August 25, 2022 • 2 Min Read

Mr. Wonderful here –
As I’m sure you know, when it comes to business, I’m always right. But do you know why? Well, it all goes back to the first lesson in investing I ever had – no, not from some elite school – from my mother, Georgette.
She got her start working in a children’s clothing factory, and from her very first paycheck she always invested 20% of her income. She did something else, too. Every year she would save up her spare cash, and at the end of the year, she would buy one item of clothing – a Chanel coat.
Did she buy the coats because they were fashionable and made her happy? You bet. But did she buy them frivolously? Not at all. It wasn’t until years later though, when I was the executor of her estate, that I learned just how smart she had been. It turns out many of those coats were one-of-a-kind collectors’ items, and they had massively appreciated in value.
Now, why am I telling you about my mother’s coats? The same reason I’m always right: Even from a very young age, Georgette had the good sense to diversify. Did she know at the time which of her coats, or which of her investments for that matter, would pay off? No. But by spreading her bets – not just across stocks, but across entire asset classes – my mother significantly boosted her odds of success.
What was true for Georgette, is true for startup investing:
If you buy only one stock or invest in only one startup, as far as I’m concerned you deserve to get wiped out. This is just as true for venture capitalists and my fellow hosts on Shark Tank as it is for everyday retail investors.
When I’m listening to startups pitch, oftentimes the deals I think will be real dogs turn out to be hits and vice-versa. That’s why I never buy just one. I buy seven or eight or ten and build a portfolio – knowing that most will likely fail, but when I get a winner, the outcomes can be extraordinary.
Let’s go back to business school for a moment, shall we? Diversification portfolio analysis generally looks like this: as a best practice, I don’t want more than 20% of my investments in any one sector of the economy and I don’t want more than 5% in any one stock. The same goes with startup investing – I don’t want to bet big on any one outcome.
So how do you make sure you’re always right, like me? Take a page from my mom – buy a lot of coats and build a portfolio.
Kevin O’Leary is a paid spokesperson for StartEngine. View the details here.
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