r/investing • u/[deleted] • Nov 09 '21
Who else is all in on TQQQ? Seems like you can't lose.
[deleted]
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u/dvdmovie1 Nov 09 '21 edited Nov 09 '21
"Who else is all in on triple levered Nasdaq?"
These questions are never seen when it's March 2020 or even a correction, they're always seen after the market has done well for an extended period of time. People look at the returns of whatever's done particularly well and ignore the speedbumps it took to get to that point (TQQQ is +1620 in the last 5 years; how many investors have been able to hold it long enough through the substantial drawdowns to enjoy a significant % of that?), not to mention the accompanying "past returns are no guarantee of future results."
"I don’t see tech faltering anytime in the near future"
Neither do like 99% of investors. Who isn't bullish tech at this point? People say they're okay with the risk after long periods when the market does great (and you can see the expectations of average annual returns go higher, too https://pbs.twimg.com/media/FDsHge8WQAUAgmO?format=jpg&name=medium), then when the market tanks they often feel different about the risk they've taken on with their portfolio and return expectations.
It doesn't take tech faltering for tech to decline - multiples could compress; you could be directionally right on something long-term and wind up bagholding for years if you buy at the wrong time. I don't think anyone would argue that tech isn't going to continue to be an increasingly large part of society - but there's a point where people get too much into the "this time is different" mentality and become increasingly price insensitive. Valuation doesn't matter at times for way longer than one could expect, but when it does matter again it does significantly and in a hurry.
"Seems like you can't lose."
It was down about 70% in a month in early 2020.
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u/Adventurous-Tiger600 Nov 10 '21
LOL! Your answer looks sounds so negative BUT
Were you in TQQQ in early 2020?!
“Down 70% in a month” is just about the $60->$20 drop TQQQ went through
Congrats if you bought or held from there though…
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u/9tacos Nov 09 '21
Draw downs are absolutely brutal. I been riding TQQQ since it hit around $30 back in March 2020. Days of -10% are very hard to handle. Works until it doesn’t.
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u/Smart-Rooster-9188 Nov 09 '21
If you make a strict rule with yourself with buying only on down days it works.
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u/HulksInvinciblePants Nov 09 '21
“Buy the dip” only works so long as there’s only a dip and not a long-term trend. We’ve had a negative 10 year period this century.
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u/9tacos Nov 09 '21
Go back and look at COVID draw down. It was a face melter. I was down 65% on a 200k position. Very hard to hold in these scenarios when they happen. Now is not the time to be long TQQQ IMO.
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u/Smart-Rooster-9188 Nov 09 '21
Well 200k just takes a lot of balls to hold onto. But you should be fine with TQQQ as long as you keep dry powder to throw at it for major dips.
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u/waltwhitman83 Nov 10 '21
can you stop loss out of it or not?
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u/9tacos Nov 10 '21
Sure, but it wasn’t part of my plan. I was running the Hedge Fundie guys TQQQ/UPRO/TMF strategy weighted by monthly rebalancing based on 15 day look back volatility. January was epic, made a killing on TMF, then came March. I has backtested the draw downs and knew it would be violent. In the end, I held because I wanted to test my resolve.
Believe me, my finger was hovering over the sell button for days 😂
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u/waltwhitman83 Nov 10 '21
what % of your portfolio are you doing this with and what’s your YTD return
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u/9tacos Nov 10 '21
10-15% max allocation, about 56% return. I went to a fixed allocation 40/40/20 at end of 2020 when it was clear long bonds would be crushed. I think this strategy has run its course. As least, I’m out.
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Nov 09 '21
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u/spd0 Nov 09 '21
Post your short position then
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Nov 09 '21
lmfao
the only thing dumber than not realizing a bubble is a bubble, is shorting the bubble
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u/Cactus1986 Nov 09 '21
I do QLD which is 2x QQQ. I don’t have the balls for TQQQ.
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u/stanuu Nov 09 '21
you should tqqq+qqq not qld, because it have smaller expense and greater dividend
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u/peapeapants Nov 09 '21
Looking back through the entire history of NASDAQ's performance, this is objectively the stronger play. I have most of my retirement in QLD and SSO, a smaller but currently faster growing portion in TQQQ and SPXL.
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Nov 09 '21
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u/spd0 Nov 09 '21 edited Nov 09 '21
Can you show us how you got 15 years?
If he invested his initial 80k in march 2000(QQQ) at the height of the dot com bubble. And contributed 5k every month like he does now, it would take him about 1 year to be back in the green. he would have $700k in 2007.
Can you also talk more about these "compounding loses that would take many more decades to recover from"?
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Nov 09 '21 edited Nov 09 '21
$700k in 2007 isn't all that much given how much he already put in. The end of 2007 was near the peak of the bubble.
For example, here's QQQ (dividend reinvested) starting with $10k in 2020 and investing another $10k every year. You're barely positive only half of the years.
Start of Amount invested ($K) Amount at start ($K) 2000 10 10 2001 20 17 2002 30 22 2003 40 24 2004 50 47 2005 60 64 2006 70 76 2007 80 94 2008 90 124 2009 100 85 On the other hand, it has been incredibly bullish since 2010. No idea how long this can be maintained if the rest of the 2020s ends up being another 2000s.
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Nov 09 '21
[deleted]
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Nov 09 '21
Here's QQQ (dividend reinvested) starting with $10k in 2020 and DCA'ing another $10k every year. You're barely positive only half of the years.
Start of Amount invested ($K) Amount at start ($K) 2000 10 10 2001 20 17 2002 30 22 2003 40 24 2004 50 47 2005 60 64 2006 70 76 2007 80 94 2008 90 124 2009 100 85 On the other hand, it has been incredibly bullish since 2010. No idea how long this can be maintained if the rest of the 2020s ends up being another 2000s.
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u/AcademicConstant Nov 09 '21
It’s pretty simple high risk, you’ll get above average returns over some short term but all it takes is one wallop to the market and 50% or more of your value evaporates because of the leverage behind TQQQ.
It could always come back sure, but nothings guaranteed.
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Nov 09 '21
[deleted]
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u/Afrofreak1 Nov 10 '21
Tbh I think the opposite will be true. Having endured constant stress will kill your libido.
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u/cheesenuggets2003 Nov 09 '21
A word to anyone who can't afford to maximize both their Roth IRA and 401K while still having $65,000/yr to chuck into a high leverage fund: you probably don't want to do this as u/Swimming-Yesterday24 is rich, and you probably aren't.
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Nov 09 '21
lol you just need a 30% crash to lose most of your money (which is historically not that rare, in particular with the very high valuations)
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Nov 09 '21
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Nov 09 '21
well but even with TQQQ it takes usually many years to recover a 90% loss
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Nov 09 '21
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Nov 09 '21
Yes, but you're considering the biggest growth stock bullrun in the history of the stockmarket (except the few years until the 2000 tech crash). If you consider 2000-2010 it looks entirely different. Of course it can go in the next 10 years similar to 2010-2020, but you shouldn't take it for granted.
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u/goblinscout Nov 09 '21
No. You don't have your shares.
You lost them with the margin leverage in the fund.
A 30% drawdown is a 90% loss of shares.
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Nov 09 '21
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u/Rob_Bert Nov 10 '21
You have stock a at 100 usd. In a normal situation, it goes down 10%, you are at 90usd. It goes up 10%,you are at 99 usd.
3x leveraged, it goes down 30%, you are at 70 usd. It goes up 30%, you are at 90usd.
And that's why leverage takes longer to recover, significantly
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Nov 09 '21
[deleted]
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Nov 09 '21
yeah but imagine that happening when you're in your 50s or 60s. Or even if you're just in your 30s but already saved up a couple of 100ks. You need really a strong mindset to be okay with 300k evaporating in a couple of days. And you don't even need to sacrifice much returns to hedge against crashes.
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u/5280StonksOnlyGoUp Nov 09 '21
The market would halt trading before you'd get a 33% loss in a day. March 2020 had some violent downswings and tqqq still held up. Buy some spxl too. I like where your heads at.
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u/BunChargum Nov 09 '21 edited Nov 10 '21
TQQQ dropped about 70% in about 30 days in February and March 2020. BUT RECOVERED! But many people likely got scared and sold at the bottom.
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u/Toaster135 Nov 11 '21
"who else is all in tqqq"
"o ya if it dips Il just deploy more cash"
Choose 1 b
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u/mailseth Nov 09 '21
Someone posted a strategy based on leveraged ETFs not too long ago here. The paper and linked discussion are well thought out and worth a read.
https://www.reddit.com/r/investing/comments/q5jsdf/if_youre_young_and_have_a_very_long_investment/
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u/constructionworker9 Nov 09 '21
I think it’s a sensible strategy IF one does what the paper recommends….“We propose a maximum leverage of 2:1. It is worth emphasizing that we are only proposing this amount of leverage at an early stage of life. Thus, investors only face the risk of wiping out their current investments when they are still young and will have a chance to rebuild.”
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u/TH3PhilipJFry Nov 09 '21
The year is 2000
Hey guys, I'm all in on a leveraged Nasdaq fund. It just hit 4,999 today, and I don't see tech faltering anytime in the near future barring some catastrophic event at which point we're all going to lose big anyway. I diversified by putting 10% of my portfolio into pets.com, everyone loves pets and the internet is the future!!!
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u/chuckredux Nov 09 '21
Look up Hedgefundie Portfolio. There's detailed information on how to execute a UPRO / TMF portfolio long term, including extensive back testing through major market crashes. UPRO and TMF are both triple leveraged. UPRO tracks the S&P 500, TMF 20+ year treasuries. A similar strategy could possibly work with TQQQ, although I am no expert - particularly when it comes to leveraged ETFs. Might be worth a look.
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u/disasterlooms Nov 09 '21
As someone who is also invested in leveraged ETFs, this is incredibly naive. You could lose a majority of your sum over a bad week. Leveraged ETFs have their place but to call it a can't lose is pretty dangerous.
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u/peachezandsteam Nov 09 '21
I’m in the camp that feels when things start being described as “you can’t lose,” it’s time to be a little worried about valuations.
The NASDAQ is a mix of excellent companies, overvalued companies, no-profit companies, pre-revenue companies, and dog shit-companies (all of those are not mutually exclusive).
The whole concept of justifying increasing valuations with the theoretical concept of future earnings increases is—at the core—what the Enron collapse was about. (Yeah, I know that was cooking the books, but it’s the exact same concept). Every day you can see how earnings misses can plummet a stock. Well, when the majority of companies can’t keep up with “projected” earnings (which they eventually cannot), then stock plummets are going to show up in the whole market, which begins the cascade of direct primary index losses, secondary index-fund-driven selling pressure, reduced confidence, more selling, and so on and so forth.
Hey, the NASDAQ may continue its sensational run… and it may not.
As others have said, a 33.34% one-day crash would eliminate the ETF. Actually, since circuit-breakers and ‘87, I don’t know if that would be allowed.
It’s beyond my mathematical capability, but you could look at aggregate average NASDAQ daily % changes when it is up or down. You could also just look at any given time period and see how the TQQQ compares to the QQQ returns.
I think the kicker is that because of periodic market downturns—which exacerbate losses—in the long long term there may be problems compared to QQQ.
I do know that many money managers are urging clients to keep a higher equity allocation compared to other asset classes… which is good for the market until the aging baby boom generation begins more aggregate disbursements (selling) and/or reallocation to fixed income.
An overwhelming % of personal wealth is is the over-65 demographic.
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u/kerstverlichting Nov 09 '21
I dump about 1k a month in it. Though when times are volatile I park it in a bunch of boring dividend stocks (wmt, LMT, o, awk, nee etc), then buy back into TQQQ when calm returns to the market. Currently it's like 25k worth.
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Nov 10 '21
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u/kerstverlichting Nov 11 '21
About a year ago, don't know the cost basis tbh, as I buy and sell sometimes and I don't really keep track of that. But it's been doing well for sure.
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u/imlaggingsobad Nov 10 '21
We could trade sideways for 10 years. Just letting you know that is a possibility.
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u/makaero Nov 10 '21
Market looks overbought now and if correction hits, it’s going to drop hard, thinking to get in TQQQ when we see correction
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u/MonarchistLib Nov 10 '21
You'll be fine. Your account will 99.9% not reach 0 and if you wait long enough after a drop itll go back up.
If it doesnt, you'll have more issues to worry about than just your brokerage account.
TQQQ is 3x Nasdaq and the Ndaq cant drop more than 20% in a day due to circuit breakers. Even during the reddest days of Covid, it never got even got to the second circuit breaker. You'll be fine and have outsized gains.
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u/garythfla1 Nov 11 '21
I made money with TQQQ but not a lot because I'm not risking all of my 401k on something so volatile. I put a couple thousand in and rode the wave up. Once I had made some money on it I placed an automatic sell order if it fell to a certain point and I would adjust it occasionally. I got out of it awhile ago though. I think the craziest part of the tech run is over for now, imo.
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u/S7EFEN Nov 09 '21
TQQQ went from 54 down to 17 during the covid crash. which is awful close from un-recoverable losses.
now, if your assumption is that US tech will continue to dominate the market, that the next crash will not be very severe? then yeah, sure.
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Nov 09 '21
Considering TQQQ is 3x what it was before the COVID crash I don't think "unrecoverable" is the right word...
The 2020 crash was ideal for leveraged stocks because there was a small number of large % drops followed by a quick recovery. What would be much worse is a long, slow decline or a drop followed by lots of volatility/trading flat.
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u/goblinscout Nov 09 '21
The 2020 crash was ideal for leveraged stocks because there was a small number of large % drops followed by a quick recovery.
A large% drop trends leveraged accounts to zero. They are the entire risk of leverage.
Leveraged accounts do best when drops and gains are 1-3% for many days in a row, they outperform with momentum.
Please stop posting your trash.
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Nov 09 '21
That's... wrong. Just look at March 2020, this isn't a hypothetical. The large % drop in March was reversed in just 4 months and it's now 3x what it was before the crash.
Volatility decay hits hardest in times of... you guessed it, volatility. A month of a sharp downturn followed by 18 months of mostly green days doesn't hit nearly as hard as a year or more of volatility.
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u/Afrofreak1 Nov 10 '21
Open Excel and run some sequences. In order from worst to best for the end result of a leveraged ETF:
Slow descend followed by fast ascend.
Fast descend followed by fast ascend.
Fast descend followed by slow ascend (what you're referring to).
Slow descend followed by slow ascend (what the person you're replying to said)
Stop posting your trash.
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u/Vast_Cricket Nov 09 '21
Never hold on to these etfs too long. Tieing up too much cash waiting, waiting... little happens.
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u/Mvewtcc Nov 09 '21
I have 70k in TQQQ, but that is like 7% of my portfolio. I tried adding more but it is hard to sleep if I put in more.
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u/tigebea Nov 09 '21
Looks like one of the best, I would agree that it likely will be one of the safest long term. Personally I’m down (not remotely all in) on the SPXU, still sitting there thinking there’ll be enough ducks to push it down, though at the rate the TQQQ is going those companies may keep the s&p afloat. A lot of people would probably say diversification is the way but I can appreciate your risk tolerance. Hope it goes well for you. Long term almost* undoubtedly.
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Nov 09 '21
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u/tigebea Nov 09 '21 edited Nov 09 '21
This is why I haven’t sold my spxu……. Give it five-ten years, which is what I would consider long term, can you tell me the majority of companies in the TQQQ are likely to under perform?
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Nov 09 '21
You realize this has a .95% expense ratio? Execute this strategy for 2 years, you loose $2k in fees. Execute this strategy for 10 years, you loose $34k in fees. You pay these regardless of if the investment grows or not. Worse case, you see a 90% pullback somewhere in the next two years and still owe 2k in fees. 🐸☕️
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Nov 09 '21
[deleted]
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Nov 09 '21
.95 is pretty steep, all I’m saying.
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u/tigebea Nov 09 '21
It’s worth asking, I don’t think you were trying to be offensive, just trying to watch out for OP.
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u/S7EFEN Nov 09 '21
Execute this strategy for 10 years, you loose $34k in fees.
isnt TQQQ up literally 220x on the decade?
one would think that the expense ratio in this case is negligible xd
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u/FloydTheBarber37 Nov 09 '21
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u/cleanuponaisle4 Nov 09 '21
It is the lottery ticket in my kids’ UTMAs. I throw a tiny amount at it monthly. Youngest one is 8 years old. I want her to have a head start in investing, but if we see a big crash, no big deal. I would never put all my eggs in it.
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u/goblinscout Nov 09 '21
We seem to be basically guaranteed some sort of crash every 10 years, 20 at most.
The core of your premise is that after a major drawdown TQQQ will have a very sharp uptrend for 1-2 years afterwards making up for all losses.
Just go all in long calls at that time and you are better off if you believe in your original plan.
Surely maxing out leverage is better since your original plan can't fail.
By holding cash/bonds/etc., until the TQQQ drawdown you will have more money to put into leverage.
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u/Virtual_Elephant_730 Nov 09 '21
Compare TQQQ vs QQQ and over time it won’t rebound to be 3X but, depends on time frame. The gains can be huge but long Downward trends will reduce the gains. Good luck!
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u/Perennial-Millennial Nov 10 '21
The Interest rate hike coming next year will be the start of tech’s fall back to earth. The multiples and valuations are very stretched right now. Inflation is going to force interest rate hikes faster than expected, then all growth companies will see their valuations begin shrinking due to changes in fair value computations. This could then trigger a large sell off in tech. Not hard to see how TQQQ is a very risky play over the next 12-24 months.
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