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A famous song lyric by the late Tom Petty says, “The waiting is the hardest part.” That’s certainly true in affairs of the heart, but it can also be true for investing, where people who aren’t born wealthy have a long climb to get to their first million. Shark Tank investor Kevin “Mr. Wonderful” O’Leary can relate, but he recently said it’s easier going from $1 million in net worth to $5 million. Keep reading to discover why he feels that way.
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Canadian-born Kevin O’Leary was largely unknown outside of business and investing circles when he first appeared on the hit show Shark Tank, where he and the other “sharks” compete against each other to invest in new business ideas. However, O’Leary’s acerbic wit and knack for closing deals on terms heavily tilted in his favor earned him equal admiration and respect from the show’s fans.
It also made him an instant celebrity. Whenever that happens, people naturally want to learn about your investment philosophy and how you achieve so much success. In a recent YouTube video, O’Leary elaborated on his success and revealed that the hardest part of any investor’s career is making their first million, which was “almost impossible.” O’Leary’s explanation of why making the first million was so difficult may surprise you.
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He said the key to making his first million was to “have the discipline of not buying ***t you don’t need.” That discipline is important because building a solid investment portfolio is challenging even under the best circumstances. If you’re building a portfolio with money left over from impulse purchases like clothing you only bought because it was on sale, you’re minimizing your chances of success. That’s easier said than done, but it’s possible.
O’Leary’s method entails investing in stocks and shooting for an 8% return until you reach your target goal ($1 million). Once that’s done, the key is setting your next milestone and continuing to work toward it with the same discipline. Moving from $1 million to $5 million becomes easier because you have more investment capital.
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Whether you earn 8% per year in passive income through dividends or appreciation on the stocks in your portfolio, having a $1 million nest egg gives you many more options to grow your wealth. It gives you the freedom to make some picks with comparatively more risk but much higher upside, freedom you may not have had when you started your nest egg with $5,000.
Imagine having a $1 million portfolio in 2005. Buying and holding $2,000 worth of shares in a stock like Nvidia or Netflix is an easier decision than it would have been if all you had to invest was $5,000. You have a much larger margin for error when investing $2,000, which represents only 0.2% of your $1 million portfolio as opposed to 40% of your $5,000 nest egg.
O’Leary advises would-be investors to continue putting their money to work after they get the first $1 million. That’s when a portfolio’s value can grow exponentially. He told Parade Magazine, “Here’s how I think of my money: as soldiers. I send them out to war every day. I want them to take prisoners and come home, so there’s more of them.”
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This article Why Kevin O’Leary Thinks It’s Easier Getting To $5 Million From $1 Million Than Getting Your First Million originally appeared on Benzinga.com
Source: finance.yahoo.com