Grow Your Portfolio the Intelligent Way

Why Doing Less Allows You to Achieve More

Want to achieve more in life?

For most of us, the answer is yes. Yet, also for most of us, the idea of achieving more comes with the corollary notion that we are going to have to do a lot more, put in more hours, work harder and generally take on more and more tasks and responsibilities.

Yet what if doing less could allow you to achieve more? Now, when I say “doing less,” I am not talking about slacking off and just letting fate’s wind sail you across life’s lake. What I am referring to here is taking on fewer overall tasks and really concentrating on getting the critical things in life right.

Another way to describe this principle in action is to hone your focus on the most important tasks at hand, and thereby become a “master of selectivity.” You see, it is by concentrating your efforts on the most important priorities needed to achieve your goals, and letting go of extraneous and often distracting tasks, that you can enhance your performance in business and in life.

This idea of mastering selectivity and prioritizing tasks was the subject of a Wall Street Journal article titled, “How to Succeed in Business? Do Less,” by Morten Hansen, former management consultant and now professor of management at the University of California, Berkeley.

In the article, Hansen explained how his strategy for success at his “dream job” at Boston Consulting Group was to work exorbitant hours, a practice which he said often resulted in 90-hour work weeks. Yet despite all his time and hard work, there was one colleague he had that put in far fewer hours, yet always had better solutions to problems than he did. Moreover, this co-worker put in a normal 8 a.m. to 6 p.m. day, never stayed late and never worked nights or weekends.

So, was this outperforming co-worker just that much smarter and talented than Hansen (as well as the rest of his colleagues)?

What Hansen discovered later in his academic research is it’s not a case of “talent” or “natural ability” or the willingness to “work hard” that can result in successful outcomes. Rather, what researchers have found that what is even more important to success is the ability to master selectivity.

“Whenever they [top performers] could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go,” wrote Hansen. “They then applied intense, targeted effort on those few priorities in order to excel.”

Hansen’s research also found that just a select few critical work practices related to such selectivity accounted for as much as two-thirds of the variation in performance among the subjects in a 2011 research study. “Talent, effort and luck undoubtedly mattered as well, but not nearly as much,” wrote Hansen.

So, how did the best performers in his study do this?

According to Hansen, “Rather than simply piling on more hours, tasks or assignments, they cut back.” Hansen then likened this ability to cut back and focus on what really makes the most difference to the philosophical principle known as Occam’s Razor. Named after philosopher and theologian William of Ockham, this principle stipulates that the best explanation in matters of philosophy, science and other areas is usually the simplest.

“At work, this principle means that we should seek the simplest solutions — that is, the fewest steps in a process, fewest meetings, fewest metrics, fewest goals and so on, while retaining what is truly necessary to do a great job,” wrote Hansen. “I usually put it this way: As few as you can, as many as you must.”

I like to apply this principle to my own life via something called the “minimum effective dose.” What this means is you want to concentrate on doing the things that have the most impact on your results, and that have the fewest extraneous elements and/or time commitments.

For example, in the realm of fitness, I engage in what’s known as high-intensity training, or HIT, to get the best strength and conditioning results in the briefest period of time, and in the safest, most efficient manner.

When investing and selecting top-performing companies for my newsletter advisory services, I concentrate on finding stocks with the strongest earnings, strongest relative share-price performance and stocks that are in the strongest industry groups. By focusing on these key components and filtering out much of the “noise” of extraneous data, I am better able to make good investment choices.

Finally, the principle of focusing more on less, i.e. focusing your effort on the most critical elements of a task or objective rather than becoming sidetracked by the superfluous, is something we can all apply to nearly every part of our lives.

So, if you want to achieve success in any walk of life, focus on the critical elements — and then get them right. Once you do that, you’ll often find the rest tends to fall into place.

Upcoming Appearances

I will be appearing at the Dallas MoneyShow on Oct. 4-5. I will be giving two presentations, “How to Invest Like a Renaissance Man,” and “7 ETFs to ‘Trump’ the Market.” For more information, or to register for this event, just follow the Dallas MoneyShow website link.

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ETF Talk: Profit from Rising Interest Rates with Floating-Rate Debt

Exchange-traded funds (ETFs) exist in even the most unlikely areas of finance, and floating-rate securities are no exception.

The largest ETF in this sector is the iShares Floating Rate Bond ETF (FLOT), which has more than $10 billion in assets under management and offers access to 700 floating-rate securities of investment-grade companies. Floating-rate securities are simply debt instruments that have a variable rate.

As such, they usually are tied to some kind of benchmark, such as the three-month London Inter-bank Offered Rate (LIBOR). These debt instruments gained some degree of notoriety during the “Taper Tantrum” of 2013, in which bond yields drastically increased after investors overreacted to the Federal Reserve tapering off quantitative easing. Floating-rate investments were perceived as a way to get around the short-term spike in yields.

In environments where interest rates are expected to rise, such as now, floating-rate securities tend to be more popular than fixed-income securities. Bond yields react inversely to interest rates, so market prices for fixed-income investments will drop when interest rates rise. Meanwhile, floating-rate investments, with no set price, are less affected. Also, many floating-rate investments offer price floors and ceilings that allow investors to know exactly how much a security will pay, making it a feasible income stream in times of rising and falling interest rates.

However, floating-rate investments tend to yield less as investors trade an enhanced income stream for greater safety, meaning reduced credit risk and volatility. That being said, FLOT’s 30-day Securities and Exchange Commission (SEC) yield is 2.5%, which is still significantly above the yields of a good many ETFs.

According to the ETF’s website, FLOT “seeks to track the investment results of an index composed of U.S. dollar-denominated, investment-grade floating-rate bonds with remaining maturities between one month and five years.” More than 50% of the portfolio exposure in the fund is dedicated to the banking sector, with consumer cyclicals, 8.2%, and supranationals, 7.8%, being the two next biggest areas.

Ever since the 10-year Treasury yield bottomed below 1.4% in July 2016, FLOT has outperformed the iShares Core US Aggregate Bond ETF (AGG), showing a slight gain compared to a loss of 5%. The fund trades with excellent liquidity of about 1.5 million shares per day, or about $78 million. The expense ratio is just 0.20%.

FLOT’s holdings are made up of some of the strongest financial names. Top holdings include Goldman Sachs, 3.82%; Morgan Stanley, 3.80%; JPMorgan Chase & Co., 2.67%; Inter-American Development Bank, 2.60%; and Citigroup, 2.27%.

With the Federal Reserve rumored to be halting increases in the Fed Funds rate sometime later this year, investors may want to do research on current trends to avoid purchasing the iShares Floating Rate Bond ETF (FLOT) at a bad time.

I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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Discovering ‘The Virtue of Happiness’

Happiness.

Is happiness a goal we should aspire to, or is it something more? And, how do you achieve real happiness?

Let’s face it, happiness is a serious problem. That’s because happiness is difficult to define, and the feelings associated with happiness can be both evanescent and elusive.

In the latest episode of the Way of the Renaissance Man podcast, I speak with Dr. Joel Wade, author of the fantastic book, “The Virtue of Happiness.”

Dr. Wade is a psychologist who specializes in marriage and family therapy. He’s also a life coach, podcast host and author.

In this discussion, we talk about happiness the way Aristotle defined it, i.e. “eudaimonia” or “the success of being human.” According to Dr. Wade, happiness should always be “on your radar like a point on the shore to aim your boat.”

Dr. Wade wants people to create what he calls a “virtuous cycle,” which means focusing on cultivating key virtues such as gratitude, courage and integrity that create the foundation necessary for a truly happy life.

We also talk about the role of “grit,” i.e. the ability to persevere through challenges and hardship to achieve goals over time, and how that relates to happiness.

I really enjoyed my discussion with Dr. Wade, and I think you will too.

Finally, if you like the Way of the Renaissance Man podcast, I encourage you to subscribe to the show on iTunes.

Doing so is free, and it will ensure you never miss the latest episodes.

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In Defense of Elon Musk

“Quick, check out the Joe Rogan Podcast on YouTube. Elon Musk is smoking a pot!”

That’s the frantic text I got from an investor friend of mine who knows I’m a fan of both podcaster, comedian and UFC commentator Joe Rogan and Tesla Motors (TSLA), SpaceX and The Boring Company founder and CEO Elon Musk.

Of course, what that friend didn’t know is that I already was watching the live-streamed YouTube broadcast on Sept. 6, and I saw the now-infamous incident where Rogan and Musk passed each other a “blunt,” i.e. a combination of rolled up tobacco and marijuana, and then proceeded to smoke it.

Now, when I saw this incident, the first thing I thought about is how much fire Musk was about to come under from the investing public. Why? Well, because this “bizarre” behavior as many have characterized it, seems to fit into a wider pattern of Musk’s recent penchant for controversy.

In August, the Tesla chief sent out a tweet that said he was considering taking the electric car and battery technology company private.

That tweet caused TSLA shares to tumble, and now there’s a Department of Justice investigation and a Securities and Exchange Commission probe into the incident for possible criminal and civil legal action.

Interestingly, the Musk pot incident, along with the eminently memorable screenshot of tobacco and pot smoke wafting around Elon’s head as he spoke with Rogan, caused an even bigger decline in TSLA shares.

The stock sank about 6% the day after the incident, which was Tesla’s worst day of trading since 2016. Musk also lost two key Tesla executives, who both decided it was a good day to tender their respective resignations.

Now, with all of this controversy, bizarre behavior and potential criminal and/or civil cloud surrounding the eccentric billionaire, why would anyone want to write an article titled, “In Defense of Elon Musk”?

Well, first, it is the purpose of this publication to take you, the reader, on a mission to peel back the surface layer on issues and dig into the deeper meanings associated with these types of situations.

Second, I also admit that I have a love and admiration for men of genius… and to be certain, Elon Musk is a true genius.

During the growth spurt of the internet and e-commerce in the late 1990s, Musk and his partners, including fellow eccentric billionaire and early investor in Facebook (FB) Peter Thiel, figured out how to make electronic payments palatable and easily adoptable to both end users and merchants. The result was online payment giant PayPal (PYPL).

After selling PayPal to eBay (EBAY) in 2002 for a cool $1.5 billion, Musk turned his entrepreneurial focus on transportation. He set out to create an all-electric car that not only didn’t pollute the environment the way fossil fuel vehicles did, but that also surpassed the finest luxury automobiles on the market in terms of ride, feel and driving experience.

Guess what… he did that, too.

When Musk looked at the space program and the virtual stagnation that NASA was experiencing, he started his own rocket company, SpaceX, with the goal of making commercial space flight a reality. Ultimately, the goal of that space flight is to lead to the colonization of Mars, making us a multi-planet species.

Oh, and then for good measure, Musk decided to take on the world’s traffic and gridlock problems by starting the ironically named, The Boring Company.

In my hometown of Los Angeles, Musk already has begun the process of exploring how to create a tunnel system below the earth’s surface in an attempt to relieve the pernicious and time-crushing task of getting around one of the most congested cities in the world.

Will he do it? I’m certainly not betting against him!

Of course, my wider, deeper point here is that Elon Musk isn’t the kind of person that sees a problem and simply bemoans its existence. He’s the type of eccentric genius who sees a problem as a catalyst for solutions, and as an opportunity to reshape reality in a manner that he thinks will enhance the world and make it a better place for us all.

More importantly, he is the kind of man who takes on the responsibility of thinking deeply about these problems, and then trying to develop real-world solutions using reason, rationality, science, technology, innovation, capital — and a whole lot of creative intellectual effort.

In short, Elon Musk is the kind of genius you might find in an Ayn Rand novel.

Just like the eccentric architect Howard Roark in “The Fountainhead,” and John Galt, the mysterious inventor of the motor that can power the world, in “Atlas Shrugged,” Musk is a man operating with a vision of his own making.

Has Elon Musk made missteps in life? Of course, we all have.

Yet, what very few of us can do is take our mind, apply it to problems of societal magnitude of the sort Musk has and actually come up with — and then also monetize — the kindling of a solution to these great challenges.

So, regardless of an ill-advised tweet, or the public consumption of a legal, though still frowned upon, recreational drug, I say Elon Musk deserves not only a strong defense, but deeper praise that’s worthy of a true industrial hero.

Do not lose the forest for the trees.

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Taking Away Perfection

“Perfection is finally attained not when there is no longer anything to add, but when there is no longer anything to take away.”

— Antoine de Saint-Exupéry

The French aviator and author documented his adventures as a pilot in works such as “Wind, Sand and Stars” and “The Little Prince.” Here, Saint-Exupéry reminds us that stripping things down to their essentials is often the way to get to “perfection.” Try that in your own life. I suspect you’ll gain more freedom in all sorts of ways.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

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