Serial entrepreneur and investor, Kevin O’Leary, is best known for his formidable demeanor on ABC’s hit reality show, Shark Tank. He brings his shrewd business sense to the table on each episode of the show, as well as to various Board and c-suite meetings across the country as he runs his business empire. I had the privilege of spending an hour with Kevin – Mr. Wonderful – after his recent speaking engagement in Pittsburgh. We sat backstage in the iconic Byham Theater with the sounds of an inspired crowd cheering in the background and talked smart investing. I wanted to know, straight from the shark’s tank, how a successful investor thinks. First of all, Kevin has an interesting back story:

- He describes his dyslexia as a superpower. “Dyslexia is not a curse. It gives you the confidence to persevere because you’ve always had to find different ways to get around problems. You understand your limitations. It doesn’t have to hold you back.”

- He’s a capitalist. Given his line of work, it’s not surprising that Kevin O’Leary describes himself as capitalist. “I want to go to bed richer than I woke up. Every day. Because I’m a capitalist. I believe in hard work and I believe in making money. If you’re in business and create jobs for people, you’re doing a great thing. People who want to work hard should be rewarded.”

- He thinks of money as soldiers. Kevin says we should view money as soldiers leaving a castle every day. “Movement of money is interesting. If we think of our money as soldiers. We send them out from the castle each day and hope they all come back. If they all come back, we’ve broken. We want them all to come back and bring a few extra soldiers with them. You want more coming back to you than you sent out.”

- He believes that de-risking children is a sin. “Entitling and de-risking children is the worst thing you can do. If they never learn how to succeed because you’ve always guaranteed them they never have to work, you’ve cursed them. I’ll support my children from birth to the last day of college and then they’re on their own. If I want to give my money to a cat, I will.”

- He balances business with art. “Business is very scientific by nature – either you make money or you lose it. Great entrepreneurs embrace the chaos of art. I’m a chef, a guitarist and a photographer. The arts give you a balance and a release that makes you think in a different way.”

- He can tell a shark tank ‘win or lose’ before they even speak. “When they first come out, either as an individual or a team, under those bright lights, I can sense their aura and I can tell right away, win or lose, before they’ve said a word.”

- He’s not a good employee. Kevin says there are two types of people in the world. The people that ‘own the store’ and the people that ‘work in the store’ and you have to decide which one you are. It’s not a bad thing to work for somebody else; you can have a great life, but it’s good to understand the pros and cons. “I got fired on the first day of my first job at an ice cream parlor. I was in grade 11 and it was a bad outcome, humiliating, but a valuable lesson. It changed my views about life. It motivated me to realize I’m not a good employee and I don’t want to work for anyone else. I owe that employer everything!” So, given all we know about him already, what exactly is Kevin’s investment philosophy, how does he view money and what is it that drives him to continue working every day? Here are a few of the top tips from our discussion:

Diversification

“My simple philosophy for investing is diversification. In a portfolio, I never let any stock or position become more than 5% of your net worth. Nothing goes up forever, so evaluate your investments every 90 days and sell back down to 5% where you need to. Reinvest that money in something else.”

Always buy quality

“It’s hard to predict the market; there are always going to be periods of volatility. If you buy into quality stocks – those companies that can show strong cash flow, that pay dividends and the return on assets are increasing – in the long run, the market returns are a lot less risky.”

Stay invested

“It’s impossible to time the market or wait out crashes. You should stay invested all the time. Most returns happen in a very compressed period of time – sometimes seven trading days in the year are 100% of the game – remarkable days where the market goes up 500 or 1000 points. If you’re not invested in those days, you get no returns. How do you time that? It’s a classic problem. Getting out of the market entirely is a fool’s game because you can’t time it.”

Manage risk

“When you make investments you really have to decide what the risk is – understanding and mitigating risk of returns. That’s why I do structures like royalty deals and venture debt when you sell something I get a dollar. If you’re getting older or even just over 40, you should be focused on preservation more than returns. The key now is to keep what you made, because when you’re older it gets a lot harder to get that money back once you lose it.”