Why don't people invest in TQQQ?
Re: Investing 100% into TQQQ
The triple leverage can significantly magnify losses, making TQQQ a high-risk, high-reward option. The compounding of daily returns can also lead to tracking error, causing its performance to deviate from three times the index's returns over time.
Option trading in TQQQ carries a high degree of risk. This is because options are leveraged products, which means that the return on investment can be much higher than the amount invested. However, this also means that the potential for losses is also much higher than with other investment products.
ProShares UltraPro QQQ has a high total risk index of 4.54 because of its standard deviation of 67.6%.
QQQ - Performance Comparison. In the year-to-date period, TQQQ achieves a 13.93% return, which is significantly higher than QQQ's 5.96% return. Over the past 10 years, TQQQ has outperformed QQQ with an annualized return of 35.70%, while QQQ has yielded a comparatively lower 17.98% annualized return.
However, because of the structure of leveraged ETFs, the recommended holding period is from intraday to only a few days. Moreover, if the index drops, the TQQQ will lose 3x as much as the QQQ.
Re: Investing 100% into TQQQ
Don't hold it long term for anything more than your “play money”, which for those that even allow for “play money” in their IPS is no more than 5%. The biggest risk is a sideways choppy market. You will get killed from the volatility in that environment.
Theoretically, if the market were to fall by more than 33.3% in a single day, TQQQ 's Net Asset Value (NAV) would fall to zero, and the fund would be dissolved.
QQQ appears to be the single best long-term investment option for investors seeking total returns due to its ability to expose holders to top U.S. companies on an ongoing basis. The Nasdaq 100 has consistently outperformed the S&P 500 in terms of total returns, making it a favorable choice for long-term investors.
TQQQ is typically used by day traders because it was built for short-holding periods. TQQQ's objective is to deliver triple the daily returns of the. The top sectors of the index include Information Technology, Communication Services, Consumer Discretionary.
Do people invest in TQQQ?
TQQQ has become extremely popular in recent years due to the bull run from large cap tech, which comprises a huge percentage of the fund. There's even an entire community on Reddit dedicated to this single fund.
ProShares UltraPro QQQ (TQQQ) is also an ETF that is simply a leveraged version of QQQ by 3X. Meaning that if QQQ is up 1%, TQQQ would theoretically be up 3%, and the same ratio would be applied if QQQ falls 1%. This is accomplished by utilizing derivatives and leveraging to provide the 3X return of QQQ.
Pay attention to the impact of volatility decay！ When investing in leveraged ETFs like TQQQ, investors need to be aware of the impact of volatility decay. For example, in a volatile market, if the Nasdaq 100 Index drops by 10% in a day, TQQQ will drop by approximately 30%.
Given the current short-term trend, the ETF is expected to rise 29.36% during the next 3 months and, with a 90% probability hold a price between $73.39 and $83.56 at the end of this 3-month period.
| ETF (ticker) | Leverage Factor |
|---|---|
| ProShares UltraPro QQQ (TQQQ) | 3x |
| Direxion Daily Semiconductor Bull 3X Shares (SOXL) | 3x |
| ProShares Ultra S&P 500 (SSO) | 2x |
| Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF) | 3x |
TQQQ Dividend Information
TQQQ has a dividend yield of 1.11% and paid $0.64 per share in the past year. The dividend is paid every six months and the last ex-dividend date was Dec 20, 2023.
Personally I keep about 2% of my portfolio in TQQQ for the long term. I do believe that it will outperform over time so I like to boost some tech exposure with it. But I don't want to risk too much capital on an instrument that will reliably lose 60% every so often. If QQQ ever drops 33% in a day TQQQ goes to 0.
Investors should note that TQQQ's leverage resets on a daily basis, which results in compounding of returns when held for multiple periods.
Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.
Can you buy and hold Tqqq? Although you can invest in the TQQQ in the long-term, market analysts advise against it, stating that the TQQQ is a highly volatile leveraged ETF.
Why not invest in 3x leveraged ETF?
A leveraged ETF uses derivative contracts to magnify the daily gains of an index or benchmark. These funds can offer high returns, but they also come with high risk and expenses. Funds that offer 3x leverage are particularly risky because they require higher leverage to achieve their returns.
In contrast, the riskiest ETF in the Morningstar database, ProShares Ultra VIX Short-term Futures Fund (UVXY), has a three-year standard deviation of 132.9. The fund, of course, doesn't invest in stocks. It invests in volatility itself, as measured by the so-called Fear Index: The short-term CBOE VIX index.
Because of the volatility associated with leveraged ETFs, it is inadvisable to hold them after market close. Otherwise, you may see the value of your investment gap down 5% to 10% when the market reopens.
ProShares UltraPro QQQ had a return of 13.93% year-to-date (YTD) and 135.53% in the last 12 months. Over the past 10 years, ProShares UltraPro QQQ had an annualized return of 35.70%, outperforming the S&P 500 benchmark which had an annualized return of 10.59%.
The Strategy Explained
The strategy under discussion is astonishingly simple — buy and hold TQQQ. Unlike other complicated strategies that involve a mix of buying, selling, and shorting various assets, this strategy involves merely purchasing shares of TQQQ and holding onto them for an extended period.
