TQQQ an OK investment over the long run? For a 401k
- Thread starter SoyUnGanador
- Start date
So, I guess may I should not be surprised - I can get a much greater return overall holding the TQQQs, but the return/drawdown ratio is worse, reflecting the "decay" or whatever it is of the leveraged TQQQ product.
So I did some more testing. QQQ versus holding roughly 1/3 of your money in TQQQ, the rest just sits in cash (earning nothing).
From the inception of the TQQQs in 2010 (as far back as I could test), if I had started with $100,000 in QQQ, always 100% invested, I would have had an IRR of 16.904% and a max drawdown percentage of 35.12%.
So I did a little trial/error, and to achieve that same 16.904% IRR holding TQQQs, I would have had to have had 36.367% of my account in TQQQs at all times. With that, getting that same IRR, my max drawdown would have been 39.22%. So worse than QQQ, but not like end of world worse. Conversely, I could have reduced my TQQQ holdings to set the max DD compared to the QQQs the same, but them my overall return would be worse - heck I went ahead and did that now and, setting the amount invested so that the max DD is the same, my TQQQ return would have been a 15.045% IRR. So wait, 15.045% return compared to 16.904% for the QQQs over that same period (beginning in 2010) that IS pretty significant.
But then I started thinking, well if TQQQ have the "drag" on them, what if you short the SQQQs (Ken's fave lol)? They should have the same "drag" on them, so that should work bigly in your favor if you short them (putting aside the interest rate you have to pay when you short them, which would kill any advantage, but putting that aside to just test the theory).
But to get that same 16.904% IRR (that I got with the QQQs), I would have to have 33.189% of my account invested, and my max drawdown would have been 35.13% - .01% WORSE than holding the QQQs!
So shorting the SQQQs would have really done you no good as compared to just holding the QQQs (assuming you were shooting for minimum drawdown to return ratio), somehow that "drag" would not have worked in your favor almost at all (and you would have been much worse off with the short interest).
That seems WEIRD to me that the SQQQs (short side) would not have done better.
Its like the QQQs are some weird, awesome product - its damned near impossible to beat them from a risk reward ratio.
What SOMEONE needs is to find a security that you can hold that tends to move at least some inversely of (or at least independently of) the QQQs, but nonetheless still tends to go up over time. That way (potentially) you could hold those some of your portfolio in those leveraged TQQQs for their huge upside, but then (probably) most of it in this other security that would provide you even more upside but possibly take away (or at least not lend to) a bit of those massive drawdowns.
Any suggestions?
So I did some more testing. QQQ versus holding roughly 1/3 of your money in TQQQ, the rest just sits in cash (earning nothing).
From the inception of the TQQQs in 2010 (as far back as I could test), if I had started with $100,000 in QQQ, always 100% invested, I would have had an IRR of 16.904% and a max drawdown percentage of 35.12%.
So I did a little trial/error, and to achieve that same 16.904% IRR holding TQQQs, I would have had to have had 36.367% of my account in TQQQs at all times. With that, getting that same IRR, my max drawdown would have been 39.22%. So worse than QQQ, but not like end of world worse. Conversely, I could have reduced my TQQQ holdings to set the max DD compared to the QQQs the same, but them my overall return would be worse - heck I went ahead and did that now and, setting the amount invested so that the max DD is the same, my TQQQ return would have been a 15.045% IRR. So wait, 15.045% return compared to 16.904% for the QQQs over that same period (beginning in 2010) that IS pretty significant.
But then I started thinking, well if TQQQ have the "drag" on them, what if you short the SQQQs (Ken's fave lol)? They should have the same "drag" on them, so that should work bigly in your favor if you short them (putting aside the interest rate you have to pay when you short them, which would kill any advantage, but putting that aside to just test the theory).
But to get that same 16.904% IRR (that I got with the QQQs), I would have to have 33.189% of my account invested, and my max drawdown would have been 35.13% - .01% WORSE than holding the QQQs!
So shorting the SQQQs would have really done you no good as compared to just holding the QQQs (assuming you were shooting for minimum drawdown to return ratio), somehow that "drag" would not have worked in your favor almost at all (and you would have been much worse off with the short interest).
That seems WEIRD to me that the SQQQs (short side) would not have done better.
Its like the QQQs are some weird, awesome product - its damned near impossible to beat them from a risk reward ratio.
What SOMEONE needs is to find a security that you can hold that tends to move at least some inversely of (or at least independently of) the QQQs, but nonetheless still tends to go up over time. That way (potentially) you could hold those some of your portfolio in those leveraged TQQQs for their huge upside, but then (probably) most of it in this other security that would provide you even more upside but possibly take away (or at least not lend to) a bit of those massive drawdowns.
Any suggestions?
You absolutely are paying interest with TQQQ. If you are borrowing 2/3 of the money in an investment, you are absolutely paying interest on it, even if it's no direct margin interest, it is in the price of TQQQ (just like with futures). Plus, you have a downside of volatility eroding your gains. I don't understand why you would buy a leveraged ETF for the long haul. I don't think it makes a ton of sense.
I do think QQQ is a nice mix in a portfolio, as is IYR, but I would recommend much, much more diversification for a long-term portfolio, and I'd stay away from leveraged ETFs personally.
Hello SoyUnGanador,
Buy TQQQ today and hold for +5 years and sell for profit. You will make more money then buying and holong QQQ for +5 years.
Pretty simple and easy investment.
Kind of a no brainer honestly. Haven't seen an investment this easy since me buying CNO and AIG in March 2009.
Lucky my ass had a friend who worked at AIG that gave me a tip.
There is really nothing else to think about.
When I friend told me about TQQQ, took me 10 minutes to invest. Glad I'm in baby.
Buy low, sell high
This is probably the main reason why TQQQ may not be a great idea. 2010 to 2020 was an insane bull run for tech stocks. 2020 to 2030 may be another lost decade, similar to 2000 to 2010, without much upside.
With that said, it's still a decent play IMO. 75% off its ATH. It could feasibly drop to ~$5 though.
%%
THAT, amen \
+ QQQ cash out performs TQQQ when the year % is low single digits.
Sure don't regret some short term trades on TQQQ or all the printed monthly charts on TQQQ.
Looking @older brokerage page.QQQ/QLD did better than tqqq;
i see i was not even in tqqq then. TECL profits,about equal to tqqq.
But that was qqq + related trade, av price $340.15/above 200dma.
Frankly, have to ask yourself, with a tqqq 00.9/+% managment fee, why dont they promote it as a ''long term investment''\LOL
2 reasons or more; they + SEC are more honest than to rubberstamp ''long term investment error.''
Heavy IT exposure is highly questionable in this market. For the last year, QQQ is down something like 24% and the TSX is break even ( -0.33% ). Why would you take a leveraged position on one of the worst performing sectors ? Put it this way, TQQQ you'd have dropped 64% of your money hoping for a rebound and just blindly owning the TSX you'd have made money if you owned it in US$. Of course conditions can change but ... . If I were buying IT now, and I am not, I'd be putting my money in 4 or 5 high quality IT firms with proven profitability and growth ( eg GOOG ). I may assess this kind of move in the summer especially if they get cheaper on recession fears. I may investigate semiconductor and biotech.
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Because the whole idea is buy low, sell high? QQQs are down nearly 29% from their high, and that high was over a year ago. At SOME point they are a buy. Down 29% from a year ago I bet, if you looked back in time at similar drawdowns, would historically be a pretty darned good time to switch from safer stuff to the QQQs, that sort of thing. Could be wrong (especially for the 2000ish tech crash), but I bet, overall, that is the case.
At what point would you put money in them, full stop, Nine_Ender? Or at least as full stop as you'd ever get into them?
Thanks!
Again, note that during a year when most on here said the sky was falling on markets, an investment in the TSX broke even and if in US$ made roughly 5-10%. What makes you think IT which is a cyclical sector in a bear market will outperform other cyclical sectors that are still in a bull market ( for now ) ?There is no real reason yet to feel bullish about IT stocks. Massive layoffs are occurring which could lead to a very favorable earnings picture in 2-3 quarters if the recession is mild like I think it will be. But there are a lot of ifs involved and I don't trust the general public not to panic sell one more time in 2023 on their US positions. Another 20-30% drop would not shock me.
I do think the semis got overly hammered and on a rational level that might be bullish with supply chain issues resolving. And I heard a guy the other day say biotech firms have been absolutely wrecked and it's often a buy when this occurs. But I haven't done the research yet.
I could see a point mid-2023 where a buy becomes very attractive. Or you can dollar cost average starting now but I think that's 5-8 months early. GOOG is at $2000 US presplit and I remember in 2020 I saw $1000-1100 as an excellent buying point every time it hit. That gives some perspective. If you think there is enough critical mass of investors in the US to drive markets higher then by all means jump in I don't see it though with so many getting burned in 2022 and a recession in the projections.
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