Why 'Boring' Businesses Are More Profitable Than 'Exciting' Ones

Editor's note: All week, we've shared some of our favorite investment lessons from our friend and colleague Dan Ferris… including why it's important to ignore the news, how to spot the world's greatest businesses, and why the price you pay is the most important key to your success. Today, in an essay that we originally published in April 2012, he explains the magic of "boring" businesses…
 
A reader wrote to me with a complaint…
 
He was irritated with my coverage of World Dominating Dividend Growers (WDDGs).
 
These stocks are too "boring," he said. Why pay to hear how these companies continue to do the same darn thing day in and day out?
 
If you're a regular DailyWealth reader, you know what I mean by WDDGs. These businesses are usually the No. 1 companies in their industries. For example, UPS (UPS) is the No. 1 package-delivery company in the world. Wal-Mart (WMT) is the No. 1 retailer. Intel (INTC) is the No. 1 maker of semiconductors.
 
These companies have thick profit margins, have fortress balance sheets, and pay out large and growing dividends. Because they are so good at what they do, and because of their dominant position in their industries, they are extremely resistant to outside competition. This allows their shareholders to safely compound their wealth over many years.
 
They are the ultimate safe havens. But according to the reader's complaint, there wasn't enough "new" stuff happening with these stocks to justify the time I spend telling readers about them.
 
It's extremely unlikely this person will ever make substantial money in the stock market.
 
You see, the urge for "action" is one of the hallmarks of the average stock market loser. Put bluntly, it's how poor people view the market. They see it as a place for "action." But investing isn't about action and excitement. That's what Las Vegas casinos are about.
 
Only after someone grows to favor "boring" over "action" does he start thinking like a rich investor, rather than a poor one. You need to understand that investing is about making money and keeping it safe, and that's what WDDGs do for you…
 
In fact, back in 2008, when the stock market fell 38% for the year, and more than 53% from its late-2007 highs, Wal-Mart returned 18%, and McDonald's (MCD) returned 6%. Not all World Dominators performed that well in 2008, but they all did better than the overall market.
 
Yes, they're boring… But think about why they're boring.
 
They don't change much over the years. Coca-Cola (KO) looks a lot like it did 20 years ago, except it's bigger now. Same with Wal-Mart, McDonald's… and most other WDDGs.
 
Coke will continue to exploit the world's largest beverage-distribution system. Wal-Mart will keep selling everyday goods at the cheapest possible price. McDonald's will keep selling fast food, based on what its customers demand. Boring. Very boring. But very profitable.
 
Compare that to exciting businesses, like biotech. Most biotech companies don't have any sales because they're just research companies. They usually wind up going out of business. Small exploration-mining stocks are also exciting. And they, too, generally have no revenues… And many of them wind up worthless.
 
But the WDDGs just keep doing the same old boring thing year in and year out… And their sales and profits grow almost every year, year after year, decade after decade. Their dividends keep growing every single year, year after year, for 10, 20, 30, more than 50 years in a row in some cases.
 
For investors, putting money into WDDG stocks is so boring, it's almost like putting your money in a plain old bank account… except this account can make you double-digit average annual returns over a long period of time… instead of the 0.1% you get in bank accounts these days (per Bankrate.com's national average). Over the past year, software giant Microsoft (MSFT), Internet "plumber" Cisco (CSCO), and medical-equipment manufacturer Becton Dickinson (BDX) have grown their dividends at an average rate of more than 16%.
 
If you want excitement, go to Las Vegas. If you want to make money, invest in boring businesses that dominate their industries and pay higher dividends every single year.
 
Good investing,
 
Dan Ferris
 
Editor's note: Many of the companies in Dan's Extreme Value portfolio are "boring." But they gush cash… trade at steep discounts to their intrinsic value… and dominate their industries. And investors who buy today could be sitting on huge profits several months from now. We think that's anything but boring. Learn more about one of Dan's favorite opportunities right here.

Source: DailyWealth

A Timeless Rule Followed by Every Wealthy, Sophisticated Investor

Editor's note: So far this week, Dan Ferris has shown DailyWealth readers why they should ignore the noise in the financial media, and how to identify World Dominators. Today, he explains the most important thing to your investment success…
 
On June 15, 1998, Coca-Cola (KO) – owner of the world's most powerful brand – traded for $88.94 per share.
 
For many years, I've been telling my readers to keep the bulk of their equity holdings in companies like Coca-Cola, which has fat profit margins, high returns on capital invested, a great brand name, and a sustainable competitive advantage. I call companies like Coke "World Dominators."
 
Owning dividend-paying World Dominators and compounding their gains over many years is the surest, easiest, greatest way to get rich in stocks. But anyone who bought Coke in late 1998 ignored a timeless rule that wealthy, sophisticated investors hold sacred. And they suffered big losses.
 
What is this rule of the wealthy? How did violating this rule allow some investors to actually lose money on one of the world's greatest companies? And how can you begin using it to make a fortune in stocks?
 
The rule is that the price you pay is the most important thing when it comes to succeeding as an investor. If you pay a cheap-enough price, you can make money in even the worst businesses. If you pay a dear-enough price, you can lose money for long periods of time in even the best businesses.
 
Back in 1998, Coke's annual earnings amounted to $1.43 per share. So at the all-time high of $88.94, the market was valuing the business at 62 times annual earnings.
 
That's crazy expensive. Investors were accepting an "earnings yield" of about 1.6%. (That's the amount in earnings the company generates as a percentage of your purchase price. So take $1.43 in earnings, divided by an $88.94 share price, and you get 0.016… or 1.6%.)
 
Think about it this way: It's like buying a $100,000 house that you can rent out for about $1,600 a year, or $133 a month. It would take you 62 years to get your money back out of that investment. And only another fool would pay you $100,000 to take the house off your hands.
 
When you accept terms like that, you're almost guaranteed to lose money in stocks. And that's exactly what happened to investors who bought Coke at the wrong time.
 
Less than three months after Coke nearly hit $90 a share, it was down more than 30%. Five years later, it was down 50%. Even 13 years later… counting dividends… those investors hadn't made a dime in Coke… which is one of the world's greatest companies. Nothing much changed about Coke's business during that time. It was still one of the world's most recognizable brands. It still sold soda all over the world. It still had high profit margins.
 
The losses incurred by folks who bought in 1998 were directly the result of paying a ludicrously high price to become a shareholder.
 
The same thing happened to investors who bought software giant Microsoft (MSFT) in 1999. Shares peaked at $119. Today, the shares trade around $53.
 
Investors who bought back then lost because they paid the wrong price. The stock was offering roughly a 2.4% earnings yield. At that rate, it would take you 42 years to get your money back.
 
I don't know about you, but I don't have that kind of time. I'd much rather see a "payback period" of 12 years or less. That means getting an earnings yield of 8%-10% (or more).
 
Smart, successful investors know that the price you pay is everything when it comes to making money in stocks, commodities, or any private business. You can lose money even in the world's greatest businesses if you pay too much. If you take that lesson to heart, and only pay the right price – the cheap price – you're virtually guaranteed to make money over the long term.
 
Good investing,
 
Dan Ferris
 
Editor's note: As Dan explained in today's essay, the price you pay is critical. Right now, one of his favorite investment opportunities is trading at a huge 40%-plus discount to the value of its assets. By buying today, you're virtually guaranteeing the price you pay is favorable. Learn more about this opportunity right here. (You won't have to sit through a long promotional video.)

Source: DailyWealth

A Common-Sense Guide to 'World Dominating' Dividend Stocks

Editor's note: We're continuing this week's series of investment lessons from our colleague Dan Ferris. Yesterday, he showed readers the key to success for some of the world's greatest investors. Today, he explains how to identify World Dominating stocks…
 
If I could teach investors just one thing, it would be how to identify and value a World Dominating Dividend Grower (WDDG) business.
 
It's the single best way to get rich in stocks…
 
Remember, these are the world's strongest, safest companies. These companies dominate their industries. They have the best brand names, the biggest competitive advantages, and the biggest profit margins, plus they pay the safest dividends.
 
In other words, these stocks are different from typical stocks. They are different from "the market." WDDGs are vastly better.
 
And today, I'll show you exactly how to identify one…
 
Let's use Becton Dickinson (BDX) as a "case study."
 
Becton Dickinson is the World Dominator of needles and syringes for the medical industry. Odds are you've come into contact with the company's products dozens of times in your life and never realized it.
 
Like many WDDGs, BDX was the driving force in creating the industry it dominates today. In 1906, it built the first plant in the United States for making needles and syringes. And in 1925, BDX began offering the BD Yale Luer-Lok Syringe, which created a secure way to attach and remove a needle from a syringe. These connectors remain an industry standard today. BDX is also the top maker of safety devices to prevent needle-stick injuries.
 
BDX has an extraordinary brand, and it is No. 1 in its industry. Those are "on the surface" clues to finding these stocks. But we also need to look inside the company… to find the financial clues of a WDDG business.
 
To say Becton Dickinson has all the financial clues of a World Dominating Dividend Grower is the understatement of the year…
 
One of the hallmarks of a WDDG is consistent profit margins. This is the amount of money a company earns from each dollar of sales. A great business should have consistent profit margins so it can pay you a consistent stream of dividends… But that company should also have a sustainable, long-term competitive advantage so it can consistently earn those profit margins.
 
Becton Dickinson's gross margins (the margin earned before deducting the basic costs of doing business) are consistently above 40%. Its net margins (the margin earned after deducting all expenses and income taxes) have consistently been between 10% and 17% for the last 10 years.
 
That's huge. Most businesses are ecstatic to earn net margins of 5% or 10%.
 
Another hallmark of a WDDG is huge free cash flow. Free cash flow is the final "cash in hand" number that a business owner has after deducting expenses. It's a vital number for investors.
 
BDX gushes free cash flow. On sales of $12.2 billion, BDX generated more than $1.6 billion in free cash flow the last four quarters.
 
A third sign of a WDDG stock is a strong balance sheet. As shareholders of a business, we want to see lots of valuable assets and low debt. We want a strong balance sheet so we don't have to worry about tough times causing a bankruptcy.
 
Becton Dickinson has an excellent balance sheet. It has $1.7 billion in cash and short-term investments and less than $11.9 billion in debt. BDX's debt is tiny compared with its earnings. Its earnings cover its interest expense nearly five times over. Just imagine earning five times your mortgage payment every month!
 
Finally, for a company to qualify as a WDDG, we need to see a history of dividend growth. Becton Dickinson is one of the best dividend-growth stocks in the world. BDX has relentlessly raised its dividend every year for the last 44 years. Its last increase was by 10%…
 
Becton Dickinson pays out nearly one-third of its earnings per share in dividends. So there's plenty of room for big dividend growth in the coming years. Right now, BDX yields 1.5%. If it maintains its 12.5% annual dividend growth, you'll be making about 14% annually over your original cost in 20 years.
 
To sum up, there are obvious things to look for when you're after the world's safest, best dividend-paying stocks… the kind you can hold for decades and get rich. This includes a dominant brand and the top position in an industry.
 
But today's essay shows you some vital "financial clues" for finding these stocks… and why Becton Dickinson is a great example.
 
Good investing,
 
Dan Ferris
 
Editor's note: Right now, many of the world's blue-chip stocks are expensive. But Dan has found a handful of World Dominators that are cheap enough to buy today. Learn about one of those opportunities – and how to get started with a risk-free trial to Extreme Value right here.

Source: DailyWealth

One Popular Investor Obsession You Should Give up Right Now

Editor's note: This week, we're featuring some of our favorite timeless investing lessons from our colleague Dan Ferris. In today's essay, he shares an idea that helped Warren Buffett and Peter Lynch become some of the world's greatest investors…
 
Today, I'm going to teach you one of the hardest lessons for investors to learn…
 
It's worth it to try, though. The fact that most investors will never learn this concept gives those of us who do a huge advantage now and forever.
 
It may come as a shock… You may find it very hard to believe… But it's the key to success for some of the world's most successful investors…
 
Gross domestic product (GDP) growth and stock market returns have just about nothing to do with one another. In fact, you can achieve great investment results without ever thinking about another "macro" issue again.
 
Most people base their investing decisions on economic data, forecasts, and what they hear in the media. They obsess over unemployment numbers… the Producer Price Index… housing numbers… interest rates… factory orders… industrial capacity utilization… the Baltic Dry Index…
 
But the wisest, richest investors in the world say to forget it.
 
Business partners and billionaire investors Warren Buffett and Charlie Munger, for example, have been investing their own and other people's money for more than 50 years. And in all that time, they claim they've never had a single conversation about the economy. They simply don't waste time on it.
 
The vice chairman of investment firm Fidelity, Peter Lynch, is one of America's top money managers. He says if you spend 13 minutes thinking about economic and market forecasts, you've wasted 10 minutes. It's just not worth thinking about.
 
Ben Inker of the money-management firm Grantham, Mayo, and Van Otterloo wrote an excellent paper demonstrating that there's no meaningful correlation between GDP growth and investment returns.
 
In other words, stock market investors who think it's important to worry about where the economy is headed are dead wrong. Every minute you spend worrying about macro data has zero value to you as an investor.
 
It's hard to remember this, though.
 
Everywhere you look, the financial news media are constantly trying to connect the two. They're obsessed with pretending to know what you should buy and sell based on all the economic data pouring out of governments, Wall Street banks, and the talking heads every day. But it's all useless noise. Most of that economic news has little value at all for investors.
 
Instead of worrying about all that, stick to studying great businesses.
 
Companies like Wal-Mart (WMT) and McDonald's (MCD) thrive in recessions as consumers pinch pennies. Consumer-products giant Procter & Gamble (PG) steals market share from its competitors during tough times because it has enough cash to maintain its advertising. In 2009, Berkshire Hathaway (BRK) used its massive cash hoard to make incredible deals with cash-strapped firms that couldn't access credit anymore.
 
For every great business like these, there's somebody who thinks a macro wind will crush it. He has failed to learn one of the greatest lessons for anyone who seeks riches in the stock market: Great businesses are great because they can ride out and even exploit macro problems.
 
Great businesses aren't cyclical. They don't get better or worse with the economy. They stay profitable and continue to gush free cash flow and pay higher dividends every year.
 
If you focus on buying great businesses, you can turn down the volume on the news fretting about the Fed's latest pronouncement.
 
You probably don't believe it… I get reader feedback indicating many folks refuse to stop obsessing about economic and political problems. They just don't get it.
 
What's a fella to do? It's my job to show you the way, to help you become a better investor. But lots of folks don't seem to want to hear it. Instead, they let the market guide their investing decisions time and time again… And they miss out on some great investing opportunities.
 
I'm not saying you should never read another newspaper. By all means, know what's happening in the world. Understand the backdrop in which you're investing. But don't waste a minute trying to figure out what stock to buy based on economic reports and forecasts.
 
Don't let macro fears prevent you from buying great businesses and compounding your wealth with great stocks.
 
Good investing,
 
Dan Ferris
 
Editor's note: Right now, Dan's Extreme Value portfolio contains several World Dominators… companies that are No. 1 or No. 2 in their industry… that gush cash and trade at huge discounts to the value of their assets. Learn more about one of those opportunities – and how to gain access to the rest of the World Dominators – right here.

Source: DailyWealth

The Biggest Lie: 'It Takes Money to Make Money'

Editor's note: We're ending Steve's weeklong series on how to live a more productive life with one of our all-time favorite essays. (If you've missed the previous essays, catch up here, here, here, and here.) In it, he debunks one of the biggest myths about money…
 
"Congrats, Steve, you just made $100,000 today," the lawyer said.
 
I had just bought a property… cheap. The lawyer figured I could sell it for a six-figure profit right away.
 
A friend of mine heard about this deal and said, "Well… it takes money to make money."
 
I was surprised he said that, actually… To me, this little phrase is one of the biggest and most dangerous lies out there… It is a convenient excuse to simply not try to succeed.
 
It's like the old joke:
 
"Lord, I've worked hard all my life, why couldn't you have just let me win the lottery?"
 
The Lord replied, "Why didn't you just buy a ticket?"
 
You have to try. And it doesn't "take money to make money"…
 
In my last real estate deal, one of my business partners put up no money at all… Instead, he's putting in "sweat equity."
 
He's doing most of the work on this project, adding value to our investment. I'm sure he will come out with a six-figure profit when we sell. He could even make a couple hundred thousand dollars! Remember, he put zero money in.
 
So in his case, it didn't "take money to make money."
 
His situation is not unique in real estate… A common deal goes like this: A young guy comes up with an idea to make money. He finds a property he can buy for $100,000, put $20,000 into, and sell for $150,000. The problem is, he has no money. So he finds an old guy with money, and they agree to split the profits 50/50. If the deal goes according to plan, they both walk away with a $15,000 profit.
 
He had the only two things you need: an idea and the willingness to roll up his sleeves and make it happen… He did everything from finding the old guy and convincing him to invest, all the way through to selling the property.
 
In both examples, the young guy didn't even have any risk in the deal.
 
Real estate deals are an easy example. But it doesn't "take money to make money" in other areas, either…
 
A young friend of mine came up with a simple idea. He launched a website that focuses on – get this – forklifts! It's like Hotels.com, only for heavy-duty equipment. If you need to buy or rent heavy equipment, you can locate… through his website… the pieces you need that are closest to you and at the best prices.
 
It's not the sexiest-sounding business… But it's a great idea. It cost him next to nothing to set his website up and call equipment owners to get them onboard.
 
Now he earns a commission from every sale or rental. Life is good. He doesn't work for "the man" anymore, and hasn't for years. And he's making more money than ever.
 
It doesn't take money to make money. You just need two things:
 
1.   A great idea.
2.   To roll up your sleeves and make it happen.
You can't underestimate either of those things. The amount of effort and commitment required will be extraordinary. But that's the way it goes. You're trying to break out of the ordinary. So an ordinary effort won't cut it. You will need to sustain an extraordinary effort.
 
This is hard. But it's how you make money.
 
It is much easier to give up. It is much easier to say, "It takes money to make money," and never try. It is much easier to complain that you'll never win the lottery, without buying a ticket. (You know what I mean.)
 
Don't ever catch yourself saying, "It takes money to make money."
 
It doesn't… It takes a great idea and the willingness to make it happen.
 
Now get to it! You can do it…
 
Good investing,
 
Steve
 

Source: DailyWealth

Seven Secrets From the Smartest Businessman I Know

Editor's note: Steve has spent this week in DailyWealth sharing simple ways to live a more productive life. You've learned about the Sjuggerud Advantagewhy wealthy people choose to keep working… and how to retire with no savings. Today, he discusses how the smartest businessman he knows worked his way up from the bottom…
 
My boss is the smartest guy I know…
 
I'm not just saying it because he signs my paychecks. Seriously, I mean it. He does things most bosses don't do. It has made him a wealthy man. And it has made many of his employees more money than they'd ever dreamed of.
 
I have a unique perspective here… I hired him 13 years ago. We've known each other since we were kids. Now, rightly, he's my boss.
 
He worked his way up from the bottom to the top. It wasn't because of some sort of power-mad ambition. He didn't have a master plan. He simply thought of better ways to do things.
 
What does he do that's different? What does he do that's made him more successful at what he does in a shorter period of time than anyone else? I'll share a few of his secrets with you today…
 
He isn't afraid to be proven wrong. I'm not saying he likes being wrong… He is competitive. But he won't hold stupidly to his original belief once it's been discredited.
 
Ever since we were kids, he has had a unique ability to lead the troops in one direction, full speed ahead… Then if he's proven wrong, he'll do an immediate about-face and lead the charge in the opposite direction.
 
If a business idea isn't working, cut it. Don't waste valuable time trying to make a wrong a right. Surprisingly, most smart people have a hard time with this.
 
In a business deal, he does an outstanding job explaining what's in it for the other guy. In short, he doesn't talk about himself, his wants, and his needs… at all. He talks about the benefits for the guy on the other side of the table.
 
Like everyone, the guy on the other side of the table is selfish. When you get down to it, he really doesn't care what's in it for you. But if you can convince him you'll make him more successful at what he does, you'll get your deal.
 
He praises and constructively criticizes people equally. If you're screwing up, my boss will call you out. So when the praise comes from him, everyone knows it's legitimate. It's valuable.
 
If you're the boss, you know constant praise without constructive criticism is useless. (Unfortunately, that's my management style. I'm too nice.)
 
He's friendly with "rivals." He even gives away most of our secrets. I didn't understand this one at first. I'm sure our competitors still don't…
 
Why would we happily give away our secrets? Well, after spending time with us, our competitors often end up wanting to partner. That grows their business, which grows ours… And if a rival's business folds, the employees know us and try to get a job. We end up with the best talent.
 
You might not like the idea of inviting your rivals over to share your secrets. But it makes great sense for both sides.
 
(My boss says, "I don't mind giving our secrets away… They'll never execute them like we can." That is the biggest insight of all.)
 
He hires people smarter than him. Wait, didn't I say he's the smartest guy I know? My friend is brilliant, yes. But he's not that organized. So he hired a man "to run the business." And when he decides to push our business into new areas, he hires the best guys he can find.
 
He pays his employees well – through pay incentives. He has done a fantastic job tying his employees' pay to the jobs he needs them to do.
 
In my own case, he has always structured my pay in a way that should increase my income and push me to put my efforts behind the best opportunity he sees.
 
Last (and most important)… it's not about the money. The money is simply one "scoreboard" of his success. A lot of it is about fun… about coming up with a business idea and seeing if it works.
 
If you took all his money away tomorrow and told him he had to move to a different country, pick a place where he didn't speak the language, and find a different industry, he would make all that money back again quickly. He would use all his secrets… like the handful I outlined above. No question about it.
 
Some of these secrets might sound backward at first. But if one sounds "totally wrongheaded," think long and hard about it… My boss is the smartest guy I know… And I've seen him do these things over and over again.
 
You should try to do the same.
 
Good investing,
 
Steve
 

Source: DailyWealth

How to Retire With No Savings

Editor's note: This week, Steve has shared some of his best advice for living a better life. So far, he has covered the Sjuggerud Advantage and why the ultra-wealthy continue to work long after they need to. Today, he explains how to retire without worrying about money…
 
"Do you have any savings?" I asked my friend Tony.
 
"Not really, no," he answered.
 
Tony is in his 50s. And he didn't sound worried in the least. How is that possible?
 
I was surprised Tony was so relaxed…
 
My wife, for example, couldn't consider living like that. My wife is hardwired to save instead of spend. She really doesn't spend. And even though we have saved and invested well… she STILL worries.
 
When Tony quit his job, he sold off a good deal of his possessions to finance living his dream.
 
Tony now builds extremely fine guitars. He has earned critical acclaim. He's doing what he always wanted to do. And he intends to do it for the rest of his life.
 
I visited Tony in Indiana so he could help me build my own guitar…
 
"This is my retirement," Tony said, pointing his arms around his shop.
 
"The Larson Brothers built guitars until they died in their 70s," he reminded me. "And John D'Angelico and Jimmy D'Aquisto built guitars until they died, too." Tony intends to do like these legends did.
 
He had a "good" job as a computer graphic artist. And before that, he worked as a cabinetmaker. But making cabinets or pushing a computer mouse were not what he wanted to do with his life.
 
Guitars were always his passion. He'd been building and tinkering with them since the 1980s. So he took the leap. If it didn't work, he figured, he could sell off the contents of his guitar workshop and return to being a graphic artist.
 
I am not as bold as Tony. But I do admire him for following his passion. He took what must have seemed like a huge risk. But now he's able to say something most people will never be able to say… He's living his dream, doing what he wants to in retirement.
 
Tony has "retired" with basically no savings. And yet he is happy, because he has set himself up to do what he loves for the rest of his life.
 
Is following your dream worth a shot? Can you turn that into a way to make money? If it doesn't work, do you have something to fall back on? You only live once… Think about it.
 
Good investing,
 

Steve

 

Source: DailyWealth

If You're So Rich, Why Do You Still Work?

Editor's note: In the first installment of Steve's weeklong series on how to live a more productive life, he discussed the importance of waking up early and getting to work. Today, he finds out why the super-wealthy continue to work…
 
I have a few friends who have "silly" wealth – more wealth than they could ever need or spend.
 
These guys are at retirement age or older… But for some reason, they work harder than just about anyone else I know…
 
Why are they working so hard? Isn't the dream to "bank" enough money so you don't have to work?
 
I called a few of these friends and asked why. The answers were interesting…
 
One wealthy friend started out with this story to explain it…
 
I had dinner with an extremely wealthy guy last week who's 71. He just retired to the desert in Palm Springs, supposedly to play some golf. I asked him how it was going…
 

"Retirement is horrible," he told me. "I do NOT enjoy sitting in the desert doing nothing. I don't have a clue what I'm doing out here. I don't think I can do this. I don't need the money… But I think I'll have to go back to work."

My wealthy friend described the same feeling… "I love what I do," my friend told me. "I don't want to stop."
 
I asked my friends specifically what it is that keeps them working so hard…
 
One said, "Nothing in life beats the thrill of coming up with a big idea and making it a reality."
 
Another said, "I like mentoring younger people… passing on what I do and seeing them succeed at it."
 
A few more talked about the thrill of a great opportunity and the chance to increase their wealth. "I know there's no economic reason for me to work," one friend told me… "But that doesn't mean I don't like to get paid."
 
I then asked these friends if they had any advice to help people join them in the "big leagues"…
 
First, they explained, opportunity doesn't knock. You have to create it. And when opportunity is close by, you have to drop everything and pursue it. The more you make those sacrifices, the better your chances of finding financial success.
 
Second, if you KNOW MORE than everyone in the room, nobody can take advantage of you… So read a lot. Do more homework than anyone else at the table.
 
Finally, one friend told me, "Work to the task, not to the reward." Don't wash a car for the $5 payment, for example… Wash a car because that's the task at hand – and do a fantastic job. Then you'll get noticed for your work and have a chance to move up in the world.
 
So why do these "silly rich" guys still work? And how can you get there, too?
 
They work because they say it keeps them "alive"…
 
"If I stop working, I'll die," one of them told me. They believe that finding success is all about recognizing, creating, and seizing opportunities.
 
You make your own luck, they say, so create opportunities for yourself as best as you can.
 
If you do that enough times in life, you'll know you're giving yourself a legitimate shot at success… at having the kind of wealth that means you're working because you love to, like my friends, not just working because you have to.
 
Good investing,
 
Steve
 

Source: DailyWealth

How to Be Dramatically More Productive, Successful, and Wealthy

Editor's note: This week, we're sharing a series of classic essays from DailyWealth editor Steve Sjuggerud. Every day, Steve will share his insights on how to live a better, healthier, and happier life. Today, he shares something he calls the Sjuggerud Advantage…
 
A few years ago, I was out to dinner with a couple of the most successful guys I know – and they were giving me a hard time.
 
They were ribbing me about what Stansberry Research founder Porter Stansberry calls the "Sjuggerud Advantage."
 
Hey, I can take it… The Sjuggerud Advantage, as I'll explain, is a major secret to my life's success.
 
The nice part is that anyone can do it… The Sjuggerud Advantage requires no special skills. Let me tell the story…
 
We were at the Prime 112 restaurant in Miami Beach. It's a hip restaurant today, no doubt. As we were leaving, rap star Rick Ross was stepping out of his Rolls-Royce and walking in.
 
Dinner was great… But my definition of a great dinner is "good times with good friends." I don't need a fancy bottle of wine or an unpronounceable delicacy to enjoy a meal.
 
Around 9:45 p.m., I started checking my watch… And Porter and the other guys at dinner gave me a bit of a hard time…
 
You see, I don't drink. I don't normally go out for fancy, three-hour meals. And most important, I go to bed early and get up early.
 
Porter was giving me a hard time about missing out on some of life's finer things. But I know these are parts of what Porter calls "the Sjuggerud Advantage."
 
I've heard Porter tell others: "You don't see the benefits of the Sjuggerud Advantage across a day or two. But over time, it adds up. The guy gets a lot done."
 
It might sound silly. But I think the most important part of the Sjuggerud Advantage is simply getting out of bed… and doing it an hour earlier than anyone else…
 
"Getting to work early is such a common virtue of successful people that I'm tempted to call it the single most important thing you can do to change your life," my friend Mark Ford wrote in his book Automatic Wealth. Mark is a self-made multimillionaire.
 
And I agree with him…
 
I get more done in the first two hours of my morning than I do in any other four-hour stretch during the day. More important, I get my BEST work done then – with no interruptions and no distractions, just focus.
 
I probably take it too far… I've come to like driving the streets when they're empty, before the sun has come up. I think it's partly because I know I'm going to get A LOT done.
 
And I've found that once it gets past 10 or 10:30 at night, I'm not very productive at all. I'm tired, I'm sidetracked thinking about the day's problems, and I'm better off calling it a day and starting up fresh in the morning.
 
While Porter would likely tell you there's more to it, I think simply getting up early is the big secret of the Sjuggerud Advantage. It's the big secret to getting a lot done.
 
It requires no special skills to get up a half-hour or an hour earlier than you usually do. And most of the extremely successful people I know get their days started very early. It's a simple thing, but it could have a dramatic effect over time.
 
As Porter said, you might not see the benefits after a day or two… But they add up. You get a lot more done early in the morning… And ultimately, you become more successful than the next guy.
 
It costs you nothing, and it could make you dramatically more productive, successful, and wealthy.
 
It has certainly worked for me. I think it's the biggest part of the Sjuggerud Advantage.
 
It's so simple. But most people don't do it. Based on what I've described, though, isn't it at least worth trying?
 
Good investing,
 
Steve
 

Source: DailyWealth

Improve Your Portfolio With One Simple Secret

 
You won't believe how many things in life can be explained with a simple curve…
 
I first learned about this secret in medical school.
 
Getting just the right amount of many key aspects of life – avoiding too much or too little – will help you lead a better, healthier life.
 
You can use this simple chart to help figure out how to reap the most benefits on things like how much sleep you should get, alcohol consumption, salt intake, exercise, and sunlight. It can even help you figure out the secret to happiness…
 
All of these tend to fall on a U-shaped curve… You want to get right in the middle to reap the most benefits…
 
Research shows that people's overall happiness falls into a U-shaped curve based on age. That midlife crisis you went through actually has some scientific backing.
 
But measuring happiness is difficult.
 
Happiness depends on key factors like physical health, relationships, and job satisfaction.
 
And your happiness significantly influences your health and wealth.
 
In 2007, researchers published a paper reviewing data from 2,000 households in the Netherlands. What they saw was that happier people made better investments. They were more willing to save their money instead of spend it on material goods. And when they invested, they were more willing to take healthy risks because they anticipated better outcomes.
 
Overall, these folks showed that happiness and optimism made them better able to look forward to a positive future. That meant they anticipated better returns and, consequently, took more risks.
 
The statistics on why this happens and how to measure happiness get a bit complicated (enough that we could write an entire issue on it), but if you'd like to read more, start with this paper from the Journal of Financial and Quantitative Analysis and this one from the Deakin University School of Accounting.
 
The reason behind this relationship between happiness and investment ability is that happier people can better adjust to losses because they don't give in to their amygdala…
 
The amygdala is the tiny region of your brain responsible for fear. It's the driving force for your primitive flight-or-fight response. Any kind of threat, including losing money, triggers a rush of emotions, including fear and anxiety.
 
The area of the brain that keeps the amygdala in line is the prefrontal cortex, or PFC. The PFC sits right at the top of your brain near your forehead. It's the center of all your planning, decision-making, and behavior control.
 
As we age and gain experience, our PFC learns to easily overpower the amygdala. This is one of the reasons why older folks are happier than those at middle age on that U-shaped curve.
 
Similarly, several articles have shown that day traders with positive attitudes see better performance in their portfolios over time. In studies by researchers for the National Bureau of Economic Research, traders with consistently better, more stable moods had overall better portfolio performances. Because their PFCs had more activity, they were able to fight the erratic fears of their amygdalas, meaning big wins or losses did not sway their judgment.
 
Further studies have shown that practicing ways to actively improve your mood and fight stress directly helps calm the signals in your amygdala.
 
Here are three things you can do to be happier…
 
1. Meditate. I love meditation and its powerful effects. Buddhist monks who practice meditation daily have much higher levels of activity in their PFCs. Even people beginning meditation see decreased anxiety. In a 2011 study from the brain research journal NeuroImage, beginning meditators showed reduced activity levels in their amygdalas when faced with fear-inducing images.
 
2. Unplug. Penn State University sociologist Glenn Firebaugh researched the resulting depression we have when we see what we have compared with our friends and neighbors, something called the "comparison complex."
 
Our obsession with the digital age feeds into this negative thinking. Not only are we flooded by television shows and commercials that remind us to buy more to be happier, but social media sites like Facebook let us see at a glance how much better off our neighbors are (or at least appear to be). Falling into the trap of not feeling "good enough" is easy.
 
So take some time each week to unplug. Try getting outside, for instance, and leaving the technology in the house. If you want an easy activity to do, garden.
 
3. Exercise. Exercise does wonders for happiness. When you work your body, you produce tons of feel-good chemicals, including serotonin. About two and a half hours of exercise per week offers the peak benefit. That's less than 22 minutes of activity a day.
 
I also enjoy taking walks during the day in the sun. Your body naturally converts sunlight to vitamin D, which helps lift your mood as well.
 
Taking care of your happiness should be as much of a priority as taking care of your portfolio and your body. Make these tips part of your lifestyle and enjoy the benefits to your wealth and health.
 
Here's to our health, wealth, and a great retirement,
 
Dr. David Eifrig
 
Editor's note: Doc's free Retirement Millionaire Daily e-letter is PACKED with tips on how to live a healthier and wealthier life. This week, he has shown readers a strategy he calls "thrift arbitrage," which can put cash in your pocket right away… and the dangers in taking a popular supplement. To start receiving Retirement Millionaire Daily straight to your inbox, click here.

Source: DailyWealth