Like most investors, Shark Tank’s Kevin “Mr. Wonderful” O’Leary has a specific set of principles for his investments strategy, but it’s how the ETF investor devised his strategy that will surprise you.
He learned from his mother.
“She was not a portfolio manager, just a Lebanese mother who was concerned about having her own money,” O’Leary, founder and chairman, O’Shares Investments, said on June 9 during a presentation on Smart Beta at the Inside Smart Beta conference.
Georgette’s golden rules were passed down to her sons. When she died, her family inherited her investment portfolio, which she hid from both husbands. Because he was the older brother, Kevin received a call from the Trustee —who had interesting news for the future shark. “He said, ‘You’ve got to come see this.’ It blew away everybody,” he said.
The amount of the portfolio was impressive for a novice investor. Kevin had known his mother was doing well financially because she was able to give him a $10,000 loan, which he used to launch SoftKey Software Products in 1983 from his Toronto basement.
Consisting of just large-cap, dividend-paying stocks and interest-bearing bonds, more than 70% of her earnings came from dividends.
“She was cheap,” O’Leary said. “She wanted to get paid to wait.”
O’Leary’s rules for investing are as follows:
- Never put more than 5% of your wealth in the stock market
- Make sure the stock pays dividends.
- Never put more than 20% in one sector.
- Buy bonds.
Since discovering mom’s best-kept secret, O’Leary has implemented these rules into his personal strategy.
To build his wealth in the SoftKey days, O’Leary licensed the software and convinced companies to use Softkey’s technology with their own. O’Leary also acquired other software firms over time. The company restructured to early childhood educational software and was renamed The Learning Company (TLC) in 1995, after one of its acquisitions. Toy giant Mattel would then acquire TLC in 1998 for $3.8 billion. His next ventures included StorageNow Holdings, a TV stint on CBC’s Dragon’s Den, O’Leary Funds Management, and O’Leary Mortgages before Shark Tank and O’Shares ETF Investments’ 2015 launch.
When reflecting on his worst decisions, Mr. Wonderful says his worst moves were the ones where he went against his gut.
The purpose for O’Leary’s story is to show that although products and markets change, rules don’t. With O’Leary’s track record, it’s hard to argue.