Kevin O'Leary Says 90% of Investors Can't Beat the Market — Recommends a Simple SPY Test

Canadian businessman Kevin O'Leary believes there is virtually no one who can beat the stock market by picking individual stocks over the long term. Outperforming the S&P 500 is difficult, although he is aware that some investors may still be stubborn enough to attempt it.

O'Leary recognises that there will always be investors who are unlikely to listen. Some will continue to try to beat the market, a task that the 71-year-old believes is a waste of time.

'If you think you're so good that you can pick stocks and beat the index, give it a try and learn the hard way. Virtually nobody beats the index,' O'Leary said on X.

For those who may not be aware, the S&P 500 tracks the performance of the largest US-listed companies. That said, any investor would have to carefully study each listing to figure out where to invest wisely. This approach is what O'Leary believes most are doing wrong.

Aware that most may not take his word for it, the businessman suggested a strategy. He encouraged investors to take a simple SPY test and see what happens afterwards.

'Maybe put $1,000 into one account where you pick stocks, and another $1,000 into SPY, the ETF that tracks the entire S&P 500,' O'Leary said. 'Then you'll find out the hard way that you're not that good. 90% of the time, you can't beat it, so you might as well join it and stop trying to pick stocks,' he added.

Aim for Long-Term Gains

O'Leary is aware that there are some investors who feel they are gifted enough to properly read the market and make risky calls. In some cases this may happen with some finding success in selecting certain individual stocks. However, O'Leary points out that these are only short-term gains and maintaining such a practice is extremely difficult.

Rather than continuing with this approach, O'Leary believes it would be better to invest in the market as a whole rather than trying to outperform it. Instead of attempting to select individual winners, he believes investors would do well to buy exposure to the entire market.

O'Leary sees this as something that guarantees a market-level approach, a practice that is historically effective compared to short-term returns.

Overconfidence is a Killer

Reading between the lines of what the Shark Tank investor was trying to convey, relying on gut or psychological factors is also risky. For investors who find success relying on trends or holding on to losing positions longer, the consequences could be dire and become costly.

This is another point that aligns with his recommendation. A passive approach tied to the broader market requires less intervention and fewer judgement calls, something that could generate huge revenue in the end.

A Promising Path To Riches

O'Leary is confident that long-term exposure to a broader market is the way to go. It all starts by deciding wisely and having a better understanding of what a stock is. He believes that after taking all of this under consideration, a person is on the right track of potentially building real wealth.

'You don't have to pick stocks and you don't even have to understand what a stock is,' he explained on his official X account.

To back his point, he made an interesting suggestion for people who intend to invest in stocks. He suggested that from an individual's total earnings, investing 15% in the index of the S&P 500 would be wise. And with time and depending on the frequency of the investment, he believes anyone could reach millionaire status at some point in their lives.

'If you're taking that 15% every two weeks/month on an average salary, you'll end up a millionaire when you're 65 plus. ... So it's about learning how to not buy sh*t you don't need and investing that money instead,' O' Leary said.

Taking that last part of his message, it calls to mind what financial adviser Dave Ramsey previously said. This was the article about a random caller asking if it was wise to invest in gold.

The radio personality immediately shot that down, citing how gold was overhyped and that returns from such an investment are not that rewarding. Instead, it would be best to invest in something that raises revenue or makes profits like stocks.