‘Shark Tank’ Kevin O’Leary’s Investment Advice To Combat Inflation
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Inflation rates rose in April, the Consumer Price Index (CPI) jumped 8.3% from a year ago, according to the Bureau of Labor Statistics.
O’Leary told CNBC, “Right now in a bank account, you’re getting very little [interest].”
O’Leary warned that because inflation is so high that “you’re actually losing money every 12 months.”
“Savings in cash in a bank account make basically no interest, certainly after inflation,” the Shark Tank investor said. “Investing is keeping pace with the equity and stock markets. And I think you’ve really got to understand the difference between the two.”
O’Leary revealed that when he was young that he “learned the hard way” that banks were a terrible way to grow his money.
“I realized ‘Wow, I’m not making anything on this cash sitting around,’ and that I had to learn how to invest,” he explained. “And that’s exactly what I did.”
CNBC reported, “O’Leary sides with the experts, including Warren Buffett, who recommend that people put their money into index funds, which are automatically diversified. Despite market volatility, O’Leary points out that the S&P 500 has traditionally outpaced inflation.”
O’Leary does recommend that people keep at least three months of salary in a bank account that is accessible in case of an emergency.
In January, O’Leary stressed that the “quality” of investments is critical in combat inflation.
“In inflationary times, all of a sudden quality really matters. Cash flow matters, distributions in the form of dividends matter, and [so do] sectors that have pricing power,” O’Leary said during an appearance on CNBC’s ETF Edge.
O’Leary’s advice for investing in exchange-traded funds, “If you’re going to be using an ETF, you want it to be something that has got diversity around sectors that are really strong in pricing power.”
“It is an ETF that’s designed to have high-quality pieces of the S&P. So it’s a rules-based ETF that says ‘give me companies that do well in inflation that have pricing power.’ So do people pay for consumable goods in inflationary times? Yes, they do,” he continued. “They have to eat, they’ve got to buy health-care products, and they have to do things they do every day even though these companies have the ability to raise prices as inflation comes in.”
O’Leary added, “I like boring – big and boring, big fat cash flows. That’s what I like because at times like this when you have a portfolio of high-quality names, you reduce your volatility.”