TQQQ an OK investment over the long run? For a 401k

[Snuskpelle]

It shouldn't go to zero (ie a 33% one day market drop) bc of circuit breakers etc.

If you backtest there have been 99% drawdowns. It eventually went on to make all time highs (ie >100X return), but I can't imagine very many people managing to hold through a 99% drop lol.

I know it can't mathematically go to zero [some kind of leverage Black swan aside], but practically speaking 100% is a good approximation for the kind of losses that can be incurred. For most people a 90% loss and a 100% loss are functionally the same in terms of severity. Exception if you're a billionare or fake one like SBF in which case you might be fine if you lose 99% of your fortune.

 

[deaddog]

but I can't imagine very many people managing to hold through a 99% drop lol.

Investors do all the time. They watch it drop, maybe average down and finally get to a point where it isn't worth selling, so they just hold until they are forced out by the company being delisted or by the company being bought out at a price way lower than they paid.

 

[Nine_Ender]

Investors do all the time. They watch it drop, maybe average down and finally get to a point where it isn't worth selling, so they just hold until they are forced out by the company being delisted or by the company being bought out at a price way lower than they paid.

Those aren't investors they are speculators. Seems to be a go to position of many day traders to bitch about "investors". It's not "investors" going broke pursuing their passion for gambling I mean day trading.

 

[deaddog]

Those aren't investors they are speculators. Seems to be a go to position of many day traders to bitch about "investors". It's not "investors" going broke pursuing their passion for gambling I mean day trading.

Semantics!!
At what point did an investor in Nortel become a speculator?

 

[Nine_Ender]

Semantics!!
At what point did an investor in Nortel become a speculator?

An investor would hold a portfolio with no more then 5% of it in Nortel. Now if they also held 5% in TD Bank from 1995 to 2019 ( last stat I saw ) it went up 2500% with reinvested dividends. In fact, many investors in Nortel also held TD Bank. A value investor on the other hand would never have bought Nortel and would certainly have considered TD Bank. Nortel rarely turned a decent profit. If you passively invested in Nortel and TD Bank by holding the TSX index or a Cdn mutual fund you did fine.

Now an active trader likely would have been obsessed trying to time moves in Nortel and totally disinterested in a plodding stock like TD Bank. However, in many cases, it would have been better to just take a position and ignore it.

 

[deaddog]

An investor would hold a portfolio with no more then 5% of it in Nortel. Now if they also held 5% in TD Bank from 1995 to 2019 ( last stat I saw ) it went up 2500% with reinvested dividends. In fact, many investors in Nortel also held TD Bank. A value investor on the other hand would never have bought Nortel and would certainly have considered TD Bank. Nortel rarely turned a decent profit. If you passively invested in Nortel and TD Bank by holding the TSX index or a Cdn mutual fund you did fine.

Now an active trader likely would have been obsessed trying to time moves in Nortel and totally disinterested in a plodding stock like TD Bank. However, in many cases, it would have been better to just take a position and ignore it.

I bought Nortel or rather Northern Telecom as an investor back when it was a stoggy old telephone manufacturer and paid a dividend. A drip program through the Canadian Shareowners program. Watched it rise and fall, listened to the pundits who swore up and down that it was a solid company and would recover, and finally got out just above break even. I left a bundle on the table. It changed me from an investor to a speculator.

I also speculate in the banks. Out in June and have been accumulating Aug & Sept.

Why would an investor limit themselves to a 5% holding? As a speculator I feel that 7 or 8 stocks is more than enough.

 

[Actuarial_Fun]

As you say, leveraged ETFs will be eroded through time due to volatility. You also have to pay to borrow at such leverage, just like with futures. You have to pay interest + expenses (very small here) + volatility erosion. I would definitely utilize QQQ, not TQQQ. Is there a reason you needed more capital in your account? If you don't have active trading systems and do passive investing, I think QQQ is a much better choice.

On the upside, if you just put 3x your portfolio in ndx short futures at the start of the year, you would have fully blown up your account. Since you have a 3x ETF, that compounds daily, the lowest level of TQQQ was not an 100% loss. So I don't agree with someone else's comment regarding you could lose a lot. You would have lost less than 3x leverage in NDX or QQQ by buying and holding TQQQ all year. Regardless, the benefits of QQQ definitley outweigh the cons (verse TQQQ) for buy and hold long term investing.

For a long-term investment, I think QQQ is a good mix with say SPY, IWM, IYR, EEM, maybe EFA, maybe XLU, maybe some metals. The person in charge of the yale endowment has a lot of comments around portfolio diversification. There are several articles online about how to get a bit more diversification, but I think QQQ is a good addition, in general.

 

[SimpleMeLike]

Any thoughts on holding this in the long run? In a 401k. I realize these leveraged ETFs are meant for short-term trading, because their price tends to "decay" (not the right technical term, I am sure) over time, but comparing it to the QQQs, it doesn't seem to decay all that much, and of course you get massive leverage. Any reason I should not put a significant part of my retirement portfolio into this? Call it 20% or 25% or something.

Hello SoyUnGanador,

I am long and strong TQQQ since it's 52 week low price this year.

I will dollar cost average if it goes lower.

I will hold for the next X to XX years and make millions. I will sell when my account shows $1,000,000

 

[TrAndy2022]

TQQQ can have a longer time span with lower returns from here, because in the decade from 2010 to 2020 it had 50% p.a., but if you look back 50 years from 1970 on and recalculate TQQQ returns, then you only get about 12% p.a., so it is more likely that it will see a phase with lower returns to come back to its longterm average of 12% gain annually.

 

[deaddog]

I will sell when my account shows $1,000,000

Whatcha gonna do with the money?