Chuangzhi Winner Mr. Miracle Answers: Should I buy individual stocks or ETFs? Is the AI bubble bursting? Should I buy Bitcoin?

The amazing Mr. Kevin O'Leary, the genius entrepreneur, recommends investors prioritize broad market ETFs over individual stocks and adjust their stock-to-bond ratios based on age. He is optimistic about AI and Bitcoin prospects but emphasizes strict diversification discipline, with single holdings not exceeding 5%.

In a specialist interview video uploaded by GQ Taiwan on May 13, the well-known investor from the American venture capital show "The Profit" — "Mr. Wonderful" Kevin O’Leary — was invited. Valued at around 400 million USD, he responded to online questions about investing, such as whether to buy individual stocks or ETFs, whether AI stocks are in a bubble, and if Bitcoin is worth buying.

Should I buy individual stocks or ETFs? Are dividend ETFs worth it?

Kevin O'Leary believes that almost no one can beat the market index. Instead of trying to pick individual stocks, it’s better to directly invest in the market.

You can try picking individual stocks with $1,000, and also invest $1,000 in a tracking ETF like SPY that follows the S&P 500. You’ll find that 90% of the time, you won’t beat the market.

Low-cost ETFs like VOO are very suitable for investing in the S&P 500 index. He does not recommend mutual funds because of high fees and lack of tax efficiency.

As for dividend-paying stocks and ETFs, Kevin O'Leary believes they are definitely worth investing in. But the key is to select good dividend indices (such as O USA), ensuring these companies distribute dividends from operational free cash flow. In plain terms, a company’s dividend fund is about returning profits to you, not taking on excessive debt just for dividends.

How to start investing? How to allocate your portfolio?

Kevin O'Leary points out that, if you have a stable salary, you can decide to automatically invest 10% to 15% of your monthly income into ETFs or a mixed stock-bond portfolio.

But remember, never put all your chips into a single stock. His principle is that any single industry should not exceed 20% of your portfolio, and any individual stock or bond should not exceed 5%.

Regarding portfolio allocation, when you’re in your 20s, you can take on higher risks for long-term market gains, so you might allocate 70% to stocks and 20% to 30% to fixed income (bonds).

By age 50, having accumulated some assets, you should start reducing risk, adjusting to 60% stocks / 40% fixed income, known as a 64/36 stock-bond ratio; by age 60, further reduce risk to 50% stocks / 50% fixed income.

Image source: Gemini AI-generated Classic 64/36 stock-bond portfolio allocation

Is there a bubble in AI? Is Palantir stock overvalued?

As AI concept stocks soar, investors are beginning to worry about an AI bubble approaching.

Kevin O'Leary believes that in the 1990s, people also said the internet was a bubble, but they were wrong. Similarly, many said Apple, Amazon, or Netflix were overvalued, but they ultimately proved their growth potential.

AI is bringing significant changes to productivity, profit margins, reducing customer acquisition costs, and robotics technology, impacting every industry within the S&P 500. He’s unsure if it’s a bubble—only time will tell—but he thinks technology tends to prove itself correct.

As for Palantir, he believes this company masters data (the new oil of the era), helping governments and businesses mine data, become more efficient, and advance AI development, with impressive profits. Whether it’s overvalued or not, only time will tell, but so far, its performance has been excellent.

Is Bitcoin and gold worth investing in?

Kevin O'Leary thinks Bitcoin is worth investing in, because he is personally optimistic about cryptocurrencies and digital payment systems long-term, predicting that within five years, cryptocurrencies will be legalized and become the 12th sector of the S&P.

However, this doesn’t mean he is heavily invested in Bitcoin; he still follows the diversification rule of limiting any single industry to 20% of the portfolio.

He holds the same view on gold. Gold is a good asset but shouldn’t be heavily weighted. In his own portfolio, only about 5% is allocated to gold, mainly through gold ETFs (like GLD) and physical gold bars stored with insurance.

Why invest in small- and mid-cap stocks and go overseas?

Some investors believe “large-cap stocks always outperform small- and mid-cap stocks,” but that’s not correct.

Kevin O'Leary points out that the Russell 2000 index, which covers small companies, often grows faster than large companies (S&P 500). Under certain conditions (like low interest rates), small- and mid-cap stocks tend to outperform large caps.

Additionally, diversification includes “geographical diversification.” Investing in other countries via ETFs (such as European markets) is necessary because some years, European markets outperform the S&P 500, and you can never know in advance which year that will happen.

Which industries will surge next?

No one can accurately predict which industries or stocks will skyrocket. Kevin O'Leary notes that, over the past three years, most of the S&P 500’s returns were contributed by just seven stocks, but there’s no guarantee they will always lead.

Therefore, the focus should be on maintaining diversification and strictly adhering to the discipline that no single stock exceeds 5% of the portfolio.

When a stock (like Tesla, which he has held for nearly 10 years) rises above 5%, it’s time to take profits and sell it back down to the 5% safe level.

GQ Taiwan Kevin O’Leary interview video