When you look around your local community, just about anyone who has made serious money is most likely a business owner.
One of the great investors of our lifetime, Naval Ravikant, said the following:
“Being an owner in a company basically means you own the upside. When you own debt, you own guaranteed revenue streams and you own the downside.”
Investing in the public markets isn’t all that different. You own slivers of hundreds of companies. If consumers keep buying and those companies perform well, you should do well.
In our American culture (and global culture is shifting more and more in this direction as well), what do you think the chances are that the majority will become minimalists? The likelihood is basically zero. Despite many of us having an appreciation for, or even admiration for that way of life, being minimalists is not in our nature. We always want more. So does everyone else.
Bear in mind that most fiscally responsible companies will only borrow the money (sell bonds) if they believe they can earn a long-term return on those dollars in excess of the interest paid. This is a simple concept that often gets ignored by a huge number of investors.
That said, given the choice, do you think you could make more money by “renting money to a company” or by owning the company? Where do you think the real money is going to be made?
Obviously, there are plenty of reasons to hold bonds – such as a safety net in tumultuous markets – but I wouldn’t look for bonds to make any significant return. Especially given where interest rates are at the moment.
I just wanted to offer the reminder: Never forget who gets to keep the profits…
Stay the course,
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This post is not advice. Please see additional disclaimers.