Leveraged ETFs: TQQQ vs QQQ -- Buyer Beware

Leveraged ETFs offer 2x or 3x the returns of an underlying index on a daily basis. Unfortunately, many investors mistakenly believe that a leveraged ETF can offer 2x or 3x annual returns of an index. In truth, these geared funds as they are called can deviate from 2x or 3x performance in just days. As a result, they are highly volatile investments that can devastate a investor's portfolio.
The attraction to TQQQ is the result of the incredible bull run of the underlying index (QQQ) over the past decade. Had TQQQ existed in 2000 to 2002 or even 2008, the results would have been very different. In this video we look at the performance of both funds, and why investors should tread very carefully before investing in any leveraged ETF.
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#leveragedetf #tqqq #qqq #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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[@smorgan125]

Definitely helpful and informative but I'm still not convinced. All in TQQQ.

[@UnHermitano]

buy tqqq on dips, sell on rally

[@thynnus2422]

I just came across your channel and appreciate your perspectives on investing and how you present them. It is a shame that the KZbin algorithm seems to reward videos with clickbait thumbnails and titles that just tell people what they want to hear instead of factual, logical, informative videos like yours.

[@Karletto-87]

Great video post Rob! Thanks for managing to explain certain ‘complex’ investing materials in simple layman terms. Keep these videos coming!

[@donhosbf]

I get the argument. But look at 2009! It made it all back and quite a bit more. Scary as cats. I will let it ride

[@ImOnUToob]

Exactly what I needed to know, thanks Rob

[@VaskoGG]

Thank you for the video, Rob! Very good explanation of the leveraged ETFs pros and cons. I believe one can hold a small position in TQQQ if we see a drawdown of the NASDAQ this year. We don't loose anything unless we click "sell" in our brokerage :) Keep up the good content!

[@dhyoon1]

Very helpful and informative. This is what I wanted to know for a very long time. Thanks.

[@horizontaldad]

Excellent…. Many warn about TQQQ but you really explain how …. The QQQ could also be a problem but it’s top 10 holdings are in many many ETFs and mutual funds as well

[@trapcracker]

Thanks for doing this Rob! I asked about this during the livestream.

[@polymath5119]

Nicely done Rob

[@dianediliberto1876]

Thank you for all your terrific informative

[@OGBhyve]

The standard deviation of nearly 50% during those 10 years scared me off.

[@RicardoHernandez-zr1pw]

TQQQ is my favorite investment!

[@Elvis00026]

Still not convinced, the difference between 3X and the asset is the price to pay for not being margin called. If you dollar cost average and use it to be a 5-10% of a portfolio still don't see any issue. Thanks for the video.

[@Q8Patriot]

Well explained, thanks alot

[@chrisbentsen1]

The gains in the up years are so good that I think it would be worth investing in this that even if a bad year caused you to lose 95 percent.

[@555125kevin]

as long as you don't sell while being down tqqq is really profitable.

[@adamcaruso6345]

I've never seen an ETF perform so well and yet be so hated. Check out how much I've made from TQQQ in the past year.

[@lairdherron8202]

Very insightful, thank you! It would be interesting to model out the hypothetical TQQQ performance in 2000-2002 and 2008. To help validate the claim that it would go to zero (I assume we could do that given we know how TQQQ moves). Also, I'm curious why the COVID crash didn't make TQQQ go closer to zero. QQQ went from ~ 234 to 170. Or a 27% drop. While TQQQ went from ~ 59 to 17. Or a 71% drop. Why was the drop not larger? Is that because the QQQ drop was over a shorter period of time than the longer Nasdaq bear runs of 2000-2002? Thanks again, I love your style of videos!

[@johntamulonis4626]

Great info!

[@george6977]

I read an article by one of the Long Term Capital Management experts which concluded 2x or 3x leverage wipes you out eventually. The optimum leverage is 1.5x if I recall correctly. I saw Bloomberg’s ETF IQ, probably in 2008, were a 2 or 3x leveraged ETF lost 98% of its value and was closed down, returning the remaining 2% of the investment, so the ETF managers crystallised the lost.

[@jvalue7204]

Great stuff, looks like we share similar ideas!

[@Ambassador055]

Bought some last week. Let’s have some fun.

[@patricktuorto]

Thanks, I invested a $16.00 slice of Invesco QQQ & another $16.00 slice in SOXL 3x’s Bull Shares, I’m up and will be trading these two for a much more stable stock, I’m loving index funds so maybe I’m put those gains in VOO.

[@narindersharma303]

always buy sqqq in September and tqqq in November, based on historical data.

[@umangpatel9599]

What if we invest for 10 year or more? As per past data it result very well... Is it good if we invest for 10 year?

[@baylorbear0358]

Would you tell an investor to ignore the last decade of past growth and profit if it involved a regular common shared stock?

[@prof.m.abbas83]

Very simple how things can go wrong: start with a $100 First day it goes down 20% and then second day goes up 25% and you are back to your original $100. With Tqqq, it would be down 60% and then up 75% leaving you with $70 instead. So in a sideways market , it could be detrimental as well. And of course in a down market. Unfortunately some people joined the market and have only seen a market rising consistently, where tqqq of course made it look like magic. But wait till you witness the other two cases. Then again, everyone learns the hard way by experimenting on their own. If you badly want double leverage, your safest choice is with a deep in the money leap call options.

[@maa11235]

So can one end up owing money (the etf falls by over 100%) when investing in a leveraged etf?

[@calvinlong1321]

US market is bullish long term (always come back), the long-term return of *compounded* high rates is enormous. Since wiped out is the main concern, applying 50% trailing stop would save half of the profit (likely still be significant) and keep enough base to go back in. (small % could stop out too often and miss the following come-back gain) Dollar Cost Averaging the back-in (space out over time) also helps the market turbulence.

[@keystoneskiguy2718]

I just ran this on my software. TQQQ vrs QQQ performance as of today. One year return TQQQ 59.97% One year return QQQ return 21.91%. Three times 21.91% = 65.97%. 6.02% slippage due to rebalancing over a 12 month period. Best for swing trading. You folks don't like any kind of trading.

[@FionaMacDonald]

Very interesting - thanks! I still don’t really understand how there is no correlation between the daily and annual, but fund returns like those make me think too good to be true anyway, so I will accept your better math conclusion 😁

[@MyTittyballs]

If NASDAQ goes down 10% in a day, it has to go up 11% the next day get back to where it was to begin with. If this happened TQQQ would go down 30% and up 33% which would leave it at 93% of where it was to begin with.

[@bisonfan715]

Someone needs to show this video to Stock Moe

[@FIRE_Dan_]

I think one great thing with TQQQ is the ability to sell calls against the position along the way to create even more income. Even a correction, one can sell calls to some degree and reinvest

[@milanjurich1526]

Hi Rob … not a leveraged ETF, but what about a product like SWAN ETF … 90% IT Treasuries/10% S&P70% Leap Options for a Defensive Hedge in a sharp downturn? Thoughts?

[@nibpicky]

For a couple years already, I’ve allocated 1% of my portfolio to TQQQ and UPRO and plan to hold it for 20 years. Either it’ll worth zero in 2040 or a few million.

[@RicardoHernandez-zr1pw]

I run TQQQ in a wheel by selling covered calls and secured puts. Easy money 💰 when it’s managed correctly. Holding it is also a great idea 💡 though.

[@ilovenarwhales]

the upsides of TQQQ and SOXL are almost never talked about. It's all about the risk, which is misleading.

[@tonydeadlock]

I just have tqq with a sell order at a few dollars over my average price so if it has a massive drop hopefully my sell order will trigger

[@InvestingAlex]

Here is an idea swing trade the emini futures at least the decay happens once a quarter.

[@JK-rv9tp]

Yes those are casino funds. I have a little bit in a much more conservative leveraged ETF, HDIV, that leverages a basket of CC ETFs representative of the Canadian market by a modest 25%, to goose the monthly call premium and dividend income by 2-3 points. It pays 8+ points monthly and seems to have only marginally more volatility than its associated unleveraged index.

[@78katz]

TQQQ is the American Dream stock. Just be prepared to sell on severe corrections.

[@noahizsak8128]

Bro what you wanna sell everytime there is a sever loss?

[@berg8970]

TQQQ, SQQQ track /NQ, both are triple leverage and are not designed to be held long term, both have decay built in them.

[@whydidyoutubeaddthis]

Yup, if you're buying tqqq with the plan to hold it for 20 years then you're probably doing it wrong.

[@RicardoHernandez-zr1pw]

Nah. I think it’s fine if you sell premiums on it and manage it correctly. 💰

[@Sylvan_dB]

This is a very good illustration of *what* can happen. I'm still trying to figure out *why* it happens and how the daily reset figures in. I think I might understand, but there's no way I could explain it. It feels kind of like it is flitting around the edges of my mind or "on the tip of my tongue" but I'm not quite grasping it.

[@baylorbear0358]

It doesn’t wipe out your investment unless you withdraw your money. Just like any stock it took a significant hit during Covid or during the housing bubble it’s only a loss on paper unless you withdraw that money and take the loss. Holding those shares and waiting for what could be a potentially significant rebound is the same strategy you would use in holding any stock. And while I understand it’s a risky investment you really highlighted the absolute worst of the worst and the most negative of the negative even if that was only one or two years and broadly ignored the extremely positive years.

[@brianh6]

What you are saying about the 2000 to 2002 period is true. Some people have calculated how tqqq would have done if it existed back then. The drawdown would have been 99.9%+. The drawdown in 2007 to 2008 would have been similar. One author calculated that if investing in tqqq at some point in 1999 roughly 20 years later it would be up 27% versus qqq being up 700%. For those feeling compelled to speculate in leveraged etfs with some small percentage of their portfolio and just hold for many years 2x etfs are the way to go. Large drawdowns will reduce them a lot, but it's significantly harder for them to get wiped out. So they can still outperform the underlying index even with large drawdowns. 3x etfs will essentially get wiped out at some point. My plan is to put maybe 1% of my portfolio into tqqq after the next 50%+ correction in qqq whenever that may be and sell at some point. Since any drawdown like 2000 to 2002 or 2007 to 2008 will essentially wipe it out, selling is mandatory.

[@jamesrockford2626]

it would have went under both times. The market only needs to go down 33% for TQQQ to go under. They could in theory keep reverse splitting but eventually it would go under $1 and be delisted from Nasdaq and would go bankrupt. Not sure you know this but the "T" is for triple. For instance in April of 2020 all the Triple Oil etfs went under. Good luck with your 1%. You will lose it.

[@mr.wrongthink.1325]

QQQ fell in 2020 covid downturn, and TQQQ fell even more. But recovery was even steeper for TQQQ. The conclusion may be that as long as TQQQ does not fall to 0, it will recover steeply every time. Could TQQQ possibly fall to 0?

[@wilson5846]

for real I had no idea, even with holding 20 years it's still risky ? :( but I like big gains lol

[@devongonzalez2037]

you should have 100% of funds into TQQQ when swing trading.

[@ghostoferlock]

Enjoyed the video, and it explains more about leveraged ETF's, and helps with choosing if they are good for an investor. I think that as a buy and hold investor they are helpful, as long as the market is climbing, but as mentioned, what about markets when they fall ? Leveraged ETF's look like a good purchase when markets are climbing from a bottom. Seeing as they can be showing different returns from indexes, they almost seem like a good investment as part of an account. Even when an investment seems to be great, speculating with one investment can destroy an account. Please leave 5 % in an investment, at most. I am curious if holding a leveraged ETF, and inverse leveraged ETF would increase an account value. If someone bought into both with a deposit of $5,000 each, how would that play out ?

[@humphreypalmer5308]

Haha.. lets go back 90 year to prove a point.. when if you invested 10K since 2010 in TQQQ and did nothing.. you have 1mil today.. and its up 86% YTD.. Tech today is not tech of 20 years ago.. Trust the data and make your own decision.. I invest in TQQQ and I hold long.. haha dont fall in love with the data... lol

[@crichards1986]

Not a long term hold, perhaps allocate a small percentage of your portfolio and take profits on any huge runup.

[@christianjohn9326]

What propelled you to begin contributing?, everybody can share their story and how they continued making millions or coming up short.

[@isabelleite3235]

Very good subject, start by telling your story and we will follow you with ours.

[@christianjohn9326]

Yeah,literally struck gold when i made my first venture on my first stock asset,i started average, with the lowest pay permitted by law and always looked at the next step up or another position within the company that looked like it had a higher pay scale,scale,untill I was acquainted with putting resources into stocks and digital asset with MCberg dravia a financial advicer.he basically set the foundation for my wealth and growth today.

[@isabelleite3235]

@@christianjohn9326 Facing market manupulating crisis is quite life draining and confusing,it feels you are literally starting all over again from long wait on certain stocks equity,i literally just got hit by the AMC and GME crisis shorting my 401k plans,i have really losed a lot from this,i keep seeing news and documentations of proof with allegations about the issues online making me feel there is no hope coming back from this and resolving the issues,if it falls into politics with the law, the court case might sit for month or years to come without compensation,my thoughts now is finding a good strategy or financial advice i can take to get back on the boat with thoughts in mind for me puting things in order,i don't usually do this, coming online to seek advice or help,but if i can get a few honest feedback from here it will be highly appreciated.

[@vinyl1Earthlink]

What is the reason for this? Let's take a simple example. The index goes down 10% in one day. What does it have to do to get back to even? Go up 11.11%. OK, let's say that happens the next day. Now what happens over at the EFT? Day one, it goes down 30%. Day 2, it goes back up 33.3%. Is it back to even? No, it's still down 6.7% for the two days.

[@jjt171]

Okay, and show me a real world example where a stock goes down 10% and goes up 10% the next day every day for a significant amount of time.

[@mangar3147]

Buy tqqq after a market crash. Get rich

[@RicardoHernandez-zr1pw]

Yeah just look at what you could have made if you bought the March 2020 dip and held till today! Big gains! 💰

[@alphabeta8403]

Blah blah blah TQQQ >> QQQ LONG TERM

[@jamesrockford2626]

Not sure why you need a 20 minute video for this. It's pretty simple. If the Nasdaq goes down more than 1/3 your will lose all you money in the TQQQ. It's that simple. In 2020 it came within a few % points of going bankrupt. They could in theory keep reverse splitting but eventually it would go under $1 and be delisted from NasDaq and woudl go under.

[@MC-gj8fg]

Leveraged ETFs are pure madness to invest with. Its utter hubris to trade with as well for that matter. I don't understand how these sucker bets are legal. They basically ask "how would you like to take on a higher expense ratio and *far* more risk to achieve no greater profit in the long run?" About the only kind of person these ETFs are for are degenerate gamblers who get a thrill out of the illusion created by big short term increases. Lots of fun til a massive 1/3 correction drops that 3x underlying to effectively zero for you as the investor or trader.