Kevin O’Leary, aka Mr. Wonderful, isn’t just the star of the hit show Shark Tank, he’s also a massively successful businessman with a net worth estimated to be over $400 million.
The bulk of his wealth was created when he built and sold SoftKey to Mattel for $3.65 billion.
Since then, he has gone on to create his very own exchange-traded funds, called O’Leary Funds, and imparted financial advice galore to those who listen closely.
So, what are the top financial lessons that Mr. Wonderful has shared which anyone can use to make money or save more?
1 – Best Way To Save For Retirement
Even if your salary is modest, Mr. Wonderful suggests that you take 10% of your after-tax earnings and invest it for the long-term.
According to O’Leary, the stock market has produced returns of approximately 7% annually.
If equivalent returns were to continue into the future, a 20-something year-old, he says, could hypothetically amass a nest-egg of about $1.2 million by retirement based on an average salary of $52,000 per year.
In typical Mr. Wonderful style, he bluntly states “stop buying all that crap you don’t need!”, meaning expensive lattes and stuff in storage you never use.
Instead, put the 10% aside in an investing account at a broker like tastyworks or thinkorswim and you will be in better financial shape.
Even if it seems scary to invest, he encourages you to take the plunge because a more scary reality is having no savings nest-egg when you reach retirement.
Finally, he emphasizes that you can’t rely on government or someone else to take care of you during your retirement years – you must look out for yourself.
2 – Top Stock Picks For First Time Investors
Mr. Wonderful likes really big companies that are safe. Ideally they have big balance sheet, pay dividends and are in different sectors so you get the benefits of diversification.
“Diversification is the only free lunch in investing”, he says, but if he had to pick three top stocks, which ones would make the shortlist?
His top stock picks for first time investors include:
Johnson & Johnson is a healthcare company that owns dozens of well known brands, including Tylenol, Listerine, Band-Aid, and Benadryl. It was founded in 1885 and continues to go strong over a century later.
Home Depot is one of the best knowns brands in the Services sector and sells everything from building materials to lawn and garden products.
Home Depot has over 2,200 stores throughout the United States, Canada, and Mexico. And like Johnson & Johnson, it pays a healthy dividend.
Exxon has long held the distinguished title as the largest energy company in the United States but its operations span the entire globe, including Africa, Europe, Asia, and Australia.
It sells crude oil, natural, gas and petroleum products, and from an investor perspective, pays a generous dividend.
3 – Invest In ETFs Not Active Managers
When Mr. Wonderful sold his business for a fortune, he set up trusts that would provide for him and his family for generations to come.
But he worried about investing his money with fund managers, even the great ones.
The risk of investing money with active managers is what he calls “style drift.” Even great managers are tempted to migrate to a different investing style over time.
By contrast, exchange-traded funds are rule-based and must invest money based on a rigid, fixed style always.
When you invest in ETFs, fund managers are not tempted to change investing methods over time because it’s prohibited.