TQQQ Review – Is It A Good Investment for a Long Term Hold Strategy?

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TQQQ has grown in popularity after a decade-long raging bull market for large cap growth stocks and specifically Big Tech. But is it a good investment for a long term hold strategy? I review it here.

// TIMESTAMPS:

00:00 - Intro
00:22 - What is TQQQ?
01:19 - What About Volatility Decay?
02:05 - Drawdowns are Important
02:44 - 100% TQQQ Is Not A Good Investment for a Long Term Hold Strategy
02:05 - Drawdowns are Important
03:32 - TQQQ vs. QQQ
04:45 - A Viable Strategy for Long Term TQQQ – Use Bonds with TMF
06:02 - Addressing Concerns Over Bonds
11:34 - Reducing Volatility and Drawdowns and Hedging Against Inflation and Rising Rates
13:07 - What About DCA / Regular Deposits?
13:45 - Implementation
14:05 - Conclusion
14:28 - Disclosure
14:54 - Disclaimer
15:24 - Outro

// SUMMARY:

TQQQ is a 3x leveraged ETF from ProShares that aims to deliver 3x the daily returns of the NASDAQ 100 Index.

These funds are typically used by day traders, but recently there seems to be more interest in holding them over the long term. TQQQ has become extremely popular in recent years due to the bull run from large cap tech, which comprises a huge percentage of the fund.

The graph shown illustrates in theory why a 100% TQQQ position is not a good investment for a long term hold strategy.

Notice how if you buy and hold TQQQ alone, it is basically a timing gamble that depends heavily on your entry and exit points. Basically, it can take too long for the leveraged ETF to recover after a major crash. Had you bought in January 2000 right before the Dotcom crash, you’d still be in the red today.

So how can we make it work? By using a hedge to mitigate those harmful drawdowns. Diversification is your friend with leveraged ETFs. Treasury bonds offer the greatest degree of uncorrelation to stocks of any asset. TMF is a very popular leveraged ETF for long-term treasury bonds. This is the same basis of the famous Hedgefundie Strategy.

Once again, the beautiful 60/40 portfolio – in this case 3x for 180/120 exposure – emerges as the best option (at least historically) in terms of both general and risk-adjusted returns.

Don’t buy and hold TQQQ – or any leveraged stocks ETF – “naked” for the long term without a hedge of some sort, because sometimes they simply can’t recover from major drawdowns. The last decade has looked great for TQQQ, but don’t succumb to recency bias.

TMF is likely the most suitable hedge for funds like TQQQ and UPRO.

I am long UPRO and TMF in my own portfolio.

Read the blog post here: https://www.optimizedportfolio.com/tqqq/

Here's the pie for the strategy for M1 Finance: https://optimizedportfolio.com/go/tqq...

#investing #tqqq #etfs #letfs #leverage #leveragedetfs

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Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: https://www.optimizedportfolio.com/te...

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