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.

----------
Video Resources
----------

----------
Investing Tools & Resources
----------

----------
Popular Videos
----------

#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.

LET'S CONNECT

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.

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.

[smorgan]

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

[thynnus]

I just came across your channel and appreciate your perspectives on investing and how you present them. It is a shame that the YouTube 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-]

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

[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!

[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

[ImOnUToob]

Exactly what I needed to know, thanks Rob

[trapcracker]

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

[Elvis]

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.

[OGBhyve]

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

[dhyoon]

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

[lairdherron]

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!

[adamcaruso]

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.

[chrisbentsen]

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.

[george]

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.

[dianediliberto]

Thank you for all your terrific informative

[keystoneskiguy]

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.

[prof.m.abbas]

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.

[baylorbear]

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

[ilovenarwhales]

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