Kevin O'Leary, star of the TV shows Dragon's Den in Canada and Shark Tank in the U.S., says he learned his secrets to investing from his mom.
He shared those secrets with about 185 people in the Pomeroy Inn this past week.
“Never own more than five per cent in any one stock, ever. That means if that stock is going through the roof, you're selling to keep five per cent in your portfolio. Never hold more than 20 per cent in any one sector – and in Alberta, you're all guilty of owning too much energy.
“And always keep 50 per cent bonds, 50 per cent stock.
“I swear if you live by this discipline and ask your advisor to do the same, no matter what hits, you'll survive,” he said.
“It's people who get caught up in the emotional stories like Nortel and Rim and let their portfolio become 20, 30 per cent of their stock who end up in a horrible outcome. Because nothing flies high forever.”
O'Leary's mom worked in a clothing factory. She would take a third of her paycheque every week and buy Bell Canada bonds. She also bought stocks, but only in large companies that paid dividends.
She did so for more than 50 years until she died.
O'Leary learned just how well she did when he became the executor of her estate after she passed away about six years go.
He says his mother amassed such a fortune she was able to fully pay not only for his education, but his brothers, and to help out many other members of the family; buying cars in some cases.
“Have you any idea what a portfolio like that does over 52 years? It beats everything; absolutely everything,” O'Leary said.
“You couldn't convince her to buy a stock that didn't pay a dividend. She had this philosophy that a stock could go down. She wanted to get paid every quarter some cash. She didn't understand why anybody would invest in anything that didn't pay her.
“She was extremely disciplined. She was not a stock analyst, she just had a pragmatic sense about her.”
As a result, he follows her formula; partly because of her great success and partly due to the damage the 2008 financial meltdown/recession did to investors.
“I will never buy a stock again that doesn't pay a dividend, because I've seen the results of it,” he said.
