It’s well-known that most stock funds struggle to beat the S&P 500. In fact, only about 15% of them succeed. So, how can the Stars model approach help improve fund performance?

There are two key adjustments that need to be made to the fund’s rules:

1. Avoid Doubling Down on Major Market Corrections – The fund shouldn’t make drastic position changes during market corrections. Consistency is key.
2. Limit TQQQ Allocation to 30% – Except in the year after a market bottom, the fund should not let the TQQQ allocation exceed 30% at year-end rebalancing.

The best way to start boosting performance is by replacing the 20% worst-performing stocks from the past year with 20% TQQQ. This strategy can be implemented anytime during the year and has shown potential for a 4% boost in fund performance if the worst-performing stocks are underperforming by 20% compared to the S&P. Plus, TQQQ’s historical outperformance could add an additional 10 percentage points to the fund annually.

With this approach, the fund could see an average annual return of 23% over the next five years, with a total growth of around 180%. This makes the typical 42% drawdown during a major correction seem less significant-especially when there’s no real loss involved. The only challenge? The self-imposed rules. If these rules are limiting the fund’s potential, isn’t it time to consider a change? Why should the fund restrict itself from maximizing growth?