There’s an investment mistake famed investor Kevin O’Leary will never make again.
“When I was a young Buckaroo trader, I used margins and got slaughtered. And I never did it again,” he said in a recent interview on “Squawk Box Asia.” from CNBC.
Margin investing involves borrowing money from a broker to buy stocks or other assets. This offers greater gains when the price of a stock goes up, but also increases risk when the stock goes down.
“I believe every generation gets a lesson in margin, including me,” said the venture capitalist, who is also co-host of “Shark Tank” and chairman of ETF O’Shares.
“You can tell all the young investors who have never seen a bear market… but until they experience the fear, the darkness and they are completely wiped out of their account, that is how you learn.”
“I think it’s very important for young traders to learn that and they’re learning that right now.”
A bear market occurs when the overall value of the stock market falls 20% or more from its recent highs. Just last week, the S&P 500 fell more than 21% below its all-time closing high set in January.
O’Leary added that margin trading is “a very, very, very complicated concept for investors.”
“They don’t understand it until they get zeroed in on margin calls and that’s happening in every industry, especially crypto right now,” he said.
“Grown men cry at the place of crypto.”
Last Monday, the crypto market capitalization fell below $1 trillion, from $3 trillion at its peak in November 2021, as trading platforms halted withdrawals, companies cut jobs and panicked investors dumped their holdings.
Over the weekend, bitcoin dipped below its 2017 high, falling to $17,601.58.