's a second thing working on you the entire time.
4:30
SPEAKER_02: Whether rates move or not, a dollar today buys way more than a dollar in 10 years.
4:36
SPEAKER_02: So even if nothing changes, the money you get back is worth a little less than the money you handed over.
4:42
SPEAKER_00: So even the reliable guy gets a little less impressive over time.
4:47
SPEAKER_02: Only if you're not paying attention to it.
4:49
SPEAKER_02: But here's the part that actually matters the most.
4:52
SPEAKER_02: If you hold your bond the whole way through instead of selling it early, none of that up and down really messes with you.
4:58
SPEAKER_02: You still get your interest rates every year, you still get every dollar back at the end.
5:02
SPEAKER_02: Inflation is the only thing quietly working against you the entire time.
5:06
SPEAKER_02: Okay, quick pro and cons because you guys are gonna forget half of this by tomorrow.
5:10
SPEAKER_02: Pros, you get paid regularly just from holding it.
5:14
SPEAKER_02: You get every dollar of your original payment back if you just hold on till the end.
5:18
SPEAKER_02: And it barely moves compared to a stock.
5:20
SPEAKER_02: So it's basically the calm one in your portfolio.
5:23
SPEAKER_02: Now, for some cons, the payout is usually smaller than what a stock can do.
5:27
SPEAKER_02: If you need your money back early, then you might have to sell for less than what you paid.
5:32
SPEAKER_02: And inflation is quietly eating a little bit of your return the entire time, no matter what.
5:37
SPEAKER_01: So I'm stable, dependable, and slightly less exciting than everyone remembers.
5:43
SPEAKER_02: Correct.
5:45
SPEAKER_01: Some people marry that, buddy.
5:47
SPEAKER_02: A bond is just a loan.
5:49
SPEAKER_02: You lend money, you get paid interest, and you get your principal back.
5:52
SPEAKER_02: It's calmer than a stock, but its value can still shift based off of the interest rates around it.
5:57
SPEAKER_02: And inflation quietly nibbles at it the entire time.
6:00
SPEAKER_02: Hold it to the end, and most of that stops mattering.
6:03
SPEAKER_01: So I'm reliable.
6:05
SPEAKER_01: Say it.
6:06
SPEAKER_01: You're reliable.
6:07
SPEAKER_01: Louder for the people in the back that think I'm boring.
6:10
SPEAKER_02: We're trouble de money.
6:11
SPEAKER_00: Date the stock for thrill.
6:12
SPEAKER_00: Marry the bond for stability.
6:15
SPEAKER_01: I heard Mary and stopped listening.
6:17
SPEAKER_01: Subscribe.