When you do an annual review of your portfolio, identify the worst relative performer over the past year. This investment will likely be 30 percentage points below the S&P. You want to sell this and replace it with TQQQ. Everything else remains the same.

If this investment made up 10% of your portfolio, you would add 8 percentage points to your whole portfolio performance per year. Your incentive to do this is 80% per year on that 10% slice of your portfolio. Every 2% TQQQ added to your portfolio adds about one percentage point performance to your portfolio. Annually you rebalance TQQQ to the same percentage.

This “greatest improvement” variation of the Stars model works so well because there is usually at least one very poor performer in a portfolio. It has sat there for years robbing portfolio performance.

Even Berkshire Hathaway can benefit from this strategy. As best I can tell they have 10% of their holdings that are about 30 percentage points below the S&P.