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

[SimpleMeLike]

Whatcha gonna do with the money?

Good Morning deaddog,

Great question:

1. Pay off debt
2. Retire from work
3. Mentor young people.
4. Donate to dog shelter
5. Volunteer to take care of homeless dogs.
6. Buy bigger property to take care of about 5 homeless dogs on my property.
7. Fix up my mom house.

Basically, to retire from work early to give back and take care of people and dogs I love.

 

[deaddog]

Good Morning deaddog,

Great question:

1. Pay off debt
2. Retire from work
3. Mentor young people.
4. Donate to dog shelter
5. Volunteer to take care of homeless dogs.
6. Buy bigger property to take care of about 5 homeless dogs on my property.
7. Fix up my mom house.

Basically, to retire from work early to give back and take care of people and dogs I love.

Don't know what it costs to fund the kind of lifestyle you want but are you sure 1 million is enough?

 

[SoyUnGanador]

Thanks everyone! To those who are saying it will go to zero (or something close to it), and I'll basically lose everything, I realize that if I were to put 100% of my money in it. But in my first post I specified that it would be something less than that, like 20% or 25% or something.

So, let's say I put 20% in the TQQQ. Then 80% call it in a REIT fund (so the TQQQ is the risky stuff, the REIT fund is the safer stuff, probably a bit less volatility than the average non-REIT stock). That would put me at (effectively) about 60% in QQQs, and still 80% in the REIT, so I would still only be 100% invested, but would functionally own about 140% of my portfolio, but no margin interest. 140% over the long haul would almost certainly kick the shit out of any regular portfolio you could come up with.

And, for that period where TQQQ goes to (almost) zero, since I only have 20% of my account in the TQQQs, my account is only down 20% on that position (and whatever my REITS would drop in value as well of course). So the account would of course would be more volatile, but not a risk that your account would go to zero (or close to it).

But it gets even better (I think). Since this is in my 401k, I would be putting money in over time (as amounts are deposited from my work pay). Given the huge volatility of the TQQQs, the DCA would almost certainly pump the returns considerably (the more the volatility of the underlying, the more DCA generally benefits).

So I think this could be HUGE.

I need to run some testing on this.

 

[SoyUnGanador]

Well shit. In my testing (non-DCA), just holding QQQs outperforms holding 20% TQQQs and 80% IYR (REIT ETF) since the inception of the TQQQs in 2010. The QQQs perform slightly better overall (IRR of 16.9%) than the mixed TQQQs/IYRs (16.66%), and the max drawdown on the QQQs is 35.12%, compared to 48% (wow!) for the mix TQQQs/IYRs.

Damn, that sound right? Surprises me a little bit.

 

[Nine_Ender]

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.

It is important to note that you were a relatively unsuccessful investor and the clues to why are in your posts. It's not good to totally dismiss what didn't work for you that worked well for millions of Canadians. Someone who wasn't heavily weighted IT in year 2000 had a year to get out with almost no loss ( SPX was down something like 5% that year ). The truth of the matter is people who are impatient with their progress, overtrade, and push for high performance metrics often aren't great investors.

 

[SoyUnGanador]

I swapped out the IYR REIT ETF for VPU (utility ETF). Got a little bit better results, but still not as good overall as just holding the QQQs.

This is very perplexing to me.

 

[deaddog]

Someone who wasn't heavily weighted IT in year 2000 had a year to get out with almost no loss ( SPX was down something like 5% that year ).

I agree and saw that in hindsight. Of the millions of Canadians, I wonder how many actually got out? But we learn from our mistakes. I came up with a strategy that did get me out of the market during the downturns and has me fully invested during the up trends.
Right now, I'm over 50% in cash with positions in finance & cyclicals. Sold my energy in early June. (Probably to early)

 

[TrAndy2022]

I swapped out the IYR REIT ETF for VPU (utility ETF). Got a little bit better results, but still not as good overall as just holding the QQQs.

This is very perplexing to me.

It is not about the backtests, it is more what you think the future will likely be. Or you need to backtest 50 years back or so to get a better understanding. But then again, future can be different.

 

[Nine_Ender]

I agree and saw that in hindsight. Of the millions of Canadians, I wonder how many actually got out? But we learn from our mistakes. I came up with a strategy that did get me out of the market during the downturns and has me fully invested during the up trends.
Right now, I'm over 50% in cash with positions in finance & cyclicals. Sold my energy in early June. (Probably to early)

True investors who aren't within 5 years of needing the money ( and often 2-3 years ) don't actually need to get out really. If you throw in weighted averaging or even better discretionary periodic buying/selling ( what I did from 2009-2019 ) you can do well with almost no time investment. I don't advocate for pure buy and hold but it works for less experienced people who may be prone to panic sell on corrections/crashes or fail to buy bargain stocks ever.

The #1 mistake people made in 2008/2009 was not holding onto investments. It was selling at or near the bottom. A lot of people panic sold. Less people made the same mistake in March 2020 imo. Trading is a different game. What I see from you obviously works for you but the tight stops wouldn't work for me in what I trade since mid-2020.

 

[deaddog]

True investors who aren't within 5 years of needing the money ( and often 2-3 years ) don't actually need to get out really. If you throw in weighted averaging or even better discretionary periodic buying/selling ( what I did from 2009-2019 ) you can do well with almost no time investment. I don't advocate for pure buy and hold but it works for less experienced people who may be prone to panic sell on corrections/crashes or fail to buy bargain stocks ever.

The #1 mistake people made in 2008/2009 was not holding onto investments. It was selling at or near the bottom. A lot of people panic sold. Less people made the same mistake in March 2020 imo. Trading is a different game. What I see from you obviously works for you but the tight stops wouldn't work for me in what I trade since mid-2020.

Gotta do what works for you. I'm happy with being a speculator.