Kevin O'Leary Answers Investor Questions

WIRED

Kevin O'Leary joins WIRED to answer the internet's burning questions about investing. Can you "time" your moves the stock market? What stocks and sectors are set to boom in the coming years? Is Palantir overvalued? What exactly are Bitcoin investors investing in?   Shark Tank Season 17 airs on its new day and time on Wednesdays at 10/9c on ABC and stream next day on Hulu.  Director: Justin Wolfson  Director of Photography: Kevin Dynia Expert: Kevin O'Leary Line Producer: Jamie Rasmussen Associate Producer: Brandon White  Production Manager: Peter Brunette Production Coordinator: Rhyan Lark Talent Booker: Paige Garbarini Camera Operator: Chris Eustache  Sound Mixer: Sean Paulsen Production Assistant: Shanti Cuizon-Burden Groomer: Evy Drew

Transcript

00:00Hey, Mr. Wonderful here, and I'm here to answer your questions from the internet.

00:04This is Investor Support, and here we go.

00:11This is large purpose.

00:15Okay.

00:16Is VOO and CHILL a viable strategy?

00:19VOO is one of the least expensive ways to invest in the S&P 500.

00:24These are called ETF, exchange-traded funds, and it's a very good vehicle.

00:28And frankly, yeah, it is a good way to chill.

00:31Bronco, Bronco, what kind of a name is this?

00:34Bronco, Bronco, Bronco?

00:36What are you, Bozo Bronco?

00:37Why do so many people say you can't time the market when you can?

00:42That's not true, Bronco.

00:43Nobody can time the market.

00:45Everybody tries.

00:46You cannot time the market.

00:47I stopped trying to do that decades ago.

00:50I got my hiney spanked, as you will, Bronco, Bronco, Bronco.

00:53It's going to happen to you.

00:54Here's one from professional underscore soft 258.

00:58Should I make a starter emergency fund or pay off debts?

01:02You got to pay it off.

01:03If you know you're being charged 21% interest on a credit card, some of them as high as 23%,

01:08you're out of your frigging mind if you don't pay that off.

01:10I can't make 23% a year.

01:13Either can you.

01:14It's really hard to do that.

01:15All right.

01:15Next on the hit parade.

01:17Gentry Court 2121.

01:20How do I get started investing for the very first time?

01:23You got to use an app.

01:24It's the easiest way to do it.

01:25If you're just starting out and your salary is 68,000 a year, that's the average salary

01:28in America.

01:30You download it on your phone.

01:31You decide, I'm going to keep 10% to 15% of my salary each month.

01:35The app is going to take it out of my bank account and just put it into an ETF in the

01:39market or a mixture of ETF and bonds, but you can set it up that way.

01:43Reswin asks, Palantir may be the most overvalued firm of all time.

01:48You could have said that about Apple.

01:49You could have said that about Amazon.

01:51You could have said that about Netflix.

01:52There's so many companies that you think are overvalued, but over time prove out their

01:57growth objectives.

01:59Palantir is about data.

02:01And data is the new oil.

02:03And they were the first to go this way and help both governments and companies mine their

02:08data become more efficient, more productive, more profitable.

02:11So are they overvalued?

02:13Only time will tell.

02:14Well, so far, it's been just killing it because data is really important.

02:19And data is what drives AI.

02:23So they're in the right space right now.

02:24That's why it's been performing so well.

02:26Here we have one from Kaldostan.

02:31Everyone investing in Bitcoin.

02:33What exactly are you investing in?

02:35Hype, technology, adoption?

02:37What makes it a good investment?

02:39Because I'm not convinced.

02:40So, listen, you don't have to invest in Bitcoin.

02:43No one's forcing you to do that.

02:44I do invest in Bitcoin because I'm a believer in crypto and a believer in digital payment

02:50systems over time.

02:51I have a general rule you should think about.

02:54Don't put the farm onto any one stock.

02:56In other words, don't bet everything ever.

02:58So my diversification strategy was taught to me by my mother.

03:01Never more than 20% in any one sector, including crypto.

03:05Never more than 5% in any one stock or bond.

03:09Now, we have 11 sectors in the S&P, including real estate, which was recently added.

03:14It's the most recent.

03:15Crypto is not yet a sector, but I believe it'll become the 12th, probably within five years,

03:19because it's being legitimized through policy.

03:23All right, here's a question from illustriousstock3068.

03:29What do you think the overall return on investment for Shark Tank is?

03:33Well, nobody really knows for sure because there's guest sharks, regular sharks, and

03:36nobody really puts together all the data.

03:39But here's what we do know.

03:40It's been on for 17 years.

03:43Something's working out.

03:44Entrepreneurs keep coming every year because it does a phenomenal job in helping them launch

03:49their businesses, create jobs in America, sell millions of dollars with the product and

03:54services.

03:55And the sharks have done quite well.

03:56Otherwise, they wouldn't come back either.

03:58RJ Investing asks, how long until average investors realize AI is a bubble that will never pay off?

04:05Yeah, they said that about the internet, too, back in 1990.

04:08Wrong.

04:09Technology has a nasty way of being right sometimes, and certainly AI is creating a lot of excitement

04:14about productivity, margin enhancement, customer acquisition costs.

04:17Doing a lot of robotics, working on all kinds of new technologies that we never even thought

04:23about, changing how movies are made, you name it, it's starting to affect every sector of

04:28the S&P 500.

04:28So I'm not sure it's a bubble.

04:30Time will tell.

04:32Big phase, 7911.

04:33Love that name.

04:34Does anyone, absolutely anyone, think that Tesla stock will go back up to its peak?

04:41When you're buying Tesla, you're buying more than electric car company.

04:45You're buying a data company.

04:47You're buying a robotics company.

04:48You're buying a company that understands energy, and they have a lot of resolution in terms

04:54of their drive towards autonomous cars.

04:57So you're buying sort of the future.

04:58King, J-U-R-G-Z.

05:02King, J-U-R-G-Z.

05:03Can someone please explain to me how short stocks actually work?

05:07Shorting is very risky.

05:08It has unlimited losses because you're basically selling a stock you don't own, and you're

05:13assuming it's going to go down, then you're going to buy it back, and you're going to

05:16profit between what you bought it, and you short it at $100, and then if it goes down

05:20to $50, you buy it back, and you made $50.

05:23But what happens if it goes to $200?

05:25Oops, you just lost $100.

05:28What happens if it goes to $1,000?

05:30What happens if it goes to $10,000?

05:32That happened in the internet bubble, and people got killed.

05:36So I wouldn't short stocks unless you really know what you're doing.

05:40That's what hedge fund guys do, and very, very risky.

05:42Javanalex asks, which is the best product that has got an offer on the tank on your perspective?

05:49You know, here's the thing.

05:51You just don't know.

05:52You can make the assumption each year when you, let's say, invest in a dozen deals, oh,

05:56I think they're all winners, but that won't be known for at least five to seven years.

06:01Then you're going to find out which ones win and which ones lose.

06:04And so sometimes the craziest deals make the most money.

06:07That's the idea of diversification.

06:08So the ones I've loved, I found out five years later, were monster winners, like Base Paws

06:14or Wicked Good Cupcakes, you know, Blueland.

06:18They're all huge winners.

06:20But you don't know out of the gate.

06:22You've got to wait.

06:23You have to let them marinate.

06:25Look, it rhymes.

06:26It's fantastic.

06:26Jumbob994, why wouldn't I invest heavily in gold?

06:31I wouldn't invest heavily.

06:33I have a 5% weighting in gold.

06:35And whoa, has that ever worked.

06:38I'm so happy with my gold.

06:40Now, I own it two different ways.

06:42The GLD is the ETF, but I like to touch my gold.

06:46So I actually own the bullion.

06:48But when you own the bars, you have to pay for storage.

06:51You're not going to walk around and put it under your mattress.

06:53You've got to put them in a safety deposit vault, and you pay for that.

06:57All right, next on the hit parade.

07:01TechnicalBank6670S, is being a successful day trader really even possible?

07:04Yes, it is possible.

07:06But it's really hard work.

07:10I mean, this is a full-time job.

07:12It's not for me.

07:13It's not something I want to do.

07:14There's a huge community all around the world that do this,

07:17and they kind of roam the earth in bands online.

07:21Not easy.

07:22And I would say the majority lose money,

07:24but some of them do quite well

07:26because they're really adept at figuring out trends or understanding momentum.

07:31But a lot of them actually trade all day long

07:33and then go back to cash at night and go to sleep

07:35because they don't want to be exposed to the market overnight.

07:38If you think you want a life like that,

07:40you can check it out.

07:42Not for me.

07:44ElectronicChange380 asks,

07:46When did you realize the power of compound interest?

07:49Almost immediately when I was taught this,

07:52I think in grade six.

07:53It's pretty friggin' cool.

07:55Just leave it there and let it compound

07:58and grow and grow and grow and grow and grow.

08:01Basically, you can double your money every seven years.

08:05Just making a few percent.

08:06It's incredible.

08:07This is from Slight Strip 1869.

08:12Sorry, Slight String 1869.

08:16Crazy name.

08:17High yield savings or invest in mutual funds.

08:194.5 year time span.

08:21No, not mutual funds.

08:23Fees are high and they're tax inefficient.

08:27ETFs.

08:28Exchange traded funds.

08:30I would do that with a four and a half year time span.

08:32This is Jumper Bumper.

08:35The Jumper Bumper.

08:36Why do people buy individual stocks instead of funds?

08:41If you think you're so good that you can pick stocks

08:44and beat the index, give it a try.

08:46Learn the hard way.

08:48Virtually no one beats the index.

08:50It's so hard.

08:52So what you do is you set yourself up.

08:55Maybe you put, I don't know, I'm just telling you,

08:57make it easy for you, $1,000 into one account

09:01where you're picking stocks

09:02and another into the SPY.

09:05That's the SPY index,

09:06the ETF that tracks the entire SP500.

09:10And then you find out the hard way.

09:12You're not that good.

09:1390% of the time you can't beat it,

09:16so you might as well join it

09:17and stop trying to pick stocks.

09:18I don't pick stocks.

09:19This is a Reddit user asks,

09:22are dividend stocks ever worth it?

09:23The answer is absolutely yes.

09:25But the right dividend stocks,

09:27you'll find a good index called OUSA

09:29that really focuses on those that actually pay dividends

09:31to make sure they're not taking on

09:33inordinate debt to pay the dividend.

09:35You want the dividend paid out of operating free cash flow.

09:38And that's just giving you back some of your profits.

09:40That's all.

09:41Of course it's worth it.

09:42Mona Shark Cavell 04 asks,

09:45what shark do you think has the best ROI?

09:47Oh, there's no question.

09:49It's Mr. Wonderful.

09:50Who else could it be?

09:51Thank you for that question.

09:53Jenna DD 126 asks,

09:56what exactly is a hedge fund

09:57and what does a hedge fund manager do?

10:00So, hedge funds are a different beast.

10:04These are managers that usually are allowed to go anywhere,

10:07any geography, any security,

10:09and they can go short and long,

10:11which means they can bet against a stock or with a stock,

10:14and they try and beat the market.

10:16Some of them do very well,

10:18some of them not so much.

10:19Generally, you want to look at a five-year track record

10:21of a hedge fund manager.

10:22If they beat a hurdle of, let's say, 7%,

10:24they take 20% of all the gains above that.

10:28Some of them have no hurdle,

10:29which means they take 20% of any gain.

10:31The point is you'd always ask what the terms are.

10:33The classic hedge fund is 2 and 20.

10:352% fees, 20% of any gains.

10:38So, investors get 80, the manager gets 20.

10:41Some of them have done very, very well,

10:43and some not so much.

10:45Equivalent Blue Jay asks,

10:46how good of an idea is it to invest into startups,

10:49and how do I sift through them?

10:51This is what I do on Shark Tank every day.

10:52I don't invest just one company each season.

10:55Sometimes I do a dozen,

10:56because I don't know which one's going to work,

10:57and either do you.

10:58Startups are tricky,

10:59because history will tell you about 80% fail,

11:03and the 20% that make it pay you back for all your mistakes.

11:06But how many should you have?

11:07I think the magic number is a minimum of 7.

11:10And the way you do that

11:11is you go to a crowdfunding site like StartEngine,

11:14and you can look at all the different deals

11:16and decide how much you're going to invest in startups

11:18and pick 2 or 3 or 4 or 5 or 6 or 7 deals

11:21and manage your portfolio that way.

11:23It makes it very easy.

11:24Bikes or Beans asks,

11:27does the market need corrections?

11:29A correction is defined by a loss of 20% or more,

11:34or that's an entry into a bear market.

11:37Sometimes, because of calamities like pandemics,

11:40you get a lot of volatility.

11:41And yes, they do go up and down,

11:43but nobody can time them.

11:44It's impossible to know.

11:45And sometimes, they go up violently.

11:47Then they go down violently.

11:48But long-term, don't bet against America

11:50because the S&P 500 has provided 8% to 10% returns

11:54for almost 200 years.

11:57Alterna9 asks,

11:59are there any logical arguments

12:00to not invest in international funds?

12:03No.

12:04Diversification is also geographic.

12:07You can find indices that provide,

12:10like those are ETFs,

12:11that will help you invest in other countries,

12:15like Europe.

12:16Europe, you know,

12:16some years outperforms the S&P.

12:18You just don't know when.

12:21FarLifeguard5027 asks,

12:23why bother with medium-small cap funds

12:26when the large cap consistently overperforms them both?

12:30Not true.

12:32Simply not true.

12:34The Russell 2000 has companies

12:36that are growing a little faster than the S&P,

12:39so in the right conditions,

12:41like lower interest rates,

12:42they tend to outperform.

12:43There's no guarantee,

12:45and you never know when they're going to outperform,

12:48but they're the small companies

12:49that grow into big companies,

12:50and they grow faster.

12:51This comes from Duke Thumper.

12:54Different.

12:55What percentage of portfolio

12:57is worth holding in bonds as a 22-year-old?

13:00Great question.

13:01When you're that young,

13:02you can take more risk.

13:04The market provides better returns over time.

13:07When you're starting out,

13:08you can be as little as 20% to 30% in fixed income, bonds,

13:14and 70% in stocks.

13:16And then when you hit 50,

13:18you go 60 stocks and 40 fixed income.

13:21Then when you hit 60,

13:23you go 50-50.

13:24That's kind of a general rule,

13:25and you're sort of de-risking yourself

13:28as you get a little older

13:29because you've built up

13:30and licensed a little S-steg.

13:31Generally, the market gives you

13:338% to 10% every year.

13:35Summiki asks,

13:36what sectors or stocks do you think

13:38will boom in the next few years?

13:40Nobody knows.

13:42You know,

13:42seven stocks have been the majority

13:45of the S&P returns

13:46for the last three years.

13:47That's a very concentrated amount,

13:49and there's no guarantee

13:50they remain at the lead of the pack.

13:52That's why you want diversification.

13:54You don't want those stocks

13:55to become more than 5%

13:56each of your portfolio.

13:58Something to think about.

14:00Here's MaryBit8237 asks,

14:05how do you guys know when to sell?

14:07You never know when to sell,

14:09but a great rule

14:11is to make sure you stay diversified.

14:13So let's say you own a stock

14:14and it becomes more than 5%

14:15of your portfolio.

14:17That's too much

14:18in the world of diversification.

14:20So you sell it down to 5%.

14:21I've been doing that

14:22with Tesla for almost 10 years.

14:24It's the discipline

14:25of diversification

14:26that forces you to sell,

14:28and no one ever goes bankrupt

14:29taking profits.

14:31Look at it that way.

14:32Reddit user asks,

14:34which shark would you want

14:35to have a deal with?

14:38For me, it's Kevin,

14:39because I think he cares most

14:40about success of people

14:42he invests in.

14:43Yeah, you know,

14:44even as Mr. Wonderful,

14:45I have to agree with you.

14:46I love that Kevin guy.

14:47I mean, you know,

14:47he cares.

14:48That's what matters.

14:49It's really about betting

14:51on the jockey

14:52that's riding a good horse.

14:54That's what I want.

14:55I want entrepreneurs

14:55that can pivot.

14:56And by the way,

14:57almost 90% of my returns

14:58have come from women entrepreneurs.

15:01They get stuff done.

15:02You want something done?

15:03Give it to a busy mother.

15:04That's what works.

15:05But I agree with you.

15:06Mr. Wonderful agrees.

15:08Kevin's the dude.

15:09Well, that's it.

15:10Those are all the questions

15:11for today,

15:11and I really hope

15:12you learned something.

15:13Fantastic being with you.

15:14And by the way,

15:15I'm impressed

15:16with these questions.

15:17I'm glad you're thinking

15:18out there.

15:19And the key to success,

15:20keep watching Shark Tank.

15:22Mr. Wonderful says,

15:24keep watching it

15:25or you're dead to me.

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