Yahoo Finance’s Alexis Christoforous and Kevin O'Leary, Shark Tank Investor, discuss his new robo-investing app, Beanstox.
ALEXIS CHRISTOFOROUS: "Shark Tank" investor Kevin O'Leary is out with a new investing app. It's called Beanstox. Here to tell us about it is Mr. Wonderful himself, Kevin O'Leary. Kevin, always good to see you.
Look, I got to ask, when I heard this, I thought, why? Why did Kevin O'Leary decide to do this? It's already such a pretty crowded space. There are a lot of investing apps out there.
KEVIN O'LEARY: Yeah, I mean, there's-- you know, what happened was last March, I have over 56 private investments in pretty well every sector, almost in every geography. And we went to cash flow negative at the beginning of the pandemic when retail shut down, and we immediately-- and I worked very hard with my team to get the PP loans-- PPP loans lined up for all my companies. And as you recall, the protocol of those loans is you had to disclose your payroll on Feb 15 vis-a-vis what it was going to be June 30.
And so we did a deep dive into payroll, and that's when I found out-- which totally freaked me out-- that the majority of my employees in their late 20s, early 30s have nothing set aside. They have no investment plan. They have two weeks of cash sitting in their accounts. I mean, like, I had no idea, and I did more research. 100 million Americans do not have any investment account, no plan for retirement.
So, I mean, that just-- that was a real shock for me, and that's what motivated me to get involved in this whole financial literacy move and become my number-one priority for 2021. So what my original plan was to simply go and, you know, endorse one of the robo-investment apps that are out there, and there's many of them. And some of them do trading where you can trade stocks, and others round you up on your credit card, and there's all kinds of good stuff. But none of them invest the way I do.
I'm a conservative investor. I have my own philosophy about long-term wealth growth, and, like, I'm not-- I'm not gonna-- I needed something that reflected what I do. And so I had to build it myself from scratch, basically, or at least had a hand in designing it with a young tech team.
ALEXIS CHRISTOFOROUS: Yeah, if you want it done right, get it done yourself. I know that you're a big lover of dividend-paying companies as well. So talk to me about what you get for the $5-a-month subscription fee because, as you know, a lot of these investing, robo-investing apps aren't charging any fees at all. So give me the elevator pitch. You're used to getting elevator pitches. Give us the elevator pitch on why it's worth the 5 bucks a month.
KEVIN O'LEARY: Well, basically, what I did was I said, look, I want this to be totally transparent. I want it to be really, really easy to use because I also made the assumption incorrectly that people actually know how to build a diversified portfolio, they know how to buy a stock, sell a stock. That also is not true for about over 90% of the people that I was worried about. And so I'm really trying to appeal to people that have not started the process of investing something towards their retirement in their 60s.
And what I've tried to say is, look, you've got to set aside $100 a week. And the average salary, depending on what region you look at, is between 52,000 and 56,000 a year. So everybody can afford, in my view, to set aside $100.
But I said, look, let's make everything transparent. Let's use it in a way that we can use a diversified portfolio of ETFs. We'll charge $5 a month regardless of how much you put to work. And for the month of-- this month, I've waived the fee. I just want people to try it and get going.
You know, this is-- I'm not motivated by making money. I'm motivated by the fact that my own employees have no plan. And if others want to try this, you know, it behooves me to make sure that the people that work in my universe have a strategy to take them out of financial stress. And in March, they were in financial stress. And I want people to have a cushion.
And I've got to point something out that I've also learned. There's a difference in the way people think between saving and investing. Putting money into a saving account is a great idea. You need 90 days' worth of cash in case of an emergency. But that's not investing.
The market over the last 40, 50, 60, 100 years has given you between 6% and 8% a year on the long term. You need to capture that accrual. That's what you're trying to do. So you need to diversify, get it in a portfolio. I wanted Beanstox to be really easy to use. I mean, I don't care if you've never invested before. I want you to try this app. That's my way of looking at it. And it's the only app on the market that invests the way I do. I'm really conservative, but I'm all about growing that nest egg so that-- in my eye, if you look at it, you put $100 a week aside and the market does what it's done for the last 80 years, you'll end up with something like a million two to a million five in the bank by the time you're 65. That is a good outcome.
ALEXIS CHRISTOFOROUS: And that's called making your money work for you. But give us two quick concrete ways people can build wealth over time. I kind of think you ticked through a few of them just now. But if you had to pick two concrete ways, what would you tell them?
KEVIN O'LEARY: Well, first of all, as I've learned, and every investor learns the hard way, you can't time the market. The idea that you know when the market's gonna go up and gonna go down is impossible. This last 12 months, this incredible 2020 year that we all want to forget about, the majority of the returns came in a handful of days. We had these crazy days when the market was up 8%, 9%, 10%, 11%. And if you weren't invested, you missed out on that. And so what I tell people is the best strategy is to simply put a set amount aside and average your way into it over a long period of time.
But I'll tell you the biggest problem. And I think this is a huge failure in financial literacy. Thank goodness in Florida, they're starting to do it. Only 18% of our kids in high school are taught anything about financial literacy by the time they graduate. That's a total fail. You got to understand what a credit card is, what debt is, what investing is, what retirement is, all that stuff. And that's really the mission I'm on is to really get out there and say, look, if you're 18 years old, you've got to start thinking about putting stuff aside at this age.
For me to find out my employees had nothing in their late 20s, that's crazy. And that is the whole motivation of Beanstox. I have really worked hard with the design team to make it really easy. I mean-- I mean really easy. But the hard part is getting everybody's discipline in their head to put $100 aside because there's always some other piece of crap you want to buy that you don't need. When you buy something you don't need a month later, you've killed $100 that you could have put to work for you for when you're 65. That's my mission, to explain, look, everybody can cut back on crap they don't need.
ALEXIS CHRISTOFOROUS: [LAUGHS] If there's nothing else we take away from this interview, I love it. That is so true. You'd be very happy with my 18-year-old. He just opened up an account, very much into making his money work for him.
KEVIN O'LEARY: I-- I'm very happy to hear that. That's exactly what you need to do because at that age, when they start putting money aside, they start watching it, and that'll work for them for the rest of their lives. I've done the same thing with my daughter and son. I've said, look, this is how it works. Diversification matters. That's the only free, you know, thing you get in life and investing is diversification. And I hope that they'll consider consistently putting aside 100 bucks.
ALEXIS CHRISTOFOROUS: Yeah, you're preaching to the choir here, Kevin. But I want to get your thoughts real quick on what's happening in our world and in Washington right now. They're trying to hammer out this stimulus deal. Should the next stimulus package include checks for individual Americans again, do you think?
KEVIN O'LEARY: Actually, I have a lot more clarity now than I had last March and April. I think the best thing to do is exactly that. It's to give stimulus checks directly to people and stop funding companies. The market has figured out who the winners and losers are. And the truth is, in my opinion of the PPP-- and I went through that whole process-- a third of that money was wasted.
What we need to do is take care of people right now because the economy is going through a massive digitization, a change. One of the reasons that the market is hitting new highs is it's figured out when this pandemic is over that we're gonna have a much better economy using all of these tools that we use the way you and I are talking together today. We don't fly to see buyers anymore in our retail locations. We do it electronically, digitally. We're saving thousands of dollars in business travel. All of the tools we use, like the DocuSigns, the Crowdstrikes, the Shopifys, these have made our businesses far more efficient. We've cut back 50% of the rent we use in headquarters. And in my companies, we've budgeted Q1 to Q2, and we've slashed business travel by between 20% and 50% because we don't need it anymore.
And so there you have an opportunity to, instead of making 15% pretax, you can make 18%. So I'm not worried about business in America. I'm worried about people in America. So I'd much rather have a stimulus package that gives individual checks or extends unemployment benefits for the next 14 months. The idea that the government can pick winners and losers in businesses has clearly been demonstrated to be false.
So I'd like to stop them from investing. Why do I want to bail out the shareholders of an airline when really it should go bankrupt? The middle name of airlines is bankruptcy. They do it well, every 7 to 10 years. Let them do it again to downsize because I don't need them. The S&P doesn't need them. We don't need to fly everywhere anymore. We can do it on a Zoom call or we don't have to go to an international location. We can meet the buyer online. And that's a great thing.
So, you know, I want to take care of the flight attendants and the people that used to work at those airlines, but that's just one sector of the economy. Do I want to buy into a movie theater chain? No, it's going to zero. But that's OK. They're the buggy whips. Those are the old economy. We have a new digital economy coming that's gonna be fantastic, and that's why the markets hitting new highs. Winners, losers, that's capitalism, but people we got to care about.
ALEXIS CHRISTOFOROUS: Before we let you go, on a personal note, you're looking ahead to 2021, any particular New Year's resolutions you've thought about yet?
KEVIN O'LEARY: Well, the big sector that I'm really investing in. I've sold a lot of real estate, commercial real estate assets. That used to be 31% of my portfolio. It's down to eight. And I'm redeploying that capital into health care, consumer, and technology. And in health care, the one that has really been-- the new sector that's emerging has been on using psychedelics as medicine. There's a lot of excitement there because we haven't had new medicines for depression and alcoholism and opioid addiction for 30-plus years. And all of a sudden in the election, if you saw what happened in Washington, DC and Oregon, they made legal the pursuit of psilocybin as a medicine.
So I've invested in that in a company called MindMed. It has a very broad portfolio of trials, stage one, stage two, and lots of molecules that they're looking at to discover new medicines in. I'm not into this for recreational drugs. This is the pursuit of medicines in an area that was first done in the early '60s that we've forgotten about, including LSD. And I think this could be really game-changing, and the market is really interesting in this space. So that's one of my big new areas of investing, and MindMed has been one of my best outcomes since I invested in it, I think, 24 months ago. I think it's up 700%, so I'm pretty happy with it.
ALEXIS CHRISTOFOROUS: Yeah, I'm looking at the chart right now, up 215% year to date. We actually had MindMed's CEO on just a few weeks ago. We talked about how he tried to convince you to invest. So we'll see-- we'll see how this does for you in 2021. Kevin O'Leary, best of luck with the new app. It's called BeanStox. Great to see you.
KEVIN O'LEARY: Thank you. Take care.