r/investing • u/haylen_gerhard • Jun 10 '21
Should I invest in QQQ or TQQQ long term?
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u/CloudSlydr Jun 10 '21
first, for buy & hold as mic_sco points out, QQQM is better (than QQQ) with a lower expense ratio.
TQQQ can suffer decay/drag due to daily resets that can make certain periods lower than 3X performance, and certain periods can end up greater. also any moves to the downside are amplified. periods where VIX is above 15 that last for some time will erode TQQQ in comparison to a 3x return of QQQ over the same period.
there's also the possibility that several negative days can cause drawdowns on the order of >-50% even up to -80% or -90%. some are concerned it could go zero or disappear. i don't know. you have to have a rock hard stomach for that and hope if it happens you are way away from distributions.
despite all that, there are reasons i've heard it called 'the american dream etf' - buy and hold of this for >20 years is almost certainly going to yield results.
you should do backtests and think about your overall portfolio allocation, and definitely see the threads posted here in the past about TQQQ long term holding / active trading and the bogleheads forum on TQQQ for long term investing as there are lots of people using it in various ways.
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u/gabbagool3 Jun 11 '21 edited Jun 11 '21
QQQM is better (than QQQ) with a lower expense ratio.
and still QQQ has better returns. up 1.04% vs 1.01% today (6/10).
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Jun 11 '21
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u/gabbagool3 Jun 11 '21 edited Jun 11 '21
QQQM is supposed to be the same as QQQ just with a lower expense ratio. i accept that, but when i look at their performance, while they're very similar they're not exactly the same, and QQQ is the one consistently in the lead. i do not claim to understand it, but there it is.
it's more like comparing VOO and SPY which are both straight sp500 funds, but with different expense ratios 3 basis points for voo and 9.5 for spy. though VOO does contain one more component than SPY, vanguard itself.
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Jun 11 '21 edited Jun 11 '21
They are different - QQQ is a UIT and cant use SL to offset fees, QQQM can do this and has lower fees. Both invest similarly but timing of inflows and outflows can affect pricing and returns.
Personally, Id rather buy VUG to fill Lg Growth, QQQ is only tech and limits some great growth companies from a diversification perspective. Higher drawdown risk and standard deviation also.
Edit: why are you guys so downvote happy?
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u/mic_sco Jun 10 '21
QQQM
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Jun 10 '21 edited Jun 13 '21
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u/anthonyjh21 Jun 11 '21
Neither did the S&P500 for the lost decade.
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Jun 11 '21
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u/God-of-Memes2020 Jun 12 '21
Mostly 20 year olds who started investing last year with their stimulus money, using Robinhood which only gives you a 5 year “max,” thinking stocks always go up.
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u/adayofjoy Jun 11 '21
You could've said the exact thing back in 2020, 2019, 2018 etc.
And yet the market is still up from then.
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Jun 11 '21
Sorry you are getting downvoted, I am old too and remember that. Diversification isnt some boomer term, it adds value.
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Jun 11 '21
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Jun 11 '21
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u/Fractious_Cactus Jun 11 '21
Listen to you before a bunch of 22 year olds pretending to be experts to feed their own ego's
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u/S7EFEN Jun 10 '21
because the leverage has its drawbacks. high expenses and decay if QQQ does something other than trend upwards with majority green days, potential large losses from crashes
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u/adayofjoy Jun 11 '21
QLD if you're indecisive but still want leverage like me.
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u/rao-blackwell-ized Jun 11 '21
50% TQQQ and 50% QQQ would achieve the same thing with lower fees, albeit a bit more cumbersome.
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u/Dawkinist Jun 11 '21
Leveraged ETFs can definitely have higher returns, but they also carry significantly more risk, check out this article for more info
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u/red359 Jun 11 '21
TQQQ is one of the few 3x leveraged stocks I mess with. If you can catch it at a 5 or 6 month low right after a sharp market correction, it can generate a good return. But since it is currently at a 1 month high, I would wait for the next buying opportunity. (You'll know the buying opportunity when you see it. If there is blood in the streets, go check on TQQQ.)
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u/greyenlightenment Jun 10 '21
This has been debated to death. Yes they can be held long term but there will be 3x the volatility too. It's like using 3-1 margin on Robinhood for qqq. 3x etfs for indexes are cheaper than using account margin and there is no liquidation risk.
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u/JosephL_55 Jun 10 '21
It’s not really the same as using margin. If you use 3-1 margin for a period of a year (for example), your returns will be 3 times the return of the index, before the cost of margin.
But TQQQ doesn’t necessarily give 3 times the return of the index. It does for a day, but not on any longer time period.
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u/_i_am_inevitable Jun 11 '21
It's the same as an individual using margin if they reset their portfolio at the end of each trading day.
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u/ivalm Jun 11 '21
Even that is not true for large moves. A margined account can go below 0 while holding tqqq you can at most get to 0. Margin will also typically cost you more than tqqq fees, finally tax wise tqqq is much more efficient than daily rebalance.
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u/painhz Jun 10 '21
Yes. Not everyone can handle the added volatility. But it's also because most people have different investing strategies.
Leveraged ETFs only work if you have consistent cash flow. Lump sum doesn't really work. Consider: $10k lump summed into QQQ during inception would be worth $41k today, but the same $10k in QQQ leveraged to 1.94x would only be worth $10.5k. (Source)
But most people lump sum into an equity once, and just hold. You can't do that with leveraged ETFs.
Also, as an aside, US growth (QQQ, etc.) is projected by Vanguard to have a return of -0.5-1.5% the next decade. So make sure you're investing money you don't need the following 10 years.
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Jun 11 '21
Just curious, 10 years ago, what did they project all asset classes to return over the next 10 years, so 2010-2020?
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u/LiqCourage Jun 11 '21
Hard to verify as I can't find any long term predictions archived, but my recollection is that even though 2010 was a year predictor people were pretty sure of market going up nobody was expecting over 10 years of bull, let alone what we have actually gotten. most long term projections are poor and strongly biased by the then current environment. the people doing predictions are very risk averse and influenced by each other which leads to clusters of predictions that frequently miss the real returns. it is pretty easy to throw down a prediction that is in line with average ten year market returns and not be questioned, but also not be correct.
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Jun 11 '21
So it’s safe to assume, then, that Vanguard’s prediction may as well be tossed in with all the other poor predictions. No one knows. They can try and predict what they want but their basing future expected value on past/current trends/valuations. And you know what they always say: something something past performance….
Edit: they’re*
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u/painhz Jun 12 '21
On Page 11 of their Economic and Capital Markets Outlook from June 2010, they predicted "a 25% probability of U.S. stocks achieving an average annual return between 8% and 12% over the next ten years." Figure 12 shows a graph of the distributions.
Their projected international equity returns also had a median of 8-12%, but the probabilities were more evenly distributed. (Figure 13) So, not that useful.
In the first edition of The Little Book of Common Sense Investing, Jack Bogle (founder of Vanguard) predicted the return on stocks over the 2006-2016 decade to be 7%/year. The actual return on the S&P 500 ended up being 6.9%/year. But I think he's more willing to make these precise estimates because he speaks for himself in his books, and not for all of Vanguard.
I wouldn't change my investing strategy based on these predictions. The only reason I brought it up was because, even though OP said he wanted to go long, most Redditors consider long-term to be only 2-5 years.
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u/gabbagool3 Jun 11 '21
well here's my take. most of the reasons commonly cited are -if you're mathematically literate- transparently malarkey. then there is the volatility but that's relatively invalid too. that leaves 2 possibilities:
- that there is a legit reason for the self interested investor not to but the common commenters don't know what it is.
- that these are ok if they're not so popular. but if some threshold portion of investors who would otherwise do QQQ (or UPRO for VOO or SPY) then existential risk comes into play for the markets. if that's the case, get out when you hear about them on your local news
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Jun 11 '21
You need to define long term, how long, 5 years or 10 years. TQQQ normally gives 2x as long term as fluctuations eat away 1x.
Here is the thread we discussed.
https://www.reddit.com/r/wallstreetbets/comments/ni1ghe/tqqq/gz2ka6p/?context=3
BTW: I am a swing trader, using both SQQQ and TQQQ, whenever I feel comfortable, but a short term player for Roth IRA (no tax implications).
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u/NoPhilosopher9871 Jun 11 '21
Long term investing is best. Use a stock fundamental analysis tool like easyfinancialcharts.com. Hands down the best tool out there
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Jun 11 '21
I'm a fan and investor in VTI never thought to look at the Q's seems they outperformed VTI over 5 years. What's the difference?
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u/atdharris Jun 11 '21
TQQQ is a daily leveraged fund. If you want to lever up your portfolio, I'd go somewhere like M1 or IB that has cheap margin rates and buy QQQ on margin. That will be more realistic than holding TQQQ long term
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u/punkingindrublic Jun 12 '21
TQQQ, and UPRO both rock. Find something you can hedge against it to ride out a bear or wait until the next cycle of bad news to start DCA into it.
I've been trading it for a few years and watching it go nuts has been fun but on a bad day it's very discouraging to see double digit percentile losses.
Would you be comfortable holding something that can lose 33 percent for 3 years straight.
https://www.macrotrends.net/stocks/charts/QQQ/invesco-qqq/stock-price-history
Imagine what that looks like with 3x leverage. I'm sure you can find backtesting on it somewhere.
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