Investing 100% into TQQQ

[RichIn7Years]

Hi, since last October I’ve been DCA into TQQQ. I think I’ll put a large amount into TMF or TLT leaps soon as well (very short term, long term still all TQQQ).


My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.


Regardless of those assumptions is this a bad idea? I’ve been playing around with 100 QQQ -200 cashx and investing 3x QQQ with 5-8% interest rates (corresponding to 3.5-6.5% LIBOR rates) on PV and this strategy seems to rarely do that much worse than just SPY. There are large drawdowns but usually eventual recoveries. This includes omitting the ZIRP era and including all terrible drawdowns with QQQ (dotcom and 2008). Now if we have a decade of sideways markets with high rates, then we will do way worse.


To me the risk profile of this strategy, without any priors, seems to be: a small chance of doing much worse than the spy, a decent chance of doing as well, and also a decent chance of doing many times better. And personally, that’s an acceptable risk to me.

Is this accurate or am I discounting risk?

EDIT: 20% of my DCA (401k) goes into VLXVX, title is meant to mean 100% of my taxable.

[Makefile]

Without addressing the rest, I note that TQQQ says it's not designed for use as a long term investment (https://www.proshares.com/our-etfs/leve ... verse/tqqq):

Important Considerations

This leveraged ProShares ETF seeks a return that is 3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.

[RichIn7Years]

Without addressing the rest, I note that TQQQ says it's not designed for use as a long term investment (https://www.proshares.com/our-etfs/leve ... verse/tqqq):

Important Considerations

This leveraged ProShares ETF seeks a return that is 3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.

I understand but I don't think that excludes it from use as a long term investment vehicle. You can test it roughly here: https://www.portfoliovisualizer.com/bac ... JroioupFlb Replace the underlying etf with 210% weighting with SPY or QQQ as you'd like.

[Crmck26]

I’ve held this long term and short term. Don’t hold it long term for anything more than your “play money”, which for those that even allow for “play money” in their IPS is no more than 5%. The biggest risk is a sideways choppy market. You will get killed from the volatility in that environment. And that environment is just as likely as far as anyone can predict as an upward or downward market. Second biggest risk is a Black Monday where the market goes down 20% and you’re down 60% - in one single day. Third biggest risk is unrelenting downwards market. All the TMF holders, me included, are still waiting for that horror show to stop. It’s only like one or two steps down from YOLOing on options.

[ge1]

One of the worst things you could possibly do.

[RichIn7Years]

The fund performs better than most probably expect (relative to the underlying) in choppy markets because of DCA. However, yes an extended non bull market with high interest rates will be bad. A 60% drawdown isn’t a huge deal to me. I’m fully prepared for that to happen.

A lot of claims are unfounded tho, you can test performance on 1999-2010 (-3% return on QQQ). This is a high interest rate sideways market for the QQQ. DCA makes this palatable.

[nisiprius]

I think you are underestimating the difference in risk between QQQ and the S&P 500.

[er999]

Good luck! You’ll either be rich in 7 years or broke like your username (although good thing you can’t lose more than your investment with tqqq unlike other forms of leverage) Not much support for tqqq on this board but if you search there’s a lot of prior discussions.

[TheTimeLord]

The fund performs better than most probably expect (relative to the underlying) in choppy markets because of DCA. However, yes an extended non bull market with high interest rates will be bad. A 60% drawdown isn’t a huge deal to me. I’m fully prepared for that to happen.

A lot of claims are unfounded tho, you can test performance on 1998-2010. This is a high interest rate sideways market for the QQQ.

My suggestion is you run the math on what percentage QQQ will need to rise after a 20% drawdown in QQQ for TQQQ to get back to even.

[watchnerd]

Hi, since last October I’ve been DCA into TQQQ. I think I’ll put a large amount into TMF or TLT leaps soon as well (very short term, long term still all TQQQ).


My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.


Regardless of those assumptions is this a bad idea? I’ve been playing around with 100 QQQ -200 cashx and investing 3x QQQ with 5-8% interest rates (corresponding to 3.5-6.5% LIBOR rates) on PV and this strategy seems to rarely do that much worse than just SPY. There are large drawdowns but usually eventual recoveries. This includes omitting the ZIRP era and including all terrible drawdowns with QQQ (dotcom and 2008). Now if we have a decade of sideways markets with high rates, then we will do way worse.


To me the risk profile of this strategy, without any priors, seems to be: a small chance of doing much worse than the spy, a decent chance of doing as well, and also a decent chance of doing many times better. And personally, that’s an acceptable risk to me.

Is this accurate or am I discounting risk?

If you hold TQQQ long term, daily reset leverage drag will eat you up.

[RichIn7Years]

Investing 10,000 at the start of the QQQ is a pretty unrealistic investment strategy, which is why I tested all of these with DCA. This reduces volatility drag. Furthermore, monthly rebalancing is not very accurate, a 1% absolute deviation rebalance is closer to daily rebalancing. And finally, I already tested leverage drag (you mean LIBOR rates). They do hurt, but not terribly at current levels as the equity risk premium helps. But no doubt a repeat of the 70s will kill an etf like this.

[arcticpineapplecorp.]

have you read some of these other fun posts on the subject:
viewtopic.php?t=378882
viewtopic.php?t=386074
viewtopic.php?t=380156
viewtopic.php?t=380187

have any of those posts changed your mind?

[watchnerd]

Investing 10,000 at the start of the QQQ is a pretty unrealistic investment strategy, which is why I tested all of these with DCA. This reduces volatility drag. Furthermore, monthly rebalancing is not very accurate, a 1% absolute deviation rebalance is closer to daily rebalancing. And finally, I already tested leverage drag (you mean LIBOR rates). They do hurt, but not terribly at current levels. But no doubt a repeat of the 70s will kill an etf like this.

Leverage ETF drag due to negative return bias from daily reset:

https://youtu.be/WoYVmlOxwbA?si=FBqoMyqV1MBIWMEv

[rockstar]

I have about 2.5% of my portfolio in a TQQQ position. This isn’t a buy and forget. It’s tradable. You should definitely have predefined sell signals.

[nisiprius]

I have about 2.5% of my portfolio in a TQQQ position. This isn’t a buy and forget. It’s tradable. You should definitely have predefined sell signals.

Why do you have 2.5% in TQQQ rather than 7.5% in unleveraged straight QQQ? What did you put in the 5% of space you freed up that is of material importance in your portfolio?

[RichIn7Years]

Investing 10,000 at the start of the QQQ is a pretty unrealistic investment strategy, which is why I tested all of these with DCA. This reduces volatility drag. Furthermore, monthly rebalancing is not very accurate, a 1% absolute deviation rebalance is closer to daily rebalancing. And finally, I already tested leverage drag (you mean LIBOR rates). They do hurt, but not terribly at current levels. But no doubt a repeat of the 70s will kill an etf like this.

Leverage ETF drag due to negative return bias from daily reset:

https://youtu.be/WoYVmlOxwbA?si=FBqoMyqV1MBIWMEv

Yes, "volatiltiy drag" or beta slippage.

https://blogs.cfainstitute.org/investor ... ag-part-1/

I think it's fairly exaggerated.

[bendix]

If you´re very confident that the age of elevated interest rates is over, you can go ahead and try that.

[Taylor Larimore]

RichInSevenYears:

Before investing 100% in TQQQ stock--read this:

What Experts Say About Investing In Individual Stocks vs. Mutual Funds

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "Attempting to build an investment program around a handful of individual securities is, for all but the most exceptional investors, a fool's errand."

[HomerJ]

Heh, Richin7years.

“After years of disappointment with get rich quick schemes, I know I’m gonna get rich with this scheme. And quick!”

-Homer Simpson.

There is a reason we all laugh at that line.

[watchnerd]

Investing 10,000 at the start of the QQQ is a pretty unrealistic investment strategy, which is why I tested all of these with DCA. This reduces volatility drag. Furthermore, monthly rebalancing is not very accurate, a 1% absolute deviation rebalance is closer to daily rebalancing. And finally, I already tested leverage drag (you mean LIBOR rates). They do hurt, but not terribly at current levels. But no doubt a repeat of the 70s will kill an etf like this.

Leverage ETF drag due to negative return bias from daily reset:

https://youtu.be/WoYVmlOxwbA?si=FBqoMyqV1MBIWMEv

Yes, "volatiltiy drag" or beta slippage.

https://blogs.cfainstitute.org/investor ... ag-part-1/

I think it's fairly exaggerated.

Well, you asked if people thought it was a good idea, but if you think it's bulletproof...

*shrug*

#YOLO

[RichIn7Years]

I have about 2.5% of my portfolio in a TQQQ position. This isn’t a buy and forget. It’s tradable. You should definitely have predefined sell signals.

Why do you have 2.5% in TQQQ rather than 7.5% in unleveraged straight QQQ? What did you put in the 5% of space you freed up that is of material importance in your portfolio?

TQQQ offers the cube of TQQQ's returns minus volatility drag and expense impacts rather than 3x TQQQ's returns (which could be more or less)

[AlphaLess]

Hi, since last October I’ve been DCA into TQQQ. I think I’ll put a large amount into TMF or TLT leaps soon as well (very short term, long term still all TQQQ).


My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.


Regardless of those assumptions is this a bad idea? I’ve been playing around with 100 QQQ -200 cashx and investing 3x QQQ with 5-8% interest rates (corresponding to 3.5-6.5% LIBOR rates) on PV and this strategy seems to rarely do that much worse than just SPY. There are large drawdowns but usually eventual recoveries. This includes omitting the ZIRP era and including all terrible drawdowns with QQQ (dotcom and 2008). Now if we have a decade of sideways markets with high rates, then we will do way worse.


To me the risk profile of this strategy, without any priors, seems to be: a small chance of doing much worse than the spy, a decent chance of doing as well, and also a decent chance of doing many times better. And personally, that’s an acceptable risk to me.

Is this accurate or am I discounting risk?

5%+ built-in funding cost (at 3x leverage, you pay that 5%+ twice), plus the gamma effect, and sky-high equity valuations render your idea crappy one.

At 0%, and low equity valuations: I can see the appeal. Maybe.

Also: daily re-leveraged ETF is a thing that MOST investors, and that includes 99% of the readers here, do not understand.

If you don't understand: you don't "invest". The correct expression, of course, is: if you don't understand, you don't speculate. There is no such thin as "investing with TQQQ", only speculating with TQQQ.

[RichIn7Years]

Hi, since last October I’ve been DCA into TQQQ. I think I’ll put a large amount into TMF or TLT leaps soon as well (very short term, long term still all TQQQ).


My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.


Regardless of those assumptions is this a bad idea? I’ve been playing around with 100 QQQ -200 cashx and investing 3x QQQ with 5-8% interest rates (corresponding to 3.5-6.5% LIBOR rates) on PV and this strategy seems to rarely do that much worse than just SPY. There are large drawdowns but usually eventual recoveries. This includes omitting the ZIRP era and including all terrible drawdowns with QQQ (dotcom and 2008). Now if we have a decade of sideways markets with high rates, then we will do way worse.


To me the risk profile of this strategy, without any priors, seems to be: a small chance of doing much worse than the spy, a decent chance of doing as well, and also a decent chance of doing many times better. And personally, that’s an acceptable risk to me.

Is this accurate or am I discounting risk?

5%+ built-in funding cost (at 3x leverage, you pay that 5%+ twice), plus the gamma effect, and sky-high equity valuations render your idea crappy one.

At 0%, and low equity valuations: I can see the appeal. Maybe.

Also: daily re-leveraged ETF is a thing that MOST investors, and that includes 99% of the readers here, do not understand.

If you don't understand: you don't "invest". The correct expression, of course, is: if you don't understand, you don't speculate. There is no such thin as "investing with TQQQ", only speculating with TQQQ.

I think you’re over estimating the impact of interest rates. Stocks should fundamentally beat treasuries, so you’re borrowing to buy something with a higher return. The real risk is an extended bear market causing ruin.

So I think by going into this, my position is essentially a bet there won’t be an extended bear market and I’m paying borrow/etf fees to make this bet. I guess I’m also betting interest rates won’t rise much from here. I just want to know if I’m misunderstanding my bet.

[DesertGator]

Based on the current cycle of the Kondratiev wave, I would caution against this strategy.

[RichIn7Years]

Based on the current cycle of the Kondratiev wave, I would caution against this strategy.

Interesting, do you have a link to a plot of it for 2023? If I had to guess the next cycle is artificial intelligence.

[TropikThunder]

Without addressing the rest, I note that TQQQ says it's not designed for use as a long term investment (https://www.proshares.com/our-etfs/leve ... verse/tqqq):

Important Considerations

This leveraged ProShares ETF seeks a return that is 3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.

Ahwhat do they know? Not like they invented the thing. Oh, wait ….

[CuriousIndexer]

You should only invest 100% if you are 100% sure you are right. Any sort of speculative investment you wanna make your percentage invested should match your conviction in that investment. Plenty of professional investors hedge their bets. That’s the smart move.

[rockstar]

I have about 2.5% of my portfolio in a TQQQ position. This isn’t a buy and forget. It’s tradable. You should definitely have predefined sell signals.

Why do you have 2.5% in TQQQ rather than 7.5% in unleveraged straight QQQ? What did you put in the 5% of space you freed up that is of material importance in your portfolio?

I have QQQ and VOO positions. Combined that’s roughly 80% of my portfolio. I have a small BRK position. And the rest is in individual TIPS and nominal t bills.

My TQQQ position is up roughly 50% since I bought it. It generates vacation money for me.

[JBTX]

My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.

The supply shocks will diminish but the govt spending likely won’t. 2023 deficit was 1.7 trillion. Debt service costs will continue to rise if rates stay near the same. As more and more debt is issued to fund future increasing deficits (per CBO) that in itself could cause rates to go up as supply exceeds demand driving bond prices down.

Now whether this happens or inflation goes down or not ultimately I don’t know, but there is no way I’d go 100% into a risky strategy based upon a hypothesis.

The various hedgefundie threads years ago stated that we can assume rates and inflation will never go up again (to a large degree) and as such feel comfortable leveraging stocks and bonds. It didn’t play out exactly as planned, but Hedgefundie was smart and abandoned the board before the strategy went south.

[watchnerd]

Without addressing the rest, I note that TQQQ says it's not designed for use as a long term investment (https://www.proshares.com/our-etfs/leve ... verse/tqqq):

Important Considerations

This leveraged ProShares ETF seeks a return that is 3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.

Ahwhat do they know? Not like they invented the thing. Oh, wait ….

I would actually say as risky as forbidden asset is, it might be less risky than this....

[RichIn7Years]

My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.

The supply shocks will diminish but the govt spending likely won’t. 2023 deficit was 1.7 trillion. Debt service costs will continue to rise if rates stay near the same. As more and more debt is issued to fund future increasing deficits (per CBO) that in itself could cause rates to go up as supply exceeds demand driving bond prices down.

Now whether this happens or inflation goes down or not ultimately I don’t know, but there is no way I’d go 100% into a risky strategy based upon a hypothesis.

The various hedgefundie threads years ago stated that we can assume rates and inflation will never go up again (to a large degree) and as such feel comfortable leveraging stocks and bonds. It didn’t play out exactly as planned, but Hedgefundie was smart and abandoned the board before the strategy went south.

Our deficit and existing debt is exactly why I don’t see interest rates going that much higher. Either we’re going to cut rates or we’re going to increase taxes and reduce government spending. Both are disinflationary. I don’t see continued borrowing being sustainable. At some point the U.S. would suck up all liquidity in the world.

I guess a long term risk is increasing dependency ratio causing a secular inflationary force. Not sure how it will pan out in the next decade or how it will affect large tech stocks.


Also @others fwiw I am diversified in the sense that I have a 401k with a standard investment approach.

[JBTX]

My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed, and that the recent supply shock + government spending is the primary driver for current inflation. Inflation and rates will eventually come down and tech dominance will persist.

The supply shocks will diminish but the govt spending likely won’t. 2023 deficit was 1.7 trillion. Debt service costs will continue to rise if rates stay near the same. As more and more debt is issued to fund future increasing deficits (per CBO) that in itself could cause rates to go up as supply exceeds demand driving bond prices down.

Now whether this happens or inflation goes down or not ultimately I don’t know, but there is no way I’d go 100% into a risky strategy based upon a hypothesis.

The various hedgefundie threads years ago stated that we can assume rates and inflation will never go up again (to a large degree) and as such feel comfortable leveraging stocks and bonds. It didn’t play out exactly as planned, but Hedgefundie was smart and abandoned the board before the strategy went south.

Our deficit and existing debt is exactly why I don’t see interest rates going that much higher. Either we’re going to cut rates or we’re going to increase taxes and reduce government spending. Both are disinflationary. I don’t see continued borrowing being sustainable. At some point the U.S. would suck up all liquidity in the world.

I guess a long term risk is increasing dependency ratio causing a secular inflationary force. Not sure how it will pan out in the next decade or how it will affect large tech stocks.


Also @others fwiw I am diversified in the sense that I have a 401k with a standard investment approach.

In 2019 nobody had COVID and all of the after effects on their bingo card. Who knows what the future holds. Good luck.

[firebirdparts]

Well, this should be obvious, but what really stands out is your risk of “ruin” is really different from what normal people do. I’m sure you see that. If you avoid ruin, then the rest of the range of outcomes looks pretty good.

[happyisland]

This has all the makings of another classic Bogleheads thread, with an OP posing a question about what sounds like a get-rich-quick scheme, getting near-universal feedback that this idea is risky and not worth it, and seemingly choosing to ignore the advice they have been given. What could go wrong?

[rockstar]

This has all the makings of another classic Bogleheads thread, with an OP posing a question about what sounds like a get-rich-quick scheme, getting near-universal feedback that this idea is risky and not worth it, and seemingly choosing to ignore the advice they have been given. What could go wrong?

Have you seen the movie: the Sting? This reminds me of the early bet that Redford makes at the beginning of the movie. Leverage is a nice distraction from the rest of the portfolio. But I wouldn’t bet the house on it.

[firebirdparts]

This has all the makings of another classic Bogleheads thread, with an OP posing a question about what sounds like a get-rich-quick scheme, getting near-universal feedback that this idea is risky and not worth it, and seemingly choosing to ignore the advice they have been given. What could go wrong?

Have you seen the movie: the Sting? This reminds me of the early bet that Redford makes at the beginning of the movie. Leverage is a nice distraction from the rest of the portfolio. But I wouldn’t bet the house on it.

I saw it in theatres! I was just a boy, though.

[firebirdparts]

This has all the makings of another classic Bogleheads thread, with an OP posing a question about what sounds like a get-rich-quick scheme, getting near-universal feedback that this idea is risky and not worth it, and seemingly choosing to ignore the advice they have been given. What could go wrong?

Self-awareness is such a precious commodity.

[toddthebod]

Without addressing the rest, I note that TQQQ says it's not designed for use as a long term investment (https://www.proshares.com/our-etfs/leve ... verse/tqqq):

Important Considerations

This leveraged ProShares ETF seeks a return that is 3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.

Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks.

I understand but I don't think that excludes it from use as a long term investment vehicle. You can test it roughly here: https://www.portfoliovisualizer.com/bac ... JroioupFlb Replace the underlying etf with 210% weighting with SPY or QQQ as you'd like.

Can you explain this? Why isn't TQQQ represented by 300% QQQ/-200% Cash? How does the Treasury fund fit in?

[BrooklynInvest]

The OP lost me at "backtest."

[rockstar]

The OP lost me at "backtest."

Lots of threads here back testing intermediate and long treasuries. This isn’t new here. It’s the basis of so many discussions.

[Crmck26]

One other thing that often gets overlooked with these leveraged etfs is their beta. The beta on TQQQ is over 3, around 3.4 or so. So it’s going to be even more volatile than what you would expect a 3x fund to be. QLD is the 2x version and that beta is around 2.3. You can see the impact of that over the 2 year and 5 year horizons, where it QLD beats TQQQ. From lifecycle investing, they target 2x leverage with S&P or similar (though through futures) for this very reason, as that beta is 2. 3x over the long haul is a bad idea.

[20cm]

The OP lost me at "backtest."

Lots of threads here back testing intermediate and long treasuries. This isn’t new here. It’s the basis of so many discussions.

The results of backtests on this forum are only acceptable if they show VTSAX beating the option being discussed, or failing that, if they show either VTSAX or VBIAX beating the option being discussed "on a risk-adjusted basis as measured by the Sharpe ratio" (a.k.a. the Participation Trophy of fund management). Any other result is obviously down to luck over the period of the backtest, even if the period is decades long and the starting point chosen simply by the inception date of the securities themselves.

[HomerJ]

OP, you know if you're right...

you could just invest 50% into TQQQ, and be rich in 9 years.

9 years is pretty fast too, and if the unexpected happens, you still have 50% of your money.

[nisiprius]

...I understand but I don't think that excludes it from use as a long term investment vehicle. You can test it roughly here: https://www.portfoliovisualizer.com/bac ... JroioupFlb Replace the underlying etf with 210% weighting with SPY or QQQ as you'd like.

Can you explain this? Why isn't TQQQ represented by 300% QQQ/-200% Cash? How does the Treasury fund fit in?

I agree that it would have been better for Richin7Years to spend the time to actually create a backtest link matching the scenario he plans to implement. I am guessing that he's trying to do something like HEDGEFUNDIE's Excellent Adventure but with QQQ instead of SPY.

[RichIn7Years]

OP, you know if you're right...

you could just invest 50% into TQQQ, and be rich in 9 years.

9 years is pretty fast too, and if the unexpected happens, you still have 50% of your money.

Title should be 100% of my taxable account. Roughly 20% of my DCA is into my 401k into VLXVX. In the ruin case (a lost decade such as the 2010s or worse without a recovery), I still have that. I personally don't care about having many millions instead of a couple million when I retire. I would much rather have that money when I'm younger. My exit plan is when/if I hit $5m, I will move to a state without income tax and set up a trailing stop loss or start selling covered calls. I derisk into spy or qqq on sell.

• In an optimistic scenario this takes 7 years give or take (2010s, bull market, low rates, or a bubble)
• In a less optimistic scenario this takes longer, 10 years give or take (90s or bull market with persistent high rates)
• In a pessimistic scenario with a recovery, this would take 15 years, but it wouldn't be that much worse than the underlying index for most time periods. (2010s or flat market with mostly high rates)
• In the worst case (80s bear market with high rates) this would lead to ruin.

https://www.portfoliovisualizer.com/bac ... HB5llHjltJ

You can play around with scenarios here. I do it with the leverage feature and add a avg FFR of decade + 1.5% rate with 100% on SPY or QQQ, depending on what's available. -200 cashx doesn't include the expense ratio + the default risk rate in borrowing I think.

...I understand but I don't think that excludes it from use as a long term investment vehicle. You can test it roughly here: https://www.portfoliovisualizer.com/bac ... JroioupFlb Replace the underlying etf with 210% weighting with SPY or QQQ as you'd like.

Can you explain this? Why isn't TQQQ represented by 300% QQQ/-200% Cash? How does the Treasury fund fit in?

I agree that it would have been better for Richin7Years to spend the time to actually create a backtest link matching the scenario he plans to implement. I am guessing that he's trying to do something like HEDGEFUNDIE's Excellent Adventure but with QQQ instead of SPY.

The problem is this is in a taxable account and I would have to move to a roth IRA to do rebalancing (otherwise it won't be worth it after income paying taxes on whatever I sell)

[Kbg]

100% TQQQ would be beyond stupid. Don't do it.

Having noted this, for a non-complex approach to leverage in order to diversify more, 33% or less will work out just fine. I find most people don't really understand the long-term behavior of 3x ETFs. No doubt there is leverage drag and it will eat your lunch when it is happening. I'm not going to get into it here, but it is important to study what happens during non-volatile times and what happens during trending down and trending up times. I've owned TQQQ since its inception, and it has been fine with no surprises. But I've spent a significant amount learning the details.

There are cheaper ways to gain leverage but they take considerably more work to trade/maintain a position and in some ways are safer.

As has been mentioned, there are some epically long threads that have "HedgeFundie" in them. You can learn a lot be going through them.

[RichIn7Years]

100% TQQQ would be beyond stupid. Don't do it.

Having noted this, for a non-complex approach to leverage in order to diversify more, 33% or less will work out just fine. I find most people don't really understand the long-term behavior of 3x ETFs. No doubt there is leverage drag and it will eat your lunch when it is happening. I'm not going to get into it here, but it is important to study what happens during non-volatile times and what happens during trending down and trending up times. I've owned TQQQ since its inception, and it has been fine with no surprises. But I've spent a significant amount learning the details.

There are cheaper ways to gain leverage but they take considerably more work to trade/maintain a position and in some ways are safer.

As has been mentioned, there are some epically long threads that have "HedgeFundie" in them. You can learn a lot be going through them.

Sorry if this isn't clear but 80% of my "free cash flow" is in TQQQ. The rest is in VLXVX (my 401k). Also, nice job! Envious of your position.

I understand I can use a balance of futures/options but this is in a taxable account so I can't rebalance without incurring massive income taxes.

[nisiprius]

...Sorry if this isn't clear but 80% of my "free cash flow" is in TQQQ. The rest is in VLXVX...

Then why, to illustrate your strategy, did you give us a backtest of a portfolio that

• is only 10% invested in a leveraged position, not 100%, with 90% of it in an unleveraged long-term bond fund...
• and only 2X leverage rather than 3X...
• and only in SPY rather than in QQQ?

Anyway, I agree with kbg. If you want to discuss this with a group of people who will "get" what you are trying to do, you probably want this thread: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

[RichIn7Years]

...Sorry if this isn't clear but 80% of my "free cash flow" is in TQQQ. The rest is in VLXVX...

Then why, to illustrate your strategy, did you give us a backtest of a portfolio that

• is only 10% invested in a leveraged position, not 100%, with 90% of it in an unleveraged long-term bond fund...
• and only 2X leverage rather than 3X...
• and only in SPY rather than in QQQ?

Anyway, I agree with kbg. If you want to discuss this with a group of people who will "get" what you are trying to do, you probably want this thread: Modified versions of HFEA with ITT and Futures / Lifecycle Investing with Modern Portfolio Theory

Because my 401k is completely separate from my tax account. I’m not rebalancing it nor do I care about its value. It’s not very relevant to this discussion. I just do a standard 401k contribution per paycheck.

[SB1234]

My hypotheses are the underlying trend that we are in a deflationary environment hasn’t changed,

Deflationary environment is caused by a supply overhang. I'm not seeing a supply overhang in the future, but you may have better vision than me.