TQQQ...

[Scataphagos]

P.P.S. why doesn't the massive 3x leverage this thing brings to bear drag down its returns more, anyone know? Its like too good to be true!!!

Not sure what to say about this. However in the Nas crash after the .com bubble, one particular leveraged mutual fund (a Rydex fund, and if I recall correctly it was "only" 2x leverage) lost -97.5% of it's value. No recovering from that. Tragic story around that too for one financial advisor who "bought the dip" and decided to "hang on and ride it out" through the bear market.

 

[Scataphagos]

Interesting. But, logically, does that make sense to you? How can a starting investment of anything less than 33.33% possibly catch up to a starting investment of $100 in QQQ given the max average 3x performance delta? Just seems completely counter-intuitive to me. I must be thinking about it wrong.

Maybe you're thinking "linear" when you should be thinking "log"?? (I trust my calculations are correct. I ran them twice... on my ancient TI BA-II)

 

[Saltynuts]

Maybe you're thinking "linear" when you should be thinking "log"?? (I trust my calculations are correct. I ran them twice... on my ancient TI BA-II)

I must definitely be thinking about it wrong, linear versus log I guess it is. Here is $100 growing at 1% a day, and $33.33 growing at 3% a day. Yea, its the log thing for sure.


100 33.33
101 34.3299
102.01 35.359797
103.0301 36.42059091
104.060401 37.51320864
105.101005 38.6386049
106.1520151 39.79776304
107.2135352 40.99169593
108.2856706 42.22144681
109.3685273 43.48809022
110.4622125 44.79273292
111.5668347 46.13651491
112.682503 47.52061036
113.809328 48.94622867
114.9474213 50.41461553
116.0968955 51.927054
117.2578645 53.48486562
118.4304431 55.08941158
119.6147476 56.74209393
120.810895 58.44435675
122.019004 60.19768745
123.239194 62.00361808
124.471586 63.86372662
125.7163018 65.77963842
126.9734649 67.75302757
128.2431995 69.7856184
129.5256315 71.87918695
130.8208878 74.03556256
132.1290967 76.25662943
133.4503877 78.54432832
134.7848915 80.90065816
136.1327404 83.32767791
137.4940679 85.82750825
138.8690085 88.40233349
140.2576986 91.0544035
141.6602756 93.7860356
143.0768784 96.59961667
144.5076471 99.49760517
145.9527236 102.4825333
147.4122509 105.5570093
148.8863734 108.7237196
150.3752371 111.9854312
151.8789895 115.3449941
153.3977794 118.805344
154.9317572 122.3695043
156.4810747 126.0405894
158.0458855 129.8218071
159.6263443 133.7164613
161.2226078 137.7279551
162.8348338 141.8597938
164.4631822 146.1155876
166.107814 150.4990552
167.7688921 155.0140269
169.4465811 159.6644477
171.1410469 164.4543811
172.8524573 169.3880126
174.5809819 174.4696529
176.3267917 179.7037425
178.0900597 185.0948548
179.8709603 190.6477004
181.6696699 196.3671315
183.4863666 202.2581454
185.3212302 208.3258898
187.1744425 214.5756665
189.0461869 221.0129365
190.9366488 227.6433245
192.8460153 234.4726243
194.7744755 241.506803
196.7222202 248.7520071
198.6894424 256.2145673
200.6763368 263.9010043
202.6831002 271.8180345
204.7099312 279.9725755
206.7570305 288.3717528
208.8246008 297.0229053
210.9128468 305.9335925
213.0219753 315.1116003
215.1521951 324.5649483
217.303717 334.3018967
219.4767542 344.3309536
221.6715217 354.6608822
223.8882369 365.3007087
226.1271193 376.25973
228.3883905 387.5475219
230.6722744 399.1739475
232.9789971 411.149166
235.3087871 423.4836409
237.661875 436.1881502
240.0384937 449.2737947
242.4388787 462.7520085
244.8632675 476.6345688
247.3119001 490.9336058
249.7850191 505.661614
252.2828693 520.8314624
254.805698 536.4564063
257.353755 552.5500985
259.9272926 569.1266014
262.5265655 586.2003995
265.1518311 603.7864115
267.8033494 621.9000038
270.4813829 640.5570039
273.1861968 659.773714
275.9180587 679.5669255
278.6772393 699.9539332
281.4640117 720.9525512
284.2786518 742.5811278
287.1214384 764.8585616
289.9926527 787.8043184
292.8925793 811.438448
295.8215051 835.7816014
298.7797201 860.8550495
301.7675173 886.680701
304.7851925 913.281122
307.8330444 940.6795556
310.9113749 968.8999423
314.0204886 997.9669406
317.1606935 1027.905949
320.3323004 1058.743127
323.5356234 1090.505421
326.7709797 1123.220584
330.0386895 1156.917201
333.3390764 1191.624717
336.6724671 1227.373459
340.0391918 1264.194663
343.4395837 1302.120502
346.8739795 1341.184117
350.3427193 1381.419641
353.8461465 1422.86223
357.384608 1465.548097
360.9584541 1509.51454
364.5680386 1554.799976
368.213719 1601.443976
371.8958562 1649.487295
375.6148148 1698.971914
379.3709629 1749.941071
383.1646725 1802.439303
386.9963193 1856.512482
390.8662824 1912.207857
394.7749453 1969.574092
398.7226947 2028.661315
402.7099217 2089.521155
406.7370209 2152.206789
410.8043911 2216.772993
414.912435 2283.276183
419.0615594 2351.774468
423.252175 2422.327702
427.4846967 2494.997533
431.7595437 2569.847459
436.0771391 2646.942883
440.4379105 2726.35117
444.8422896 2808.141705
449.2907125 2892.385956
453.7836196 2979.157535
458.3214558 3068.532261
462.9046704 3160.588229
467.5337171 3255.405875
472.2090543 3353.068052
476.9311448 3453.660093
481.7004562 3557.269896
486.5174608 3663.987993
491.3826354 3773.907633
496.2964618 3887.124862

 

[Saltynuts]

Not sure what to say about this. However in the Nas crash after the .com bubble, one particular leveraged mutual fund (a Rydex fund, and if I recall correctly it was "only" 2x leverage) lost -97.5% of it's value. No recovering from that. Tragic story around that too for one financial advisor who "bought the dip" and decided to "hang on and ride it out" through the bear market.

Hmmmmm. But whatever it was, the underlying lost a ton too, right, like 45% or something crazy? Or wait, maybe not? Maybe it lost far less than this and the log thing works in reverse and absolutely brutalizes you in a down market far more than simply holding 200% (in a 2x ETF) or 300% (in a 3x ETF)?

 

[Scataphagos]

Hmmmmm. But whatever it was, the underlying lost a ton too, right, like 45% or something crazy?

The underlying lost like 83%!

 

[Saltynuts]

The underlying lost like 83%!

Haha, ok good. What all these calculations are leading me to believe is that the drag on at least some of the leveraged funds, including TQQQ, is not that much at all, and rather than putting 100% of your money in QQQ (assuming you had a long time until retirement and want to let it ride), just put like 10% of your money in TQQQ and use the other 90% on whatever you want. Even if QQQ gets cut in half and TQQQ goes to almost zero, you are still down max 10%. AND you then have plenty of money to pile into TQQQ at that time and make the investment of a lifetime.

 

[Scataphagos]

What all these calculations are leading me to believe is that the drag on at least some of the leveraged funds, including TQQQ, is not that much at all,

The cost of leverage drag during a bull phase doesn't seem like much with the high performance, but in a long bear market... it's a killer!

We've got a whole generation of stock players and money managers who have never experienced a bear market. There will be screams of despair and cries of agony when they do.

 

[Saltynuts]

The cost of leverage drag during a bull phase doesn't seem like much, but in a long bear market... it's a killer!

Hmmm, are you saying that you just feel it more in a bear market since in a bull market you are still making a killing and don't notice the slight drag, or are you saying that the actual "drag" increases in a bear market, i.e. the cost of getting that 3x leverage actually goes up in a bear market?

 

[Scataphagos]

Hmmm, are you saying that you just feel it more in a bear market since in a bull market you are still making a killing and don't notice the slight drag, or are you saying that the actual "drag" increases in a bear market, i.e. the cost of getting that 3x leverage actually goes up in a bear market?

I don't know if the expense costs for whatever leverage vehicles used actually go up, but they have to pay for it.. and it keeps expiring worthless... only to be bought again and again expiring worthless... yadayada. Those costs have an compounding negative effect too. The time it takes for a bear to run its course is a big additional negative.

 

[manic]

TQQQ is still in an 80% drawdown from its tech bubble peak, even though the Nasdaq is up 270%.

That said, if you had bought it any time other than a few months during the peak of the bubble, you'd be quite profitable today.

Buying and holding TQQQ is a low alpha strategy. You are better off using options, futures, or margin for leverage. Of course, if you want to use leverage, you would be wise to have some market timing strategy that are willing to stick to.