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Shark Tank's O'Leary Shares His Own Investing Techniques

By Brett Eversole
Friday, September 29, 2017

"No one ever thought a show about business could ever become this popular," Kevin O'Leary told the crowd in Las Vegas.
 
O'Leary was Wednesday's keynote speaker at our annual Stansberry Conference. You probably know him as "Mr. Wonderful" from the Shark Tank television show. But he's also a knowledgeable investor in the markets, with his own line of exchange-traded funds (called O'Shares).
 
Shark Tank brings business owners together with potential investors – or "Sharks" – like O'Leary. He has built a portfolio of more than 40 businesses from the show. But on Wednesday, he explained to the audience that Shark Tank-style investing isn't how to build a long-term portfolio.
 
"It's not my Shark Tank persona, but the real dough is in this philosophy," he said.
 
O'Leary told the crowd how to build their own portfolio like he does. And the good news is that his method is simple. Anyone can do it.
 
Here are the details...
 
Every successful investor needs a set of ground rules – principles they plan to follow no matter what.
 
For O'Leary, the rules are simple...
 
First, every investment must pay a dividend. Cash is king, so you want to own investments that pay cash.
 
O'Leary looks for investments that pay a monthly or quarterly distribution. And only his gold and personal real estate holdings (homes he lives in) don't fit this requirement.
 
Next, you need to diversify. There are plenty of ways to make that happen. But Mr. Wonderful follows two simple ideas: Never invest more than 5% in any company. And never invest more than 20% in any sector.
 
Those two diversification rules mean you'll never own too much of one company or group of companies. It means diversification will allow one part of your portfolio to zig while the other zags.
 
With those rules in place, O'Leary explained how he invests for the long term in his family trust. The simplicity might surprise you...
 
Investment
Portfolio Percentage
Stocks
50%
Fixed Income & Real Estate
35%
Cash
10%
Gold
5%

Stocks, bonds, cash, and gold. Simple, right?
 
His one additional idea is moving a good portion of your stock holdings outside of the U.S. He does it by investing 60% in the U.S., 20% in Asia, and 20% in Europe.
 
O'Leary has built a conservative portfolio. But it's one that should perform well for decades.
 
He told the crowd, "Preservation of wealth is all that matters." That means he's more interested in not losing money than shooting for the moon. And most investors are smart to listen to that advice.
 
Again, to echo O'Leary, "This is where the real dough is."
 
You don't have to be a genius to build your own portfolio like this Shark. Just follow Mr. Wonderful's simple rules...
 
Own investments that pay dividends. Diversify. And follow the simple, long-term asset allocation outlined above.
 
Good investing,
 
Brett Eversole




Further Reading:

"Once a year, we gather the best minds we know and ask them to share their best ideas," Steve writes. Learn why this event is a rewarding experience for any investor, and check out the speakers for this year, right here: Our Favorite Ideas Today – Live, From Your Couch.
 
In this essay, our colleague Dave Eifrig shares one of his own investing ground rules – the key question you must answer before you get in. "Most people never consider how they'll get their money back," he says... Learn more here: The No. 1 Question Most Investors Forget to Ask.

Market Notes


THIS HOTEL STOCK SIGNALS HEALTHY SPENDING

Today, we look at a sector that bodes well for the U.S. economy...
 
As we've covered many times, strength in things like credit cards, swimming pools, and cruise lines can be a clue to how consumers are feeling. So, too, is the performance of hotels... Trends in traveling can shed light on the economy because these expenses are generally luxuries, not necessities – they show that consumers have extra cash to spend on trips and getaways.
 
We can see this today in shares of hotel operator Hyatt Hotels (H). This $7 billion company has 13 hotel brands, with around 730 properties in 56 countries. Early this year, Hyatt acquired wellness resort Miraval with the aim of catering to high-end travelers. And with increasing revenue as of the second quarter, Hyatt has plans to open a total of 60 new hotels by the end of the year.
 
As you can see in the chart below, Hyatt's stock is surging to new 52-week highs. And shares are up 27% the past year. It's a sign that the U.S. economy is chugging along...
 

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