SQQQ will not work and erode the value. The intention was to hold long term knowing its drawdown.
What would a good ETF/fund be to balance TQQQ?
- Thread starter Saltynuts
- Start date
Yea, I bet TLT would have been really good. But I wouldn't feel comfortable with it now with rates near zero - set for a huge fall whenever they creep up. But thanks Girija, just the kind of stuff I'm looking for!
Because you can get a much higher % return with much smaller investment. And given the HUGE logarithmic returns over time you can start even smaller and let it compound up. So you can have just a very small amount invested in TQQQ over the long haul and still come out the same as if you have put all your money in QQQ. Like all you need is less than 10% of your money in TQQQ to come out ahead in the very long haul. You don't want to put ALL your money in TQQQ, because it can go to basically zero. But a small amount, letting it compound, and couple that with an investment in something else with all that cash you have freed up, sounds like success to me, especially if you can find something that goes up over time but, when TQQQ goes down violently, also tend to track up to offset your small position in TQQQ going down. Gold or something based on it is an obvious candidate.
That is another way to go, and I will do some tests on that. But there is a few problems there -
1. I am talking about very large dollar amounts here. Like hundreds of thousands of dollars. That makes it a bit impractical to be buying and selling all on the crossovers.
2. Buying and selling all on the crossovers means you are going eventually pay tax on all your gains. And maybe not even long terms capital gains tax, could be short term ordinary income rates. I don't want to pay tax.
3. I've done this MA buying and selling on the crossovers thing before (with small but still significant dollar amounts), it sucks badly when you get whipsawed on the crossovers when the market bounces around the crossover values and you are buying and selling every day or two. Sounds easy in practice, and its easy to do, but those whipsaw losses can mount up, and suck.
Again, you could do such a thing obviously, but testing such is a subject for a different thread.
Thanks!
I like your thinking wmwmw! I suspect 50% in TQQQ 50% in GLD is too much in TQQQ, your drawdown will be too much. But I will test it. Wait, in fact, I already have.
Starting 2/11/10, when TQQQ first came about, if you had stuck 50% of your portfolio in each of TQQQ and GLD, you'd have achieved an IRR of 31.95%, but have had a max drawdown of 50.16%. I think that drawdown is too much for most people.
If you had gone 25%/75% TQQQ to GLD your max drawdown would have been 28.89% and your IRR would be 18.77%.
You can obviously change the ratios to get more return/more risk or less return/less risk.
My goal is to find an alternative to GLD that goes up as much as possible over time but also tends to go up sharply when TQQQ goes down sharply.
These are just inverse to one another, so while they would help reduce my drawdown on a TQQQ investment, they would also drive my long term return to virtually zero, probably negative (assuming 50% in TQQQ and 50% in SQQQ for example - that would almost certainly lose money over time)
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I like your thinking wmwmw! I suspect 50% in TQQQ 50% in GLD is too much in TQQQ, your drawdown will be too much. But I will test it. Wait, in fact, I already have.
Starting 2/11/10, when TQQQ first came about, if you had stuck 50% of your portfolio in each of TQQQ and GLD, you'd have achieved an IRR of 31.95%, but have had a max drawdown of 50.16%. I think that drawdown is too much for most people.
If you had gone 25%/75% TQQQ to GLD your max drawdown would have been 28.89% and your IRR would be 18.77%.
You can obviously change the ratios to get more return/more risk or less return/less risk.
My goal is to find an alternative to GLD that goes up as much as possible over time but also tends to go up sharply when TQQQ goes down sharply.
I don't think there is a better alternative for GLD.
For my setup, the bigger the drawdown, the more money you make in long term.
wmwmw, I might try and simulate what you are proposing exactly. But when you say:
"Whenever TQQQ drop below 10%, inject all capital from GLD into TQQQ."
What do you mean? You mean when TQQQ drops 90% from its highs? That's when you sell your GLD and go all into TQQQ?
If that is right, your 90% number is suspiciously close to the 92.7% max drawdown number of TQQQ beginning with its opening in February 2010. What's that phrase called, when one fits one's strategy neatly to the past numbers, but the strategy is so closely fit to numbers that they won't like repeat that the strategy is not helpful going forward? Curve fitting or something like that?
"Whenever TQQQ drop below 10%, inject all capital from GLD into TQQQ."
What do you mean? You mean when TQQQ drops 90% from its highs? That's when you sell your GLD and go all into TQQQ?
If that is right, your 90% number is suspiciously close to the 92.7% max drawdown number of TQQQ beginning with its opening in February 2010. What's that phrase called, when one fits one's strategy neatly to the past numbers, but the strategy is so closely fit to numbers that they won't like repeat that the strategy is not helpful going forward? Curve fitting or something like that?
Ah, I think you are right - corrected one thing in my spreadsheet wmwmw. So holding all TQQQ since its inception, I see a max drawdown at 69.92% with a 51.91% IRR - that look/sound right to you?
Holding 50/50 TQQQ/GLD since inception I have a 31.95% IRR and a 43.35% max drawdown. That would be what your portfolio would have done, correct, since there was not a 90%+ drawdown in TQQQ, correct?
Holding 50/50 TQQQ/GLD since inception I have a 31.95% IRR and a 43.35% max drawdown. That would be what your portfolio would have done, correct, since there was not a 90%+ drawdown in TQQQ, correct?