16 September 2020

On today’s show, Robert Leonard is honored to sit down with Kevin O’Leary, also known as “Mr. Wonderful” on the hit TV show Shark Tank. Robert and Kevin talk about investing and personal finances strategies and lessons for the millennial generation. Kevin is an entrepreneur, venture capitalist, author, and television personality, famously appearing on Shark Tank. Kevin is involved in several businesses, and has recently founded Beanstox, an investing advisory service that helps people reach their financial goals.



  • Kevin’s new investing platform called Beanstox.
  • How and why Kevin used crowdfunding rather than other traditional means of raising capital.
  • How investors make a return on their money via crowdfunding.
  • The biggest mistake new investors and millennials make with their personal finances.
  • The potential of cryptocurrencies in millennials’ portfolios.
  • The best way for young people to invest.
  • How people can use the pandemic as a time to better themselves.
  • The first step you can take to better your financial future.
  • And much, much more


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Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Robert Leonard (00:02):

On today’s show, I’m super excited and honored to sit down with Kevin O’Leary, also known as Mr. Wonderful on the hit TV show, Shark Tank. For most people, Kevin really needs no introduction, but for those who may not be familiar with him, he is an entrepreneur, venture capitalist, author, and television personality, famously appearing on Shark Tank.

Robert Leonard (00:22):

Kevin has also recently started Beanstox, an investing advisory service that helps people reach their financial goals. I was very lucky to have the opportunity to speak with him regarding investing and personal finance strategies that young people can explore, and how they can better themselves during these difficult times. Without further delay, let’s get into today’s episode with Kevin, Mr. Wonderful, O’Leary.

Intro (00:45):

You are listening to Millennial Investing by The Investor’s Podcast Network, where your host, Robert Leonard, interviews successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Robert Leonard (01:07):

Hey, everyone. Welcome to this week’s episode of Millennial Investing. As always, I’m your host, Robert Leonard. And with me today, I have a very special guest, Mr. Kevin O’Leary. Welcome to the show, Kevin.

Kevin O’Leary (01:18):

Great to be here. Thank you so much.

Robert Leonard (01:20):

My guess is that the majority of the audience probably knows who you are, but for those who may not, tell us a bit about yourself, and specifically, how did you get to where you are today?

Kevin O’Leary (01:30):

No different than anybody listening, I think. I’m an entrepreneur. I tried many businesses and had a huge success in one called The Learning Company, SoftKey Software Products was the original name, became the largest purveyor of educational software in reading and math. Sold it to a toy company for 4.2 billion in the late nineties. And I’ve been an investor mentor shark on Shark Tank. I really like what I do.

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Kevin O’Leary (01:53):

I help young entrepreneurs achieve their dreams. We don’t always make it, obviously. Venture investing is highly risky and very serendipitous in nature. And sometimes you need luck and whatever else. But I’m very proud to say that over my career, I’ve helped a lot of companies grow and it helped a lot of people achieve their freedom. That’s what it’s about.

Kevin O’Leary (02:15):

It’s not about money. People think it’s always about money. It has nothing to do with money. It’s about personal freedom. And that’s why investing is so important.

Kevin O’Leary (02:22):

I got to tell you an incredible story. I have over 50 companies now. And we went into the pandemic, and obviously, everybody started losing money, because all the retail shut down and everything shut down. And I discovered during these last six months that 90% of the people that are working in my companies and the supply chains, tens of thousands of people don’t have more than two weeks’ worth of cash. They have no investments. There are a hundred million Americans with no investment strategy. That totally freaked me out. And that’s why we’re talking today.

Robert Leonard (02:56):

And so, that’s why you recently launched the investing platform, Beanstox. And I want to talk about that a bit first, and then we’ll get into some more broad investing topics. What made you want to start an investing platform? There’s a lot out there. So, what makes Beanstox different and what made you really want to start it?

Kevin O’Leary (03:12):

I made the assumption that it would be adequate to just go use one of the ones that exist out there. And I realized that’s not the case. If you look at the genre of apps that are out there, a lot of them gross up your credit card. So, that’s cool. That’s interesting, but that’s not a disciplined investment strategy, because you don’t know how much you’re going to spend at any one time.

Kevin O’Leary (03:32):

And then a lot of them are creating platforms where you have to be a day trader and pick stocks, and understand what you’re doing. And that is definitely very risky as far as I’m concerned.

Kevin O’Leary (03:42):

So, when I saw there was nothing out that I needed, because for my own employees, my own people that I work with, I wanted to create a platform that was based on some very basic premises. If you’re in your early twenties, you’re starting your job. Even if you’re 18 or older, if you take a hundred dollars a week and you have the discipline of just, whatever it is, you got to stop doing. Don’t buy that pair of shoes. Don’t buy that latte. Invest in yourself. Instead of spending it on some marketing.

Kevin O’Leary (04:09):

Everybody is pitching you to buy something every day, but I’m just saying, “Okay, take a hundred bucks, put it into Beanstox by just a transfer from your bank. You set up Beanstox to transfer automatically out of your account each week. By the time you retire, you’ll have over a million and a half dollars there, if the market just continues to do what it does.

Kevin O’Leary (04:26):

Because people need to understand, there’s a difference between saving and investing. Investing means that you buy great companies that are growing and servicing the economy. And that’s what Beanstox does, it uses exchange-traded funds, really good ones. And you buy fractional or you buy amounts of these ETFs each week at a hundred dollars at a time. And over your life, this is how you protect your own future. And that is why I built Beanstox. It’s unlike any other app of its kind. I’ve got a whole team doing this.

Kevin O’Leary (04:57):

We looked at the market inside out. Grossing up credit cards is not investing. There’s nothing wrong with it. Picking stocks is really hard. These stocks avoid all of that and become a platform that can build your wealth over a long period of time. And it’s a hundred bucks a week. That’s what I’m recommending. You don’t have to do that. You can do more, but I’m recommending a hundred a week.

Robert Leonard (05:16):

So, does Beanstox only allow investors to invest in ETFs or can you buy individual stocks too?

Kevin O’Leary (05:22):

You don’t buy individual stocks, because then you don’t get enough diversity. It forces you to basically diversify. The only free lunch in investing is diversification. And so, I’m not against buying one stock and hoping like crazy, it’s going to be a winner, but that is not… To me to that’s day trading. That’s not how I build my own wealth. I don’t do that. I don’t pick stocks and go nuts all day long, trading them. I use ETFs. That’s what I do. I use exchange-traded funds that are baskets of stocks in different disciplines, and I invest over the long term. I buy in, every couple of months I redeploy capital, put it to work.

Kevin O’Leary (06:01):

The rule of investing for those of you that are just starting up and listening to this, let me give you some rules that I learned the hard way. In other words, I didn’t do this and I got killed. Number one, never let a stock become more than 5% of your portfolio, or a bond or anything. Number two, never let a sector like energy or technology, or healthcare, or pharmaceuticals become more than 20% of your portfolio. If you do that, what you’re going to find over a long period of time is when there are drawdowns in those market corrections, you don’t get killed.

Kevin O’Leary (06:30):

In the late nineties when people got slaughtered, when tech blew up, and that was a time way back, that’s all they had. They had their whole net worth in technology. And I’m not saying that they were bad traders, but they got too concentrated in one area.

Kevin O’Leary (06:43):

So, diversification is what Beanstox is all about. Beanstox is really about building your net worth. There are many, many, many apps that you can download to trade, and you want to trade. To me, that’s like going to Las Vegas. And it’s fun. As long as you say, “I’m going to take a thousand dollars or 2000, or 3000,” whatever it is. “And I’m prepared to lose it all.” Go ahead and trade. But I’m talking about something else, I’m talking about investing for your future.

Kevin O’Leary (07:07):

And my employees, the tens of thousands of them in my Shark Tank companies and their supply networks, this is what I’ve done. I’ve said, “Guys, day trade all you want. But when you want to really put something aside, I got Beanstox for you.”

Robert Leonard (07:22):

So, when we think about diversification, do we have to diversify across different ETFs, or is there enough diversification in one ETF to satisfy that optimal diversification?

Kevin O’Leary (07:33):

The great thing about Beanstox is it lets you decide what your profile is. If you’re young and you’re in your early twenties, it’s going to set you up for a long-term investment strategy. Maybe if you’re in your forties or fifties, believe me, there are people of that age that are not investing anything. It’s a different profile, maybe a little bit more conservative. But the point is, it uses multiple ETFs, not just one. It gives you tremendous portfolio diversification. And if you look at the performance of the underlying ETFs it’s using, very good performance. And you can go look at all that. It’s a totally transparent app.

Kevin O’Leary (08:07):

What I suggest to everybody, download it, have a look at it, check it out, compare it to everything else out there, because I wouldn’t have spent all the time and money, I’ve invested a lot in this product to, do this, if I thought someone else did it better. I did it because I’m doing it better. That’s the way I look at it. But not as a day trader, that’s not what I’m doing. If you want to day trade, just go to any of the big online brokers and they’ll let you trade for free. No permissions. It’s not investing. That’s going to Vegas. And I think it’s fun. I’m not against it, but it’s that talking to my son and daughter about the difference, I have told them the same thing, “You’ll have to start.”

Kevin O’Leary (08:44):

And by the way, Mr. Wonderful here is not giving a free ride to my kids. They’re going to have to make it on their own. I might give all my money to a cat. I haven’t decided what I’m going to do yet. I’m not empowering anybody for free. My kids have to do… My mother said to me, “Look, I’m sorry, I’ve paid for your education. I’m done with you. Good luck to you.” And that was pretty scary. That was back in, when I was 21 years old, she just cut me loose. And I learned the hard way, what it takes.

Kevin O’Leary (09:10):

And I’m doing the same thing to my kids. So, I explained to them, “Here’s how Beanstox works out. Here’s how you save. Here’s how you invest. Here’s diversification.” There’s a lot of information on Beanstox. I’m extremely proud of this app. I’m really happy with the work and the money I’ve invested in developing it. I think it’s terrific. And look, I always say to people, “It’s a free market. Go look at everything. Find something better.”

Robert Leonard (09:31):

At the beginning, you mentioned that people could potentially cut back on their lattes or some of their other small items to find some extra money to invest. There are some popular books and personal finance experts that recommend against that. And they say, maybe you should work on your bigger things, get rid of your auto loans and your mortgages, and things like that, and continue to buy all of your coffee. Which strategy do you think is best for someone when they’re looking to optimize their personal finances?

Kevin O’Leary (09:55):

First of all, I don’t believe in debt. I don’t think you should go into debt. I believe in debt for maybe a home because you need a mortgage. Nobody has enough money to buy a home. But when you use a credit card to finance your lifestyle, let me put it straight to you, you’re an idiot, because I can’t make a 20% return on my investments, and yet the credit card companies can. They milk you dry. And the reason I own all the credit card companies as an investor is that’s exactly what they do. They prey on people. I’m not against them. I’m just saying that the credit, card debt, is the most expensive debt you’ll ever have in your life. So, the idea that you would buy more stuff and services than you actually can afford is really bad. I’m against putting yourself in debt.

Kevin O’Leary (10:38):

I have lots and lots of people working for me now that don’t have a car because they don’t want the debt…that walk to work, that don’t buy homes. They rent them. I mean, there’s all kinds of people with a new philosophy, but no debt.

Kevin O’Leary (10:48):

But investment is for the long term. When you start in life and in your twenties, you have to have an investment strategy for retirement. So, I’d say, yeah, pay off your debts, but better still have discipline. I’ve written three books about this, Men, Women, and Money, [which] is the basic theme about it.

Kevin O’Leary (11:08):

And I tell people, in your twenties and you’re meeting your partner and you’re romancing, et cetera, love is great. I love love. But when you form a family, that’s a business, and you both have to have the same objectives. If you’re living with somebody, and I’ve learned this when I wrote the first book with a divorce attorney, he told me something really interesting. The number one reason people divorce is not infidelity. Most marriages, even in the early stages can survive that. It’s stress, financial. That it’s money. And one partner spends the other, and they get themselves into real trouble, and they divorce because of that.

Kevin O’Leary (11:44):

So, I’m really into the holistic view of life is that you’ve really got to find a way in your life to put aside a hundred dollars a week, minimum, minimum. Everybody can do that. And I’ll make sure when you get to 65, you’re okay.

Robert Leonard (11:59):

Is it worth cutting out some of the things that we really love in life? Say somebody really loves getting that coffee every morning. Is it worth it to cut those types of things that make people happy to save a little bit more and invest more? Or should they find some other way, maybe make an extra hundred bucks a week, so that they can continue to do those things that they like and still invest?

Kevin O’Leary (12:15):

Both are good. But I want everybody that’s listening to understand something because I’m part of this. Our whole society is built on selling you crap you don’t need. I’m guilty of that. I have so many companies that make products and services, and we market to you and want you to buy them.

Kevin O’Leary (12:31):

Every time you buy something, jeans, shoes, lattes, t-shirts, whatever it is, whatever you’re thinking of buying, another service online, another whatever it is, ask yourself, “Do I really need that? Do I really need to take money that I could invest in my own future and buy this piece of crap?” And the answer a third of the time is, no, you don’t. That’s the money I want you to invest in Beanstox. That’s for your future. That’s the stuff you don’t need. Go into your closet…

Kevin O’Leary (13:03):

I was talking to one of the women that works in my marketing department about Beanstox. And I gave her a challenge, “Go into your closet and tell me how much of the clothes and shoes, and belts and [inaudible 00:13:18], all that jewelry crap you bought, you actually wear, and you have worn in the last 30 days. I’m going to bet it’s less than 20%.” And you know what? I was a hundred percent right. She was guilty of buying crap she didn’t need, stuff that she absolutely didn’t need.

Kevin O’Leary (13:35):

I’m the same way. I go into my closet and I look at the jeans that I bought, I never wear, the shoes I bought, I never wear. I don’t do that anymore. I’m a lean and mean, dude. On Shark Tank, I wear the same suit all the time. I have twenty-five of those suits, but that’s all I got. And that’s my uniform, is stuff I’m wearing right now. I got five t-shirts I love. I got five hoodies that I love. I got five Japanese fishing pants that I love. I don’t waste money on crap I don’t need. I don’t care how much money you have. You can cut back huge and invest in your future. That’s what Beanstox is about.

Robert Leonard (14:06):

We were talking about this before the show started, is people that don’t dress very fancy when they have a lot of money, you find that a lot of the wealthiest people actually dress pretty normal. And the people that actually are spending a ton of money on their belts and their shoes and things like that are usually the ones that don’t have as much money.

Kevin O’Leary (14:20):

You’re lucky I have any clothes on at all right now. And I’m just in Japanese fishing pants or Vietnamese fishing pants and a hoodie that I got at the Jimmy Kimmel Show, and this Austin, Texas t-shirt, Cuban gave me. This is my uniform all week long. Now, I do wear a suit when I go on business networks and when I shoot Shark Tank. But you’re right, I like to be comfortable.

Kevin O’Leary (14:40):

But I’m learning, my mother taught me something you’ll find very interesting. A lot of my lessons in life came from her. She as a young woman would save and save, and save, and save, and buy one jacket from Chanel, one jacket. All the girls were buying all the stuff around her, all the crap they bought. And she saved for two years and buy one Chanel jacket. Do you know when she passed away, in my family, all of her clothes were all classic, really, really valuable classic outfits from designers in the sixties and seventies, and that she had specifically bought. And there was a catfight trying to get at her Chanel jackets. I had to beat them back with a stick to be fair about it, because everybody wanted Georgette’s outfits because she didn’t buy crap. She bought stuff that lasted her whole life, classic Chanel outfits. That was her whole thing. And it taught me something so important. You don’t need a lot of stuff. You need good stuff that’s going to last. And so, I adopted her way of thinking.

Kevin O’Leary (15:45):

The only indulgence I have in an alternative asset class is collectible watches as art. And I trad it as an investment. I have a massive watch collection and really rare pieces. You can see we’re on Zoom here, I’m wearing two watches today, because I was with my son and his friends, and I was teaching them about different brands of watches and how it works.

Kevin O’Leary (16:07):

My watch collection is up 131% in the last two years. So, I consider it an investment, but that’s my one indulgence. And my wife is constantly poaching my watches. And my daughter is trying to steal them from me. They all want to wear my watches. No, no, no, no, no, that’s never going to happen. I’m burying this whole collection with me. That’s an investment for me. It’s not garbage. It goes back to the idea of how do you think about your own future? You have to take care of yourself and that’s a hundred bucks a week, and it’s in Beanstox.

Robert Leonard (16:39):

Actually, I had a guest on the show a few weeks back. He made a similar type of alternative investment. He even bought Apollo artifacts, if you will. And he would save those. And those were his alternative investment. He said they’ve done really well. But how do millennials deal with the psychological component of, I guess just keeping up with the Joneses, you could call it? So, all their friends are out buying everything, and how do they stay strong and not fall victim to that?

Kevin O’Leary (17:03):

The consumer mentality that we work as a society, at least in business, is so hard to make you think you have to have that hot belt or that new car, or that new boat, and all that stuff that takes you away from taking care of your own future and putting you in debt. Think about it this way. When you take money and you buy a consumer good with it, you have killed that money in its ability to provide for you later in life. You have taken it beyond the bar and you’ve shot it, because that belt that you bought or that boat you bought, or the car you bought, that will die before you do. It definitely will just turn to crap, and just melt and turn into crap.

Kevin O’Leary (17:43):

Had you taken that money and invested it in your future for a long-term, I’m talking 20, 30 years, when you get to that time in life at 65, and have to make a choice, “Do I have to keep working?” Because the average salary in America is $58,000. That’s it. And everybody that’s making $58,000 a year can save a hundred bucks a week, but they don’t. They get sucked into buying crap they don’t need. And that it’s akin, it’s the same idea of just taking money and killing it, and saying to it, “No, don’t provide for me in my future. Don’t make me safe when I’m 65. I’m going to buy a piece of crap. I’m going to buy a coffee for $4 and 50 cents that could end up being part of my future. No, no I’m going to consume it.”

Kevin O’Leary (18:26):

Be smart. Hear my message on this. Be hip to the idea that you don’t have to do that. Don’t get sucked into that. Look, I’m guilty. I’m on the dark side. All of my companies try and sell you what you don’t need. Not every one of them, but there’s some stuff that is very important, like clothing, food and things like that. But consumable goods are consumable. They’re used and they’re thrown out. Buy less of them. Buy less. Buy a hundred dollars less of them a week. Even though it’s really hard to do, is having a little Mr. Wonderful on your right shoulder saying, “Don’t buy that.” Invest in Beanstox or any app you wish. Put it aside. Just remember I’m on your shoulders saying you don’t need that. And 30% of the time you don’t.

Robert Leonard (19:08):

I’m going to be able to replay this video so that I can have that on my shoulder when I’m considering buying things. And I’ll make sure that I hear your voice.

Kevin O’Leary (19:16):

On your shoulder saying, “Don’t buy that crap.” I’m okay with you buying that crap 66% of the time, but 33% of the time save that a hundred bucks for me, but it in Beanstox and build your future.

Robert Leonard (19:27):

With your network of investors and even your own money, why’d you decide to use crowdfunding to raise money for Beanstox, rather than bringing in investors from your own network?

Kevin O’Leary (19:36):

Because I wanted people to be able to take the journey with me. I wanted my own Beanstox users, the same people I’m asking you to save a hundred dollars a week in Beanstox to actually own part of Beanstox. It was the only way I wanted to do it. And I investigated the market and I said, “What are all the platforms on crowdfunding?” I looked at all of them.

Kevin O’Leary (19:57):

One great thing about being a Shark is everybody returns your calls. So, I called up the CEO of the one I thought was the biggest, which I was right, StartEngine. They’ve got 250,000 investors on their platform. And I call up Howard and said, “Howard, I think I know you. I think you were the co-founder of Activision when I was starting up The Learning Company.” “What’s this Beanstox thing?” And I said, “I just want you to know, Howard, I’m going to compete with you. I’m going to start my own crowdfunding platform. And I’m going to crush you like the cockroach you are.” I love to compete. It’s just a wonderful thing.

Kevin O’Leary (20:28):

And he said, “No, you’re not going to crush me like a cockroach because you don’t have what I have. You don’t have a quarter of a million investors.” I said, “Well, you’re right. I don’t.” And so, by the time that conversation was over an hour later, he convinced me to become an investor in the platform StartEngine. And I’m now the paid spokesman too because I’ve got other Shark Tank companies on that platform.

Kevin O’Leary (20:49):

But for Beanstox and Connor O’Brien, the CEO, I talked to him about it and we agreed, why not make this everybody’s platform? If you want to invest in Beanstox as an investor and use it to build your own portfolio, do both, you choose. And so, we made it available. And we’re very, very happy with the outcome of that. So, anybody on Beanstox can actually own a piece of Beanstox.

Kevin O’Leary (21:13):

Beanstox is about a communal mission for you to protect your future. That’s what it is. It’s the idea that you take care of yourself. And you a third of the time, as we’ve talked about, you and I today, I know everybody listening to us right now, I want them to think about this idea. Don’t buy that piece of crap, you don’t need, invest in yourself. Use Beanstox to do it.

Robert Leonard (21:39):

So, if an individual investor, a Main Street investor, maybe someone listening to the show today decides to invest in Beanstox through the crowdfunding platform, not through ETFs, or really any company through crowdfunding, how do you make a return on a crowdfunding investment?

Kevin O’Leary (21:54):

Well, the whole platform of crowdfunding was started with the JOBS Act years ago, five years ago now. The government wanted to democratize venture investing. I’m a huge venture investor. I’ve 56 companies now, that I’m a private with venture investment. They had a long-term vision. They said, “Okay, we can democratize investing, so you can buy $150 of Beanstox or whatever it is, whatever the minimum is.” I think that’s what it is. “And be a shareholder.” But we also contemplated a time when we will allow these stocks to trade when they will become tradable, and they’ll have their own tradable platforms. So, when you’re buying into a crowdfunding platform, you’re on that ride to where we’re going to democratize this and eventually make it liquid as well. And so, that you’ll be able to trade your shares of whatever you invest in on a startup engine or on another platform between other shareholders.

Kevin O’Leary (22:46):

And I’m very much part of that because I got to tell you something. I have been in the hedge fund community or private equity community my whole life. And every one of those guys always wants some kind of preference or time pressure on you.

Kevin O’Leary (23:00):

The reason I’m such an advocate of getting my Shark Tank companies on equity crowdfunding, and particularly, StartEngine where I’m now a shareholder and spokesperson is, I want them to get the deal that makes sense for them, not what some 22-year-old venture capitalist wants to do, that’s never run a business.

Kevin O’Leary (23:16):

So, I want to compete with VCs. I’m not against them. I’ve been partners with them for decades. But now they’re really going to have a hard time against crowdfunding, because crowdfunding links together the customer with the product, and gives you the ability to price your deal with the right terms for you, and lets your customers decide whether they want to invest with you or not. It’s completely transparent, completely open, completely without all these crazy preferences that the VC guys want. I’m not against them. I want to be careful because lots of my companies still use VCs. That’s not how I want to do a deal. I don’t want someone who’s never run a business telling me how to run mine. And that’s exactly what venture capitalists do. So, sign our VCs, I’m now going to crowdfund.

Robert Leonard (24:02):

So, if we don’t get to a point where the crowdfunded investments are liquid and they’re tradable between people, do those investments go to zero or how would a new investment still make money?

Kevin O’Leary (24:12):

Not at all. You want a piece of a profitable company, you could participate in distributions eventually. You’re making a private placement now, but I don’t think that’s what’s going to happen. I think, watch the development of this platform, watch how it moves to a liquid platform eventually. I’m not guaranteeing anything. I don’t know anything else that anybody else knows, but I know what the JOBS Act said. And I know the direction. The fastest-growing class right now in terms of venture investing is this private equity or in terms of crowdfunding funding, equity crowdfunding. There are many, many platforms all around the world doing this. So, I’m very optimistic on what happens.

Kevin O’Leary (24:47):

You’re investing in a business with all the same risks that every business has. But at the same time, you build a portfolio. When you open an account on StartEngine, you don’t just buy one. You might buy 10 or 12 different deals because you don’t know what the outcome of anyone is. But the point is, you’re buying into a business. And if the business is successful, you’re a shareholder in it. And eventually, the outcome, whether that’d be acquired or where they provide distributions, that’ll happen. There’s lots and lots of opportunity in the private side. You don’t always have to be public.

Robert Leonard (25:17):

I know it varies significantly. Some could be zero. Some could be 10,000%. But in general, what do you think an investor could expect for returns in a crowdfunded investment?

Kevin O’Leary (25:26):

I think that’s all over the map. I mean, I’ll tell you this. I’ve got over 50 companies, as I said. And probably due to the pandemic, 20% of them are going to go to zero on me because they’re involved in entertainment. They’re involved in travel. They’re involved in food services. And they’re involved in the wedding industry. Those are very difficult. But I have 80% that are doing phenomenally well, they’re pivoting with the new digital America.

Kevin O’Leary (25:49):

It goes back to how we started our conversation. Diversification is what matters in investing. I can’t know the outcome or what the returns will be in any one investment. That’s impossible. But because I have a portfolio of them, I have the opportunity to average the average growth for markets. And that’s what Beanstox does. It looks at the market and says, “How do I get total diversification? I use ETFs.” And over a long, long, long period of time, 30, 40, 50, 60 years, you’ve been able to get 6% to 8% of the market annually over long periods of time. And that’s really how you calculate the difference between saving in a bank account and letting inflation erode cash. There’s nothing wrong with cash, but that’s not investing. You have to find a way to invest in companies that are going to grow with the economy and get you that 6% to 8% compounded annually. And that’s basically what Beanstox does.

Kevin O’Leary (26:38):

There’s no telling in any one year what one investor will do, or even crowdfunding one investment will do. But to not be exposed at all to venture, which is a good part of a portfolio, and that’s what StartEngine does, you take 5% or 10% of your portfolio over time investing in venture deals. You have no idea what’s going to work. But generally, between 2% and 4% of a portfolio of 10 work out in the long run and provide all the returns. So, maybe 20% work, maybe 30% work, maybe 40% work. You don’t know. But when they work, they really work. So, that’s why I always stay involved in ventures.

Robert Leonard (27:14):

How many crowdfunded investments do you think we need to spread our portfolio over if we want to have appropriate diversification?

Kevin O’Leary (27:21):

I like the number of 10 because that’s the typical venture kind of metric, you think. Two are going to provide all the returns. Four are going to be living dead until it goes zero within two years. That’s what happens since the fifties in venture investing. So, I think you should broaden your base and invest in 10 different deals. Maybe Beanstox is one. Maybe you find a bunch of other ones. You can look at all the platforms. You just have to Google equity crowdfunding, you’ll find them all.

Kevin O’Leary (27:47):

I really like StartEngine because they’re absolutely anal on compliance. You must be compliant with the SEC rules, and they are just crazy focused on compliance. And that’s why I partnered with them, became a paid spokesperson. I felt comfortable. They were doing their work on the compliance side because you are in a public market when we sell equities this way.

Robert Leonard (28:10):

How does somebody vet a company like this? If they’re going through StartEngine, there’s a bunch of different options on there. And they’re trying to decide which one to invest in. Whether it’s Beanstox or something else, how do you analyze this type of company? They’re not pitching you necessarily like they do on Shark Tank and probably can’t see financials. So, how are you making a decision on which companies to invest in?

Kevin O’Leary (28:26):

I recommend the same to everybody. It’s a great question, you’re asking. Go to a platform like StartEngine, look at the portfolio of products, there are hundreds to choose from. Watch the videos. See if it connects with you. See if the product or service connects with you. I always say, would you buy that yourself? Would you use it yourself? If it is something you would buy or use. And I ask them to do the same thing on Beanstox. Would it be something you would use? If you’re going to use Beanstox, why not invest in it? That’s the whole point.

Kevin O’Leary (28:54):

I invest in things I actually use on Shark Tank, for example. If I don’t use the product, now I bring back all the products. I bring them home. I get Trevor and my daughter, Savannah, all her friends, and all his friends, we have a Shark Tank day. I pitch them the products that I think are going to work on Shark Tank because I get a sample from everything, right? I do it for a purpose. I want to see which ones they hit on right away. And I come back with 30, 40 products. And we have that Shark Tank session. And everybody comes over and they want to see it. It’s a sneak preview. They can’t tweet it. They can’t put it on Facebook or Insta, because it hasn’t aired yet.

Kevin O’Leary (29:33):

But I can tell you right there, the ones that they want to use, and they try and steal from me, are the ones that I invest in. Because when I see a millennial go nuts over something I bring home, I’m writing a check for a million bucks. That is the best due diligence money can buy. And I get a whole bunch of them there. Everybody wants to come to my Shark Tank bake-off, everybody. And we have a crazy good time. But that’s when I really see. And another little hint, did the cameraman steal it when they’re shooting it, or did the production staff want to rip me off from my sample. Those are the things that matter that I learned about.

Kevin O’Leary (30:06):

And I’ve been pretty successful on Shark Tank. I’ve invested in a lot of fantastic things because I listened to what people think about them. Even though I make my own assumptions and my own team looks at them, but I like to do my bake-off with my kids. And then I watch what the camera guys do.

Robert Leonard (30:21):

Yeah. I’m sure when your kids are excited, your eyes turn to dollar signs, and you’re excited for those opportunities. How do you think about the valuation? So, I know you’re big on valuation, especially in the Tank. I’m big into evaluation as well. I’m a value investor by trade. Warren-Buffet-style investing is what I follow. And a lot of us here on the show do. So, when you’re investing in a crowdfunded company, how do you think about valuation?

Kevin O’Leary (30:43):

Well, crowdfunding, we’re at the very, very early stage. So, you have to decide that the product or service is something you believe in long-term. You should have a three to five-year horizon when you’re doing that. So, it really shouldn’t be more than five or 10% of your portfolio that you’re building for yourself. I think you should have some venture ideas and a diverse portfolio of them.

Kevin O’Leary (31:04):

When you invest in a venture, you better love that product. You better personally love that service. You better believe in it because it’s very, very risky in terms of outcomes. But at the same time, if you use it, that means other people are using it. And then you can really follow the track of that product or service.

Kevin O’Leary (31:23):

So, that’s why I do what I do. And I was talking to you about every product I invest in on Shark Tank, and I’ve got a bunch on my desk, I can’t show you right now because I just saw them when I was shooting last week, I’m using right now. I’m trying right now. As a matter of fact, this morning, just before I came on with you, I have about 15, 16 of Trevor’s friends here at our Lakehouse, and I was doing my bake-off with them. And a third of what I like they’re crazy about it, and the other two-thirds they hate. So, I got to find out why they don’t like them. But that’s my point, you need diversification and you really need to understand what you’re investing in. And I think you keep that at probably 10% of your portfolio. It’s highly risky.

Robert Leonard (32:04):

We’re talking a lot about alternative assets, alternative investing. So, I want to bring up Bitcoin and cryptocurrencies. Do you think there’s room in a millennial’s portfolio for these types of assets?

Kevin O’Leary (32:15):

I’m not against it, but I will tell you one thing, people have been trying to sell me on Bitcoin or some of the other cryptos. Will Bitcoin still be Bitcoin or will it have evolved into something else, or will it be gone? And so, I caution anybody and because I get pitched these derivatives all the time. And I say to my kids because I’m helping them build their portfolio and do the whole Beanstox way of thinking, diversification, “How many Bitcoins do you own?”

Kevin O’Leary (32:46):

Because I’ll tell you what I did a few years ago. I teach at Harvard. I lecture there. And we were having this big debate on crypto. So, I said to the class, “Okay, guys, together, we bought all of the cryptos.” And this is probably, I don’t know, three years ago. Right? But the point was, I said, “Okay, class, who’s in for crypto, who’s not?” I said, “Not just Bitcoin, all the cryptos. Because Mr. Wonderful here is going to take…” I can’t remember whether it was a thousand or a hundred bucks, I invested. I bought them all. It was in our two-hour night classes.

Kevin O’Leary (33:19):

We went together, installed the app. I bought it in front of them. I think I’m down 80% and it never came back, because a lot of the crypto garbage, all that stuff that was hyped at the beginning, basically failed. And Bitcoin is the one that seems to have survived, but there’s no diversification. If the only crypto is going to be Bitcoin, I’m not into it. I need diversification. As we’ve been talking about, since we started talking, we talked about diversification. You don’t get that with Bitcoin. You get one crypto that maybe works in the long run, maybe it doesn’t.

Kevin O’Leary (33:51):

If that’s your choice, if those that are listening are saying, “I’m going to take a hundred bucks a week and put it into crypto or a hundred bucks a week in the Beanstox.” I would do Beanstox. I would get broad diversification across all of the world’s sectors and companies and all that stuff as opposed to crypto.

Kevin O’Leary (34:06):

Now, I get a lot of hate mail when I say this stuff, I don’t care. I would never put my net worth into a cryptocurrency because I’ve learned along with all those classes at Harvard, it didn’t work is my whole point. And I bought it four years ago. And somebody just says, “Oh, you bought it at the hot.” Well, investments over long periods of time that are diversified, grow. That’s what happens. Bitcoin is extremely volatile, and it’s not clear what the real value is, and it’s still not embraced by institutions. So, sorry, my answer is no.

Robert Leonard (34:36):

Do millennials need to be worried about hedging against inflation using gold, similar to what you’re doing? Can we weather a little bit more volatility and risk of inflation because we’re so young?

Kevin O’Leary (34:46):

You should be because right now we’re doing something no one’s done before. We put maybe as much as $7 trillion in helicopter flew it over the economy and just sprinkled it onto the land. And that generally is inflationary. So, the way to protect against that is you have 5% leading a gold for me, but it’s the by great American companies that have pricing power and inflation that have positive dividend strategies and distribute capital, and price their products according to whatever inflation is. And that’s exactly what happens in Beanstox, diversification, really high-quality companies that have pricing power inflationary times.

Kevin O’Leary (35:25):

The best protection against inflation is to actually buy companies that are profitable, that distribute profits to shareholders. That’s in my view what happens. And right now, which is why I’ve moved my own personal allocation from 50, 50 fixed income equities to 70 equities, 30 fixed income because I’m worried about inflation with government bonds and other things like that. And so, I say to a millennial at this time in your life, maybe a little bit more in the equities, a little less on fixed income. So, we find out in the next three years, what’s going to happen.

Robert Leonard (35:57):

Is real estate possibly an inflation hedge that millennials should be considering. Is there room in the millennials’ portfolio to get into real estate investing?

Kevin O’Leary (36:05):

Residential, yes, but not commercial or retail right now. We don’t know yet what the impact of the pandemic is going to be. We’ve been talking to companies now that are going to reduce their demand on office space by as much as 15% because of many of the people that work in accounting, compliance, and logistics are interested in working at home. So, that’s going to reduce the need for that much office space. We know that C grade and B grade strip malls are probably not going to reopen, and those are held in portfolios real estate. So, I probably wouldn’t invest in that.

Kevin O’Leary (36:36):

I think buying a home makes sense. A home with a backyard is in huge demand in every American city in the suburbs now for obvious reasons. I think you have to be very careful in real estate. It’s worked well for 35 years as rates went down. Now, rates are effectively at zero. And if inflation hits and rates go back up for some reason, real estate will not be the best performing asset class. So, take care of yourself, maybe with a home, but I wouldn’t invest in it right now for the next three years. That’s my opinion.

Robert Leonard (37:04):

What are some of the biggest mistakes that you see millennials make? Maybe it’s your kids, or maybe it’s just other millennials you hear or meet. What are some of the mistakes they’re making with their personal finances and their investing?

Kevin O’Leary (37:14):

Personal debt, credit card debt, spending beyond their means, making assumptions about upside and their earnings power that don’t come true, and finding themselves in an inability to service all their debt. Smart millennials don’t get into debt. They don’t use their credit cards to pay for their lifestyle. They take a portion of their salaries, maybe one’s working, maybe two, and they invest it. They don’t say that they invest it. And they try and figure out how to build portfolios that are going to serve them as they age.

Kevin O’Leary (37:43):

It’s very important by the time you turned 50 years old to be out of debt, very important, very, very, very important. The only debt you could consider maintaining that age would be your mortgage. But even that, I’d recommend you get rid of. But you really can’t afford to have credit card debt, bank debt, all kinds of debts for boats, and things you didn’t need to buy. Because at that age, you got to start thinking about your nest egg and how you’re going to survive after you’re 65. You have to think about your life in the early stages where you do take on debt, particularly mortgage. You got to get rid of that by the time you’re 50. And that’s the biggest mistake I see.

Kevin O’Leary (38:19):

I talked to lots of people in their fifties that have nothing saved. It’s a disaster. And you could still start saving it 50. But if you start saving in your twenties with that a hundred bucks a week and use an app like Beanstox, you’ll end up with over a million and a half by the time you’re 65, hopefully, if the markets do they’ve done for decades previous. And I think they will.

Robert Leonard (38:37):

If there are millennials who maybe took on some debt, most likely probably student loans, but maybe a car loan or some other debt, maybe they racked up some credit card debt while they were in college. And this was all before they started studying personal finances or heard what we’re talking about. And now they decide that they want to combat that, they want to get back on a better spot if they can, do they invest, or do they focus on paying down that debt, which is more important?

Kevin O’Leary (38:59):

I think the most important thing is to pay off credit card debt first, the most expensive. That’s in the 18% to 21% range. It’s very hard to make that in any investment. So, once you’ve paid back your credit card debt, and then you’re dealing on your car loan and your mortgage, then you start to put some aside for yourself and invest. So, you can do both at once, but if you have credit card debt, you pay that off first, absolutely pay that off first. You can’t make 21% a year in the markets. It’s impossible. And that’s what they’re charging you in many cases.

Kevin O’Leary (39:31):

So, number one, pay off the credit card debt. Number two, start taking a hundred bucks a week and start investing. And then also try and pay off your other debts. I hate car loans. Ask yourself, “Do you really need a car?” Maybe you should be one of those people that works at home or avoid getting a car at all. I understand buying a home. I hate car loans. I really do. And maybe it’s better to lease a car, or maybe it’s better not to have one at all, and think of crowdfunding or crowd ride services when we get rid of this pandemic. But debt is a really bad thing when you’re in your twenties. Avoid it like the plague.

Robert Leonard (40:10):

How can the listeners of the show use this time that we have, the pandemic? Some people have some extra time on their hands. How can they use this time to better themselves and actually come out stronger and in a better position than they went into it?

Kevin O’Leary (40:21):

For the third of the people that are listening to us right now are going to become entrepreneurs and start a business. And so, they should have, and should during this time when they’re living at home, think about a product or service, you can sell people online because the whole economy is going digital. There’s no question about that. Retail is going to be a subset of the overall market by the time this pandemic is over.

Kevin O’Leary (40:42):

And so, I would highly recommend that those people focus on an idea. That’s a third. And the other two-thirds are going to be employees. Think about the new digital economy. Think about how people are going to be selling products and services all around the world. Become part of that process. So, in other words, maybe you’re a great film editor, maybe a great photographer. Maybe you can tell stories. Maybe you understand how platforms work and how the algorithms work. Anything you can do to help a business go online is extremely valuable now. And so, that’s what you want to be doing with your career.

Kevin O’Leary (41:13):

It’s remarkable. I was talking to people that graduated from film school, how tough that was to get a job, not anymore. If you can edit video to 59 seconds or 29 seconds, or 14 seconds, and tell a story, you’re in huge demand by most American corporations now, who’ll have to take their story away from retail and go direct onto social platforms.

Robert Leonard (41:33):

On Shark Tank, you’re never shy from giving your brutally honest opinion. That’s one of my favorite things about you as a Shark. So, in relation to millennials and their money or investing, what’s a piece of advice that you give that might be a little bit controversial or just not everyone really agrees with you?

Kevin O’Leary (41:48):

I tell people three things on Shark Tank. You want to be successful in life because you’re always either a leader, if you’re going to be a leader, or you’re going to be someone that tries to work in business or be an entrepreneur, you have to understand that you have to be able to communicate. And Shark Tank pitches that are successful, and this is just advice to anybody that’s doing anything, whether you’re a teacher, a preacher, or a general, an entrepreneur, a manager in a business, you have to be able to tell people what you want, 90 seconds or less. You have to have a vision of where you want to go and explain it to them in a minute and a half or less.

Kevin O’Leary (42:19):

Number two, if it’s a business, you got to know your numbers. There’s no question about that. And also you have to be able to explain how you can execute on a plan. If you want to be a leader, you need people to follow you because they know where you want to go and where you want to take them. And they trust that you can execute to get them there. And above all, you understand the numbers, so you can measure your milestones as you go. Those are definitions of leadership. Anybody that wants to be a leader or be successful in business, or move up the corporate ladder or whatever it is, even teach children, you got to understand those three things.

Robert Leonard (42:52):

As we wrap up the show, I think listening to podcasts like this and learning about everything that we talked about is really valuable. And I think it’s important. But if you don’t take action on it, then it’s really all for nothing.

Kevin O’Leary (43:03):

I want one action out of this. I want people to download Beanstox and look at it. I really want, I know that more than half the people listening to us right now have nothing invested. Do not stay in that situation. If you’ve learned anything from this long conversation, which has been very fruitful in my view, you must start thinking about yourself. Now, whether it’s Beanstox or something else, try Beanstox, download it. I made it for you. I made it so that you can take a hundred bucks a week and invest in your future. And if you think that’s a great idea, I’m very happy, because there’s some piece of crap you’re going to buy next week you don’t need, and I’d rather you invest it in yourself.

Robert Leonard (43:41):

Kevin, thanks so much for taking time out of your busy schedule to talk with me today. I know you’ve been shooting Shark Tank. I know you’ve got a lot of things going on, so I really appreciate it. For those that want to learn more about you and also Beanstox, where can we go to find them?

Kevin O’Leary (43:55):

You can go to kevinoleary.com. You can go to beanstox.com. You can go to startengine.com. All the information is at any one of those places. And I hope people try it. You got to invest in your future. You have to do it. Don’t let anybody talk you out of that. And don’t buy that piece of crap you don’t need.

Robert Leonard (44:10):

Nobody is going to do a forum. So, guys I’ll put links to Beanstox, all of Kevin’s resources in the show notes, so you guys can go check it out there. I’ll put the crowdfunding platform, StartEngine as well with the link directly to Beanstox as well. So, be sure to go check that out. Kevin, thanks so much. I really appreciate you coming on the show.

Kevin O’Leary (44:26):

Thank you. Take care. Bye, bye.

Robert Leonard (44:28):

All right, guys, that’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (44:34):

Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. The show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.


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