He’s certainly the longest-tenured.
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Kevin O’Leary – a.k.a. Mr. Wonderful – has been a Shark Tank panelist since the show’s August 2009 debut. Not surprisingly, the partnership was extended to 11 years.
O’Leary’s appeal is undeniable. His propensity to counter the ridiculous with a blunt witticism is enrapturing: “You’re murdering money in front of children” and “It’s a stupid idea, it’s going to zero, take it behind the barn and shoot it” are two of many.
Behind the entertaining extemporaneous talent lurks a savvy businessman. O’Leary knows grit and grunt is required to grow a business . . . and an investment portfolio.
O’Leary founded an educational software company in the mid-1980s that he grew through savvy bolt-on acquisitions. He sold the entire collection to Mattel (NASDAQ: MAT) in 1999 for $4.2 billion.
Storage Now was the encore. O’Leary founded the climate-control storage REIT in 2003. He sold the shebang four years later for $110 million. O’Leary returned to the stage in 2015. He launched his personal brand of exchange-traded funds (ETFs) called O’Shares.
Through entrepreneurship and astute investing, the popular Shark Tank panelist has compounded his net worth to $400 million.
Attentive Shark Tank viewers know the ethos that underpins O’Leary’s business and investing approach – income. Everything he buys must stream income his way.
It’s no coincidence that his Shark Tank deals are structured as either equity with a royalty component or as pure debt. Whether O’Leary invests or lends, immediate income must flow his way.
The ethos extends to passive investments.
O’Leary claims that he’ll buy a stock only if it pays a dividend. Every investment in the O’Shares portfolio must pay income.
What’s more, the dividend must be sustainable.
The companies that pay the income must be fortified by strong balance sheets. They must generate ample free cash flow.
Of course, a tributary of that cash flow must be diverted to shareholders as dividend payments.
Like O’Leary, I, too, am an income-first investor. Every investment I own pays a dividend, a distribution, a royalty, or interest.
What do I do with that investment cash that flows my way? Like O’Leary, I invest the investment cash into other cash-paying investments.
O’Leary understands the power of compounding investing income, as do I. We keep regal company.
John Bogle, the late legendary founder of the Vanguard funds, understood it.
Bogle offered the following investment-income insight a few years ago:
“An investment of $10,000 in the S&P 500 Index at its 1926 inception with all dividends reinvested would by the end of September 2007 have grown to approximately $33.1 million (10.4% [annual] compounded).
“If dividends had not been reinvested, the value of that investment would have been just over $1,200,000 (6.1% compounded) – an amazing gap of $32 million. Over the past 81 years, then, reinvested dividend income accounted for approximately 95% of the compound long-term return earned by the companies in the S&P 500.”
In short, dividends stocks reinvested in dividends stocks accounted for almost all of the S&P 500’s long-term total return
In some decades, dividends were the only return: The 1930s was one. The 2000s was another. Dividends in these decades accounted for all the returns of the S&P 500.
There’s your secret: Buy income-producing investments. Use the income these investments generate to buy more income-producing investments. Repeat as frequently as your household finances permit. You might not grow your portfolio to $400 million, but your portfolio is sure to grow.
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