Steal These 4 Investing Tips From Kevin O’Leary

Invest like Mr. Wonderful by buying National Bank of Canada (TSX:NA), Alaris Royalty Corp. (TSX:AD), and iShares DEX Universe Bond Index Fund (TSX:XBB).

The Motley Fool

Thanks to his successful media career–first on Business News Network, and then as one of the stars on Dragon’s Den and Shark Tank–Kevin O’Leary has gone from a successful businessman to a true household name. Love him or hate him, there’s no arguing with his success.

Since O’Leary’s wealth is concentrated in private investments, nobody is really sure just how much he’s worth. Various estimates peg O’Leary’s net worth to be approximately US$400 million. That’s not bad for a man who started his first business in a basement funded by a $10,000 loan from his mother.

Over the years, the man who calls himself Mr. Wonderful has been kind enough to share some of his wisdom with individual investors. Here are four of Kevin O’Leary’s most important investing lessons.

Diversify

O’Leary has a simple strategy to make sure you don’t really get hurt in case one of the companies in your portfolio ends up being a fraud or going bankrupt. As long as investors limit their total exposure to one stock at a maximum of 5% of total holdings, that’s enough diversification.

Unfortunately, many investors don’t do that. I know many people who buy their employer’s stock aggressively, enticed by the discount offered to employees. Others might load up on the next sure thing, only to buy right when shares are hitting their peak.

Diversification protects investors from themselves. There are dozens of stories out there of certain investors riding one hot stock to riches. What we don’t hear about are the thousands of people who tried the same thing and failed.

Don’t ignore bonds

O’Leary repeats the same investing advice that many financial advisors have been saying for years. Every investor should have a healthy bond component in their portfolio.

O’Leary recommends a simple rule. An investor should have their age as a percentage of bonds in a portfolio. A 30-year-old investor should have 30% in bonds and 70% in stocks. A 70-year-old should have the exact opposite asset allocation.

There’s an easy way for investors to get exposure to all sorts of bonds, and that’s through the iShares DEX Universe Bond Index Fund (TSX: XBB), an ETF that holds nearly 1,000 different Canadian government and corporate bonds.

The trailing 12 month yield is 2.85%, which isn’t bad in today’s low interest rate world. But most importantly, bonds have a history of doing well when equities struggle.

Be careful when swinging for the fences

When you watch a few episodes of Shark Tank or Dragon’s Den, you’ll notice something about the way O’Leary invests. He often makes offers much lower than what his peers offer.

It’s obvious why O’Leary does things this way. He wants exposure to the types of businesses that are featured on these shows. He just doesn’t want to pay top dollar to own them. He’s a value investor.

Many investors would benefit from having this sort of restraint in their personal portfolios. We all want to own great companies. Just don’t pay high prices for them.

Insist on dividends

O’Leary has a simple rule when it comes to owning a stock. If it doesn’t pay a dividend, he doesn’t even consider it. The slogan of his investment company was “get paid to wait” after all.

O’Leary doesn’t disclose his own personal holdings, but it’s pretty easy to guess what kind of stocks he likes.

Canada’s banks have been terrific dividend investments over the years. National Bank of Canada (TSX: NA) might not be as well known as the so-called Big Five, but it has plenty of things going for it. It has a cheap P/E ratio (at least when compared with its peers), expansion potential both inside Canada and internationally, and a great dividend yield of 4.8%.

Another dividend stock investors should be looking at is Alaris Royalty Corp. (TSX:AD), a company that negotiates royalty deals for privately held companies. O’Leary is well known for asking for these types of deals on both Dragon’s Den and Shark Tank, and the 5.2% dividend yield is enough to make just about every dividend investor happy.

Fool contributor Nelson Smith has no position in any stocks mentioned.

More on Dividend Stocks

Person holding a smartphone with a stock chart on screen
Dividend Stocks

For BCE vs. Enbridge, a 5.7% Yield vs. 5.9% (And the One I’d Prefer for Income)

Both BCE and Enbridge offer attractive income, but BCE is a higher-risk turnaround opportunity, whereas Enbridge offers a more predictable…

Read more »

man shops in a drugstore
Dividend Stocks

How Much to Invest in RioCan for $300 a Month in Dividends

How much should you invest in RioCan for $300 a month in dividends? Explore its retail business, monthly payout and…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Telus Dividend Safety: Is the Stock Still Worth Buying for Income?

Explore the latest insights on Telus dividend amid a challenging earnings report and management's new Transformation Strategy.

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

BCE Just Reported: What $10,000 Could Earn You in Dividends Today

BCE is yielding a very generous 5.2%, as the company's telecom business improves and long-term investments drive growth.

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

Is Intact’s Rough Quarter a Blip or the New Normal for Canadian Insurers?

Intact reported $660 million in pre-tax catastrophe losses during the quarter, which dragged its net operating income per share lower.

Read more »

investor faces bear market
Dividend Stocks

How Much to Invest in BCE for $1,500 a Year in Dividends

BCE (TSX:BCE) could be a huge dividend value winner as the stock markets correct and potentially flirt with a bear…

Read more »

diversification is an important part of building a stable portfolio
Dividend Stocks

Want $6,000 a Year From Your TFSA? Here’s the Portfolio Size to Aim for

A $150,000 starting target can support a $6,000 annual TFSA income goal without requiring an extreme yield.

Read more »

top TSX stocks to buy
Dividend Stocks

Hot Take: The Best Monthly Dividend Stock on the TSX Right Now

For investors seeking monthly dividend payments, this REIT has a history of consistent dividend payments across different market conditions, along…

Read more »