Investing 100% into TQQQ

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mall0c
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Re: Investing 100% into TQQQ

Post by mall0c »

Here is the story of market_timer, a smart guy (too smart) who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
Last edited by mall0c on Mon Nov 20, 2023 8:43 am, edited 1 time in total.
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Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
mall0c
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Re: Investing 100% into TQQQ

Post by mall0c »

Valuethinker wrote: Mon Nov 20, 2023 7:58 am
You make me feel very old realising I was on this Forum 15 years ago :oops:
Thank you for your service. Always appreciate your posts here.
FIRE'd. Mid-40s.
er999
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Re: Investing 100% into TQQQ

Post by er999 »

Valuethinker wrote: Mon Nov 20, 2023 7:58 am
mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
The benefit of leveraged etfs, though, is you can never lose more than your initial investment, unlike traditional margin. Worst case for the poster is seven years later he’s lost all his contributions.

If he does go forward with his 100% into tqqq plan hopefully he can be conservative in the rest of his financial life — have a larger than usual emergency fund, maybe 2-3 years. If he buys a house don’t do a 30 year mortgage, do a 15 year mortgage and try to pay off in 5-10 years to make up for the heavy portfolio risk.
gtrplayer
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Re: Investing 100% into TQQQ

Post by gtrplayer »

Valuethinker wrote: Mon Nov 20, 2023 7:58 am
mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
What amazes me about that thread is his theory would have worked in almost every conceivable environment except the one that happened.

Hedgefundie is similar although not quite as devastating because the plan could still work out, but the chance of interest rates skyrocketing and taking down TMF at the same time UPRO fell is the only scenario where it fails and it happened.

IMO - and here’s where I’m probably just as wrong as any other theory - to make leveraged ETFs work longterm, you need an actual negative correlation. You can do that with short leveraged ETF’s. I have attempted a 2 times short QQQ (QID) coupled with TQQQ. You lose gains but in the event of a crash, QID will come up enough to rebalance back and TQQ should rebound. TMF won’t save you but QID will. I am confident that I am missing something, though…
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

gtrplayer wrote: Mon Nov 20, 2023 9:26 am
Valuethinker wrote: Mon Nov 20, 2023 7:58 am
mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
What amazes me about that thread is his theory would have worked in almost every conceivable environment except the one that happened.

Hedgefundie is similar although not quite as devastating because the plan could still work out, but the chance of interest rates skyrocketing and taking down TMF at the same time UPRO fell is the only scenario where it fails and it happened.

IMO - and here’s where I’m probably just as wrong as any other theory - to make leveraged ETFs work longterm, you need an actual negative correlation. You can do that with short leveraged ETF’s. I have attempted a 2 times short QQQ (QID) coupled with TQQQ. You lose gains but in the event of a crash, QID will come up enough to rebalance back and TQQ should rebound. TMF won’t save you but QID will. I am confident that I am missing something, though…
The OP has to bail this strategy if volatility turns against them. The volatility drag will destroy their returns. Better off in QQQ with high volatility.

I don’t like leveraged bonds. But they feel less risky at a 4.5% yield than one close to zero. I’d still stick to t bills if swapping back and forth.
gtrplayer
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Re: Investing 100% into TQQQ

Post by gtrplayer »

rockstar wrote: Mon Nov 20, 2023 9:40 am
gtrplayer wrote: Mon Nov 20, 2023 9:26 am
Valuethinker wrote: Mon Nov 20, 2023 7:58 am
mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
What amazes me about that thread is his theory would have worked in almost every conceivable environment except the one that happened.

Hedgefundie is similar although not quite as devastating because the plan could still work out, but the chance of interest rates skyrocketing and taking down TMF at the same time UPRO fell is the only scenario where it fails and it happened.

IMO - and here’s where I’m probably just as wrong as any other theory - to make leveraged ETFs work longterm, you need an actual negative correlation. You can do that with short leveraged ETF’s. I have attempted a 2 times short QQQ (QID) coupled with TQQQ. You lose gains but in the event of a crash, QID will come up enough to rebalance back and TQQ should rebound. TMF won’t save you but QID will. I am confident that I am missing something, though…
The OP has to bail this strategy if volatility turns against them. The volatility drag will destroy their returns. Better off in QQQ with high volatility.

I don’t like leveraged bonds. But they feel less risky at a 4.5% yield than one close to zero. I’d still stick to t bills if swapping back and forth.
Past performance, while not a predictor of future performance, doesn’t seem to support that volatility decay will lead to a worse result over time. TQQQ comes out ahead of QQQ eventually.

The problem is a crash that wipes out 99% of the value. This is where I think you need something negatively correlated to save the portfolio. If you had 3x short QQQ, you’ll lose most of the gains so there’s not much of point to it, which is why I’m thinking 2x short would work. (Again, there are probably a myriad of reasons I’m wrong)
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

gtrplayer wrote: Mon Nov 20, 2023 9:26 am
Valuethinker wrote: Mon Nov 20, 2023 7:58 am
mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934
You make me feel very old realising I was on this Forum 15 years ago :oops:

He was quite honest. He was fortunate in that he could borrow from his family to cover the deficit (about $1m from memory - he was a graduate student at that time) and then to work in a lucrative field. With very tight expense control, he was able to repay his other family members. He said he learned a lot from the experience - in particular not to believe that economic theories represent all possible states of reality that can occur. Also living very tightly for a period, about what was important and gave pleasure in life.
What amazes me about that thread is his theory would have worked in almost every conceivable environment except the one that happened.
Perhaps not entirely a coincidence? There was a lot of leverage, by a lot of players, in the market -- investment banks, hedge funds etc. And the American Average Jo/sephine was doing a huge leveraged play on residential Real Estate. It's of course hard to size relative to GDP (or any other metric) for eras pre the actual creation of GDP, but it appeared that was the largest asset bubble in human history-- perhaps Japan 1990 was the biggest before that? The Chinese RE bubble now is even larger, it appears.
Hedgefundie is similar although not quite as devastating because the plan could still work out, but the chance of interest rates skyrocketing and taking down TMF at the same time UPRO fell is the only scenario where it fails and it happened.
"Aye. Therein lies the rub". If there's a set of circumstances where something should not happen, then maybe that's when it does. I don't know your acronyms but 1994 was a year when we saw the 30 year US Treasury return something like -30% (despite a positive return from yield of over 5%) and stocks, from memory, fell by c -8%. The circumstances around the 1998 fall of Long Term Capital Management were also "unprecedented".

(the Goldman Sachs Small Cap Value hedge fund that nearly collapsed in August 2007, there was a famous line "this event could only happen once in every 6 million years, according to our models" (paraphrasing)).

If the instruments exist for a market play, then perhaps they do because people are already doing it? By the time someone works out a way to do it, for retail investors, it's out there, and (to riff off Hegel) "the market's thesis generates its own anti-thesis" (I am just being a bit pretentious here because I've never actually read Hegel :( :wink: ). And somebody out there has figured out the new "the Big Short" against your strategy.
IMO - and here’s where I’m probably just as wrong as any other theory - to make leveraged ETFs work longterm, you need an actual negative correlation. You can do that with short leveraged ETF’s. I have attempted a 2 times short QQQ (QID) coupled with TQQQ. You lose gains but in the event of a crash, QID will come up enough to rebalance back and TQQ should rebound. TMF won’t save you but QID will. I am confident that I am missing something, though…
They don't do what people think they do. Allow a long term bet against a market index, or for a market index. You are making an additional bet as to how the change in market level occurs. To my mind, there are LEAPS (S&P 500 calls?) and perhaps there is a Put option equivalent? That's how you implement this strategy.
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

The Warren Buffett dictum about "First, don't lose money" seems very apposite to this question of long term wealth building.

The risk of a multi-year bear market in equities is great enough, that you can't afford to leverage your position and risk wiping yourself out.

I always draw an exception for a home mortgage, because:

- you can't be margin called (although you can lose your job in a recession)
- it's the only really cheap money most of us will ever have (rates on car loans etc in the past 10 years were anomalous)

So equity leverage achieved that way, with an up to 30 year time horizon, has a good chance of working (it seems, based on limited historical evidence of independent 30 year periods).
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HomerJ
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Re: Investing 100% into TQQQ

Post by HomerJ »

moneyflowin wrote: Mon Nov 20, 2023 2:47 am
HomerJ wrote: Mon Nov 20, 2023 12:02 am
watchnerd wrote: Sun Nov 19, 2023 11:51 pm
Alpha4 wrote: Sun Nov 19, 2023 11:23 pm

Perhaps this is indeed what might've happened to a hypothetical TQQQ in the dotcom crash....but I would counter that UOPIX (the 2X daily NASDAQ-100 fund) dropped almost 98.84% from its March 2000 peak to its late autumn 2002 low and it never got shut down
I still have 1.16% of my money?

yay, I guess?
$10,000 invested in UOPIX from Jan 2000 to Oct 2023 is worth $12,400 today. It was worth $7000 in Jan 2020, after 20 years. At least, after 23 years, it's now made a small profit.

QQQ is worth $44,900 today.

How is possible that a long-term holding of 2x QQQ is worth 25% of plain old QQQ? The young adults today should probably investigate that before investing 100% of their money in a leveraged QQQ product.
While I know the point you're making, it's not relevant to the OP's situation. You're assuming a single lump-sum investment at the worst possible time. The OP will be contributing monthly, some of which would be purchased at low prices of 2001-2002. If you re-run the simulation with monthly contributions as the OP stated, it will show UOPIX outperforming QQQ since 2000
Except at some point, one will have so much that it will be a lot like a lump-sum investment. When the OP has $7 million in it, his $100,000 a year contribution will be a much smaller part of the pie, and if it drops 98%, he will basically be starting all over again. The example above shows that it just doesn't necessarily bounce back in a year or two. If you experience a 98% loss, you could be looking at 20 years and still be underwater. Because that is what happened before. So, by definition, it's possible.

OP needs a plan to diversify away the risk. He should think now about how large his holdings can get before it gets too dangerous (compared to his human capital) to hold it all in TQQQ.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Topic Author
RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

mall0c wrote: Mon Nov 20, 2023 7:49 am Here is the story of market_timer, a smart guy (too smart) who once had a similar get rich quick scheme, that he was honest enough to document here on BH about 15 years ago. It's a gem of a read.

viewtopic.php?t=5934

His strategy is much riskier than mine, for a few obvious and not so obvious reasons.

The obvious reason: I can’t go below 0 so I can’t be margin called during unfortunate times

The not so obvious reason: a proper leveraged bond/equity portfolio would have done fine in 2008. Clearly OP messed up.

Edit: I misread on skimming it, it was hedged with a house. maybe I misread again but I’m not going to read a 30 page thread :(
Last edited by RichIn7Years on Mon Nov 20, 2023 12:45 pm, edited 2 times in total.
Nathan Drake
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Re: Investing 100% into TQQQ

Post by Nathan Drake »

inksane wrote: Mon Nov 20, 2023 4:10 am
Nathan Drake wrote: Sun Nov 19, 2023 3:53 pm What is the point of having 100% of your portfolio in TQQQ? What is the thesis? Tech = outperform, therefore, lever up as high as possible until it "trends" against you? Why didn't your trend indicator flash in 2022?
The thesis is that yes, I think tech will continue outperforming in the next decade even if AI doesn't fully materialise (which I think is overhyped anyway). I consider Nasdaq100 sufficiently diversified even if the top 5 companies that is just tech make the 50% of the index, the quality is very different from the dot com bubble so I don't fear a burst like that one.

I'm relatively young with a decent paying job and I can afford to make mistakes even if that pushes away my retirement goal by 10 years, is worth thee try and I know I would regret not having tried this when I had the chance.

No, I'm not trying to lever up as high as possible as that wouldn't be 100% TQQQ, more like 300% TQQQ/-200% CASH which I could do if I wanted given that the TQQQ has a 30% margin requirement on IBKR. I consider TQQQ high enough in the tangent line of the efficient frontier.

Something else that I'm considering is having 150%QLD/-50%CASH as this also achieves 3x but without that much volatility decay as this would be a mix of constant leverage and constant amount, but would need rebalancing frequently. I need to test this more but as I mentioned before I'm not concerned about decay and I rather not overcomplicate if I can get similar result with a simpler strategy.

At lastly yes, my indicator flashed in Feb 2022 as it did most of the standard SMA/EMA indicators out there, anybody that sold would have avoided the crash. I have TQQQ positions but I look at the QQQ for signals, TQQQ "doesn't care" about trends, it will do whatever the QQQ does minus fees thee borrowing rate so it doesn't make sense to look at TQQQ.
All you've ever known is a fairly short boom cycle for Tech. It goes through Booms and Busts.

It has nothing to do with the quality of the companies, some of them just get overvalued - see Nifty Fifty era in the 70s.

Even the companies in the year 2000 were high quality, like Cisco. Grows profits handsomely in the mid double digits for two decades. Too bad the price was too high in the year 20000.

In a secular bear market for Tech, any strategy focusing on QQQ even with trend indicators will get slaughtered.

This strategy is pure greed and speculation.
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RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

inksane wrote: Mon Nov 20, 2023 4:10 am
Nathan Drake wrote: Sun Nov 19, 2023 3:53 pm What is the point of having 100% of your portfolio in TQQQ? What is the thesis? Tech = outperform, therefore, lever up as high as possible until it "trends" against you? Why didn't your trend indicator flash in 2022?
The thesis is that yes, I think tech will continue outperforming in the next decade even if AI doesn't fully materialise (which I think is overhyped anyway). I consider Nasdaq100 sufficiently diversified even if the top 5 companies that is just tech make the 50% of the index, the quality is very different from the dot com bubble so I don't fear a burst like that one.

I'm relatively young with a decent paying job and I can afford to make mistakes even if that pushes away my retirement goal by 10 years, is worth thee try and I know I would regret not having tried this when I had the chance.

No, I'm not trying to lever up as high as possible as that wouldn't be 100% TQQQ, more like 300% TQQQ/-200% CASH which I could do if I wanted given that the TQQQ has a 30% margin requirement on IBKR. I consider TQQQ high enough in the tangent line of the efficient frontier.

Something else that I'm considering is having 150%QLD/-50%CASH as this also achieves 3x but without that much volatility decay as this would be a mix of constant leverage and constant amount, but would need rebalancing frequently. I need to test this more but as I mentioned before I'm not concerned about decay and I rather not overcomplicate if I can get similar result with a simpler strategy.

At lastly yes, my indicator flashed in Feb 2022 as it did most of the standard SMA/EMA indicators out there, anybody that sold would have avoided the crash. I have TQQQ positions but I look at the QQQ for signals, TQQQ "doesn't care" about trends, it will do whatever the QQQ does minus fees thee borrowing rate so it doesn't make sense to look at TQQQ.
I think AI is living up to its hype, given the whole OpenAI fiasco seeming somewhat related to part of them thinking AI development is going too fast. We are probably not that far from a general intelligence.
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HomerJ
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Re: Investing 100% into TQQQ

Post by HomerJ »

RichIn7Years wrote: Mon Nov 20, 2023 12:59 pm I think AI is living up to its hype, given the whole OpenAI fiasco seeming somewhat related to part of them thinking AI development is going too fast. We are probably not that far from a general intelligence.
We are nowhere near general intelligence.

AI can still be disruptive, but AGI is still very far off.

Just my opinion, of course, but the AI we have today is so obviously limited in certain aspects, I don't see any glimmer of AGI yet.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

Nathan Drake wrote: Mon Nov 20, 2023 12:36 pm
inksane wrote: Mon Nov 20, 2023 4:10 am
Nathan Drake wrote: Sun Nov 19, 2023 3:53 pm What is the point of having 100% of your portfolio in TQQQ? What is the thesis? Tech = outperform, therefore, lever up as high as possible until it "trends" against you? Why didn't your trend indicator flash in 2022?
The thesis is that yes, I think tech will continue outperforming in the next decade even if AI doesn't fully materialise (which I think is overhyped anyway). I consider Nasdaq100 sufficiently diversified even if the top 5 companies that is just tech make the 50% of the index, the quality is very different from the dot com bubble so I don't fear a burst like that one.

I'm relatively young with a decent paying job and I can afford to make mistakes even if that pushes away my retirement goal by 10 years, is worth thee try and I know I would regret not having tried this when I had the chance.

No, I'm not trying to lever up as high as possible as that wouldn't be 100% TQQQ, more like 300% TQQQ/-200% CASH which I could do if I wanted given that the TQQQ has a 30% margin requirement on IBKR. I consider TQQQ high enough in the tangent line of the efficient frontier.

Something else that I'm considering is having 150%QLD/-50%CASH as this also achieves 3x but without that much volatility decay as this would be a mix of constant leverage and constant amount, but would need rebalancing frequently. I need to test this more but as I mentioned before I'm not concerned about decay and I rather not overcomplicate if I can get similar result with a simpler strategy.

At lastly yes, my indicator flashed in Feb 2022 as it did most of the standard SMA/EMA indicators out there, anybody that sold would have avoided the crash. I have TQQQ positions but I look at the QQQ for signals, TQQQ "doesn't care" about trends, it will do whatever the QQQ does minus fees thee borrowing rate so it doesn't make sense to look at TQQQ.
All you've ever known is a fairly short boom cycle for Tech. It goes through Booms and Busts.

It has nothing to do with the quality of the companies, some of them just get overvalued - see Nifty Fifty era in the 70s.

Even the companies in the year 2000 were high quality, like Cisco. Grows profits handsomely in the mid double digits for two decades. Too bad the price was too high in the year 20000.

In a secular bear market for Tech, any strategy focusing on QQQ even with trend indicators will get slaughtered.

This strategy is pure greed and speculation.
Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
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HomerJ
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Re: Investing 100% into TQQQ

Post by HomerJ »

rockstar wrote: Mon Nov 20, 2023 2:11 pm Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
SP500 has always been top-heavy.

If there's a tech crash, then at least the SP500 could have some other sector to prop it up.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Nathan Drake
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Re: Investing 100% into TQQQ

Post by Nathan Drake »

rockstar wrote: Mon Nov 20, 2023 2:11 pm
Nathan Drake wrote: Mon Nov 20, 2023 12:36 pm
inksane wrote: Mon Nov 20, 2023 4:10 am
Nathan Drake wrote: Sun Nov 19, 2023 3:53 pm What is the point of having 100% of your portfolio in TQQQ? What is the thesis? Tech = outperform, therefore, lever up as high as possible until it "trends" against you? Why didn't your trend indicator flash in 2022?
The thesis is that yes, I think tech will continue outperforming in the next decade even if AI doesn't fully materialise (which I think is overhyped anyway). I consider Nasdaq100 sufficiently diversified even if the top 5 companies that is just tech make the 50% of the index, the quality is very different from the dot com bubble so I don't fear a burst like that one.

I'm relatively young with a decent paying job and I can afford to make mistakes even if that pushes away my retirement goal by 10 years, is worth thee try and I know I would regret not having tried this when I had the chance.

No, I'm not trying to lever up as high as possible as that wouldn't be 100% TQQQ, more like 300% TQQQ/-200% CASH which I could do if I wanted given that the TQQQ has a 30% margin requirement on IBKR. I consider TQQQ high enough in the tangent line of the efficient frontier.

Something else that I'm considering is having 150%QLD/-50%CASH as this also achieves 3x but without that much volatility decay as this would be a mix of constant leverage and constant amount, but would need rebalancing frequently. I need to test this more but as I mentioned before I'm not concerned about decay and I rather not overcomplicate if I can get similar result with a simpler strategy.

At lastly yes, my indicator flashed in Feb 2022 as it did most of the standard SMA/EMA indicators out there, anybody that sold would have avoided the crash. I have TQQQ positions but I look at the QQQ for signals, TQQQ "doesn't care" about trends, it will do whatever the QQQ does minus fees thee borrowing rate so it doesn't make sense to look at TQQQ.
All you've ever known is a fairly short boom cycle for Tech. It goes through Booms and Busts.

It has nothing to do with the quality of the companies, some of them just get overvalued - see Nifty Fifty era in the 70s.

Even the companies in the year 2000 were high quality, like Cisco. Grows profits handsomely in the mid double digits for two decades. Too bad the price was too high in the year 20000.

In a secular bear market for Tech, any strategy focusing on QQQ even with trend indicators will get slaughtered.

This strategy is pure greed and speculation.
Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
S&P 500 is far less concentrated than QQQ. True, in such an environment where big tech does poorly, S&P 500 returns will likely not do well. But remember that the NASDAQ lost over 80% of its value in the early 2000s while the Market was only down 50%.

These posters are banking on "trend" signals to tell them when to get out of a TQQQ scenario to spare them of a 98% drawdown. I'm unconvinced. They may be more likely to double down as it drops, not realizing that it could have manic periods of volatility up and down while still trending negatively overall for over a decade.
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Hyperchicken
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Re: Investing 100% into TQQQ

Post by Hyperchicken »

rockstar wrote: Mon Nov 20, 2023 2:11 pm Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
This seems self-contradictory.

You are saying that S&P 500 is top-heavy, and that is bad. But QQQ is even more top-heavy. And you are saying that that is somehow better?

https://www.etfrc.com/funds/overlap.php

All the "usual suspects" (Apple, Microsoft, Alphabet, etc.) have more weight in QQQ than in S&P 500.
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

Hyperchicken wrote: Mon Nov 20, 2023 2:23 pm
rockstar wrote: Mon Nov 20, 2023 2:11 pm Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
This seems self-contradictory.

You are saying that S&P 500 is top-heavy, and that is bad. But QQQ is even more top-heavy. And you are saying that that is somehow better?

https://www.etfrc.com/funds/overlap.php

All the "usual suspects" (Apple, Microsoft, Alphabet, etc.) have more weight in QQQ than in S&P 500.
You’re gonna gain more, so even if it drops more, you’re still ahead with the exception of the dotcom bust, where the S&P 500 didn’t have as much tech exposure at that particular time. That is no longer the case. Now, you have tech exposure in both, but you have more names dragging the performance overall in the S&P 500. And there is no guarantee that when tech explodes, the other 493 names will automatically do good. Just like there no guarantee that bonds will negatively correlate.
Hyperchicken
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Re: Investing 100% into TQQQ

Post by Hyperchicken »

rockstar wrote: Mon Nov 20, 2023 2:33 pm You’re gonna gain more, so even if it drops more, you’re still ahead with the exception of the dotcom bust, where the S&P 500 didn’t have as much tech exposure at that particular time. That is no longer the case. Now, you have tech exposure in both, but you have more names dragging the performance overall in the S&P 500. And there is no guarantee that when tech explodes, the other 493 names will automatically do good. Just like there no guarantee that bonds will negatively correlate.
So top-heavy is good when QQQ does it but bad when S&P 500 does it?
rockstar
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Re: Investing 100% into TQQQ

Post by rockstar »

Nathan Drake wrote: Mon Nov 20, 2023 2:18 pm
rockstar wrote: Mon Nov 20, 2023 2:11 pm
Nathan Drake wrote: Mon Nov 20, 2023 12:36 pm
inksane wrote: Mon Nov 20, 2023 4:10 am
Nathan Drake wrote: Sun Nov 19, 2023 3:53 pm What is the point of having 100% of your portfolio in TQQQ? What is the thesis? Tech = outperform, therefore, lever up as high as possible until it "trends" against you? Why didn't your trend indicator flash in 2022?
The thesis is that yes, I think tech will continue outperforming in the next decade even if AI doesn't fully materialise (which I think is overhyped anyway). I consider Nasdaq100 sufficiently diversified even if the top 5 companies that is just tech make the 50% of the index, the quality is very different from the dot com bubble so I don't fear a burst like that one.

I'm relatively young with a decent paying job and I can afford to make mistakes even if that pushes away my retirement goal by 10 years, is worth thee try and I know I would regret not having tried this when I had the chance.

No, I'm not trying to lever up as high as possible as that wouldn't be 100% TQQQ, more like 300% TQQQ/-200% CASH which I could do if I wanted given that the TQQQ has a 30% margin requirement on IBKR. I consider TQQQ high enough in the tangent line of the efficient frontier.

Something else that I'm considering is having 150%QLD/-50%CASH as this also achieves 3x but without that much volatility decay as this would be a mix of constant leverage and constant amount, but would need rebalancing frequently. I need to test this more but as I mentioned before I'm not concerned about decay and I rather not overcomplicate if I can get similar result with a simpler strategy.

At lastly yes, my indicator flashed in Feb 2022 as it did most of the standard SMA/EMA indicators out there, anybody that sold would have avoided the crash. I have TQQQ positions but I look at the QQQ for signals, TQQQ "doesn't care" about trends, it will do whatever the QQQ does minus fees thee borrowing rate so it doesn't make sense to look at TQQQ.
All you've ever known is a fairly short boom cycle for Tech. It goes through Booms and Busts.

It has nothing to do with the quality of the companies, some of them just get overvalued - see Nifty Fifty era in the 70s.

Even the companies in the year 2000 were high quality, like Cisco. Grows profits handsomely in the mid double digits for two decades. Too bad the price was too high in the year 20000.

In a secular bear market for Tech, any strategy focusing on QQQ even with trend indicators will get slaughtered.

This strategy is pure greed and speculation.
Same will happen with an S&P 500 strategy. So much of its recent growth has been in its top 7 holdings. If those blow up, the index will go down with them. At least with QQQ, you have more weight in what has been growing.
S&P 500 is far less concentrated than QQQ. True, in such an environment where big tech does poorly, S&P 500 returns will likely not do well. But remember that the NASDAQ lost over 80% of its value in the early 2000s while the Market was only down 50%.

These posters are banking on "trend" signals to tell them when to get out of a TQQQ scenario to spare them of a 98% drawdown. I'm unconvinced. They may be more likely to double down as it drops, not realizing that it could have manic periods of volatility up and down while still trending negatively overall for over a decade.
Selling will be challenging for the OP. The tax bill alone is gonna be a drag. You can’t hold this position forever.
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Re: Investing 100% into TQQQ

Post by rockstar »

Hyperchicken wrote: Mon Nov 20, 2023 2:36 pm
rockstar wrote: Mon Nov 20, 2023 2:33 pm You’re gonna gain more, so even if it drops more, you’re still ahead with the exception of the dotcom bust, where the S&P 500 didn’t have as much tech exposure at that particular time. That is no longer the case. Now, you have tech exposure in both, but you have more names dragging the performance overall in the S&P 500. And there is no guarantee that when tech explodes, the other 493 names will automatically do good. Just like there no guarantee that bonds will negatively correlate.
So top-heavy is good when QQQ does it but bad when S&P 500 does it?
Do you want more weight in winners or losers generally speaking?

And QQQ did rebalance this year. There are limits for holdings.
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Re: Investing 100% into TQQQ

Post by Hyperchicken »

rockstar wrote: Mon Nov 20, 2023 2:37 pm
Hyperchicken wrote: Mon Nov 20, 2023 2:36 pm So top-heavy is good when QQQ does it but bad when S&P 500 does it?
Do you want more weight in winners or losers generally speaking?

And QQQ did rebalance this year. There are limits for holdings.
Since I don't know which is which, I let market cap do its thing.

And, you did not answer the question.
keith6014
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Re: Investing 100% into TQQQ

Post by keith6014 »

In my opinion, 100% is too high. FWIW, I have 20% of my net worth in 3x ETFs.
Kbg
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Re: Investing 100% into TQQQ

Post by Kbg »

nisiprius wrote: Sat Nov 18, 2023 3:15 pm
Kbg wrote: Fri Nov 17, 2023 8:28 pm...
- Bear markets…usually out performs its equivalent in QQQ...
??? Typo?

Or do you consider TQQQ's a final balance of $2,092 to have "out performed" QQQ's final balance of $6,742 because QQQ's performance was downward, and TQQQ's was three times as far downward?
No and yes...32.58 x 3 = 97.74 vs 79.08. Unless this is the new math you have 20% of your money left vs. 2% if you would have invested equivalently and maintained 3x exposure the whole way down.

But getting back to understanding the math and the behavior vs. picking random dates to make a point...in severe bear markets, when adjusted for 3x, they perform better. Ditto for strong bull markets. It's all in the math of the daily reset. Volatility decay is for sure a thing. Over time, you are more likely to get 2x than 3x in terms of returns.

I'll be the first to say IMHO anything above 50% in a 3x ETF is pure stupidity and I personally would never go above 33%. I'm also not going to make a case of TQQQ being better than QQQ or QQQM at equivalent levels on a Sharpe basis (normally). However, we both know the benefits of diversification in lowering portfolio risk so the real question is what do you do with the funds not invested? I find that question far more interesting. Leverage is just a tool. If you smash your hand with a hammer, that doesn't mean the hammer is bad.
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Re: Investing 100% into TQQQ

Post by Kbg »

watchnerd wrote: Sat Nov 18, 2023 2:40 pm
Kbg wrote: Sat Nov 18, 2023 9:37 am
watchnerd wrote: Fri Nov 17, 2023 8:43 pm
Wanna see something funny?

https://www.portfoliovisualizer.com/bac ... CAEThf9pxh
Perhaps I see the point you were making??? But it's also apparent you're not too serious about evaluating data rigorously.

For typing sake, I'll bite. Asset returns normally have reasons behind them. You would be profited by going to the underlying reasons for really odd performance for BTC 2018, Nasdaq 100 1998-2002 and Gold/USD 1972-76.
Gold is obvious -- we came off the gold standard during 1970s high inflation.

Nasdaq 100 was the dotcom bubble.

What's the underlying reason for BTC in 2018?
Got me, no clue. Seemed like a combination of the earlier two. Why anyone buys crypto is a mystery to me. What I am relatively certain of is we aren't going to see a repeat of those 2018 returns in our lifetimes. For those who speculated successfully in it, my hat's off to you. No doubt it was one of the all time great speculative bubbles.
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Re: Investing 100% into TQQQ

Post by Valuethinker »

RichIn7Years wrote: Mon Nov 20, 2023 12:01 pm

The not so obvious reason: a proper leveraged bond/equity portfolio would have done fine in 2008. Clearly OP messed up.
That seems like a bold statement, to say the least.

Do you mean a market neutral bet on volatility? If you could have anticipated the market crash, that would have made a lot of money.

Paulson & Partners (no relation to the US Treasury Secretary at the time) made billions betting on the CDO crash as I recall. But then lost a lot for clients on bets that inflation would go up. Eventually shut down.
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Re: Investing 100% into TQQQ

Post by Valuethinker »

From what I can gather of this strategy:

- it captures daily volatility in tech stocks. It doesn't capture long run returns

- it involves leverage in the instruments used

Somewhere in there some market maker is going to make a return every time this product is created or traded. Logically that has to come from investors (when a company issues equity on the stock market there is a cost to shareholders (investors), however companies don't issue a lot of equity on the market relative to the total market cap). In an IPO it is a wealth transfer to investment banks, the favoured clients of the investment banks, and to pre IPO shareholders.

There's been comments that these strategies fail only under peculiar circumstances. I would submit that "peculiar circumstances" happen a lot more often than conventional assumptions about probability would suggest. That's Benoit Mandelbrot's point, I think.

And George Soros' point about reflexivity is the existence of such products influences markets to be have in ways which will eventually wipe them out.

Borrowing money to make money is a strategy which frequently fails for investors, in history.

Thinking in particular the leveraged utility trusts on Wall Street in 1929, one of which nearly brought down Goldman Sachs - - and led to profound changes in its culture which have continued to this day, it appears (in dilute form).

But there were also the split capital investment trusts fiasco in the UK. Closed end funds that owned shares in other closed end funds. Cost investors billions.
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Re: Investing 100% into TQQQ

Post by james22 »

RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
When people say things are different, 20 percent of the time they are right. John Templeton
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Re: Investing 100% into TQQQ

Post by Valuethinker »

james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
To state it less elegantly.

If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?

market timer had personal reasons (graduating with a prestigious graduate degree, working in a high paying role) that meant the disaster that his strategy became did not finish him off as an investor/ person of financial means. And he was young.

Most of us don't have the investing time pre retirement ahead of us, let alone the advantage of a high financial surplus from our incomes.
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Re: Investing 100% into TQQQ

Post by rockstar »

Valuethinker wrote: Tue Nov 28, 2023 7:57 am
james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
To state it less elegantly.

If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?

market timer had personal reasons (graduating with a prestigious graduate degree, working in a high paying role) that meant the disaster that his strategy became did not finish him off as an investor/ person of financial means. And he was young.

Most of us don't have the investing time pre retirement ahead of us, let alone the advantage of a high financial surplus from our incomes.
If they’ve held a 100% TQQQ position since the beginning of the year, their portfolio should have doubled. They can sell off their original investment and invest that conservatively and let the rest run. That would reduce their leveraged portfolio to 50%. And they wouldn’t have loss anything. If I was uncertain about this strategy, that’s what I would do the moment my holding became a long term hold.
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RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

Valuethinker wrote: Tue Nov 28, 2023 7:57 am
james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
To state it less elegantly.

If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?

market timer had personal reasons (graduating with a prestigious graduate degree, working in a high paying role) that meant the disaster that his strategy became did not finish him off as an investor/ person of financial means. And he was young.

Most of us don't have the investing time pre retirement ahead of us, let alone the advantage of a high financial surplus from our incomes.
Because this is not relevant to my situation. It's probably not clear, but the leverage used in that thread (margin) is very different from the leverage I use.
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Re: Investing 100% into TQQQ

Post by HomerJ »

RichIn7Years wrote: Tue Nov 28, 2023 1:05 pm
Valuethinker wrote: Tue Nov 28, 2023 7:57 am
james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
To state it less elegantly.

If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?

market timer had personal reasons (graduating with a prestigious graduate degree, working in a high paying role) that meant the disaster that his strategy became did not finish him off as an investor/ person of financial means. And he was young.

Most of us don't have the investing time pre retirement ahead of us, let alone the advantage of a high financial surplus from our incomes.
Because this is not relevant to my situation. It's probably not clear, but the leverage used in that thread (margin) is very different from the leverage I use.
This is true. Richin7years can't go negative using TQQQ, just to zero. He, at least, is investing money he already has, instead of borrowing money to invest.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: Investing 100% into TQQQ

Post by OohLaLa »

HomerJ wrote: Tue Nov 28, 2023 1:32 pm
RichIn7Years wrote: Tue Nov 28, 2023 1:05 pm
Valuethinker wrote: Tue Nov 28, 2023 7:57 am
james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
[...]
If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?
[...]
Because this is not relevant to my situation. It's probably not clear, but the leverage used in that thread (margin) is very different from the leverage I use.
This is true. Richin7years can't go negative using TQQQ, just to zero. He, at least, is investing money he already has, instead of borrowing money to invest.
Proshares and Direxion are doing it for us, at only 10%+! How nice of them! :wink:
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Re: Investing 100% into TQQQ

Post by Kbg »

All we have is market history. Market history is fact, elsewise is opinion. Some comparisons of the SPX and NDX indices. The first are the indexes without dividends (e.g. not total return, index values only)

Daily Data (CAGR/Max DD)
12/14/1972 - 11/27/23
SPX 7.42/-56.78
NDX 11.80/-82.90

3/24/2000 - 11/27/23 Nasdaq 100 Internet Bubble Peak
SPX 4.71/-56.78
NDX 5.30/-82.90

10/8/2002 - 11/27/23 Nasdaq 100 Internet Bubble Trough
SPX 8.57/-56.78
NDX 15.12/-53.71

Daily returns data total return
I have total returns data from 3/4/99
SPXTR 9.97/-55.25
NDXTR 9.71/-82.87

3/24/2000 - 11/27/23 Nasdaq 100 Internet Bubble Peak
SPXTR 6.72/-55.25
NDXTR 6.12/-82.87

10/8/2002 - 11/27/23 Nasdaq 100 Internet Bubble Trough
SPXTR 10.73/-55.25
NDXTR 16.11/-53.42

I have access to a private data source that has simulated the SPX back to 1925 (e.g. top 500 by market cap) and the worst ever drawdown for it was -86.22 during the Great Depression.

I tend to favor data that reflects something that was actually investable vs. historical data that no one could invest in. Using portfoliovisualizer:

Jan 2000 - 10/31/23

SPY 6.41%/-50.80%
QQQ 6.50%/-81.08%

Additional dates per above not added because the performance is essentially the TR index less ETF management fees.

No one knows the future, but history strongly suggests the Nasdaq 100 is a solid index that normally outperforms by a good margin with greater volatility. If one takes the absolute full history then one can't really say SPX can't crash has hard or as far as the NDX because (simulated) it has and this is backed up using the DJI which was a live index at the time.

I'm not here to sell or denigrate either index but a lot of what has been posted earlier is just not true. If one is genuinely interested in what "might" be a valid comparative analysis to make a decision from, my suggestion is to always take a look at the 36 and 60 month rolling return tab on portfoliovisualizer. One datapoint based assertions/analyses are just that...based on a single point. Much better to base an assessment on a multiple datapoint approach.

But again...no one knows the future. All we can do is look at the data and hope to draw inferences that do resemble the future (sort of). My inference from the above is that if I was looking for better performance/growth, I'm probably going to get it by investing in the NDX vs. the SPX to the tune of 3-4 CAGR per annum (that's significant) but the ride is going to be more volatile (that's what the historical volatility metrics say no matter what time period is used and data not included because it's always the case.)
Kbg
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Re: Investing 100% into TQQQ

Post by Kbg »

Found this for another take with some data (and same as my bottom line)

https://www.etmoney.com/learn/stocks/na ... in-the-us/
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Re: Investing 100% into TQQQ

Post by watchnerd »

james22 wrote: Mon Nov 27, 2023 8:43 pm
RichIn7Years wrote: Mon Nov 20, 2023 12:01 pmI’m not going to read a 30 page thread :(
Yeah, it could only save your life.
Classic Dunning-Kruger
65% Global Market Stocks | 31% Global Market Credit | 4% Global Market Weight Gold, Crypto || LMP TIPS
Valuethinker
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Re: Investing 100% into TQQQ

Post by Valuethinker »

Kbg wrote: Tue Nov 28, 2023 10:17 pm All we have is market history. Market history is fact, elsewise is opinion. Some comparisons of the SPX and NDX indices. The first are the indexes without dividends (e.g. not total return, index values only)

Daily Data (CAGR/Max DD)
12/14/1972 - 11/27/23
SPX 7.42/-56.78
NDX 11.80/-82.90

3/24/2000 - 11/27/23 Nasdaq 100 Internet Bubble Peak
SPX 4.71/-56.78
NDX 5.30/-82.90

10/8/2002 - 11/27/23 Nasdaq 100 Internet Bubble Trough
SPX 8.57/-56.78
NDX 15.12/-53.71

Daily returns data total return
I have total returns data from 3/4/99
SPXTR 9.97/-55.25
NDXTR 9.71/-82.87

3/24/2000 - 11/27/23 Nasdaq 100 Internet Bubble Peak
SPXTR 6.72/-55.25
NDXTR 6.12/-82.87

10/8/2002 - 11/27/23 Nasdaq 100 Internet Bubble Trough
SPXTR 10.73/-55.25
NDXTR 16.11/-53.42

I have access to a private data source that has simulated the SPX back to 1925 (e.g. top 500 by market cap) and the worst ever drawdown for it was -86.22 during the Great Depression.

I tend to favor data that reflects something that was actually investable vs. historical data that no one could invest in. Using portfoliovisualizer:

Jan 2000 - 10/31/23

SPY 6.41%/-50.80%
QQQ 6.50%/-81.08%

Additional dates per above not added because the performance is essentially the TR index less ETF management fees.

No one knows the future, but history strongly suggests the Nasdaq 100 is a solid index that normally outperforms by a good margin with greater volatility. If one takes the absolute full history then one can't really say SPX can't crash has hard or as far as the NDX because (simulated) it has and this is backed up using the DJI which was a live index at the time.

I'm not here to sell or denigrate either index but a lot of what has been posted earlier is just not true. If one is genuinely interested in what "might" be a valid comparative analysis to make a decision from, my suggestion is to always take a look at the 36 and 60 month rolling return tab on portfoliovisualizer. One datapoint based assertions/analyses are just that...based on a single point. Much better to base an assessment on a multiple datapoint approach.

But again...no one knows the future. All we can do is look at the data and hope to draw inferences that do resemble the future (sort of). My inference from the above is that if I was looking for better performance/growth, I'm probably going to get it by investing in the NDX vs. the SPX to the tune of 3-4 CAGR per annum (that's significant) but the ride is going to be more volatile (that's what the historical volatility metrics say no matter what time period is used and data not included because it's always the case.)
Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
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Re: Investing 100% into TQQQ

Post by Kbg »

Valuethinker wrote: Wed Nov 29, 2023 8:25 am Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
Some thoughts on your thoughts.

Both indexes have long published rules and the stats are what the stats are. They clearly are not the same indexes and the tradeoffs are clear per my previous post. However, given the competitiveness of the Nasdaq as an exchange vs. the NYSE, the really big companies have resided in both indexes (and exchanges) for quite a while.

Both are large cap indexes and I don't think either is a great proxy for all listed US stocks. There are several indexes that are far superior total US market indexes...so if one wants that, then they should invest in an instrument/index that provides that.

I should have posted this earlier...but I think it nicely summarizes, for me, the bottom line between the two: Gain/Loss Ratio QQQ 1.15/SPY 0.85

When the market is doing well, you just normally get more upside and about the same downside (internet bubble excepted). And, since the market is in a bull market 70% of the time that's why I'm a Nasdaq 100 fan. (Ok, I just crossed the salesman line :D )
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Re: Investing 100% into TQQQ

Post by BAM! »

watchnerd wrote: Sat Oct 21, 2023 8:00 pm
RichIn7Years wrote: Sat Oct 21, 2023 6:30 pm 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.
Can you explain how this happens in simple terms? It's easy for me to look at the graph, see it go up and up over the long term and think, why aren't I invested in this!? I suspect I'm missing something where money is taken away from your investment somehow.
BAM!
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Re: Investing 100% into TQQQ

Post by BAM! »

watchnerd wrote: Sat Oct 21, 2023 8:00 pm
RichIn7Years wrote: Sat Oct 21, 2023 6:30 pm 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.
Can you explain how this happens in simple terms? It's easy for me to look at the graph, see it go up and up over the long term and think, why aren't I invested in this!? I suspect I'm missing something where money is taken away from your investment somehow.
Alpha4
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Re: Investing 100% into TQQQ

Post by Alpha4 »

Kbg wrote: Wed Nov 29, 2023 8:24 pm
Valuethinker wrote: Wed Nov 29, 2023 8:25 am Given the composition of the Nasdaq index I would be very careful about taking historical comparisons back too far.

S&P 500 is more broadly based, and serves as a better, albeit imperfect, proxy for listed US stocks.
Some thoughts on your thoughts.

Both indexes have long published rules and the stats are what the stats are. They clearly are not the same indexes and the tradeoffs are clear per my previous post. However, given the competitiveness of the Nasdaq as an exchange vs. the NYSE, the really big companies have resided in both indexes (and exchanges) for quite a while.

Both are large cap indexes and I don't think either is a great proxy for all listed US stocks. There are several indexes that are far superior total US market indexes...so if one wants that, then they should invest in an instrument/index that provides that.

I should have posted this earlier...but I think it nicely summarizes, for me, the bottom line between the two: Gain/Loss Ratio QQQ 1.15/SPY 0.85

When the market is doing well, you just normally get more upside and about the same downside (internet bubble excepted). And, since the market is in a bull market 70% of the time that's why I'm a Nasdaq 100 fan. (Ok, I just crossed the salesman line :D )
Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available; I have computed triple leveraged daily returns on it (for daily borrowing costs I used the commercial paper rate plus 0.38% and then divided by 253 since 253 trading days in a year) and the triple-leveraged version (i.e. simulated TQQQ) had five down years in a row from 1937 to 1941 (and to boot the recovery in 1942 from June to December was only enough to give a slightly positive 1942; vol decay hurt this one badly in the first part of 1942). Granted, 1943 to 1945 this one did stunningly (as it did from 1949 to 1959...although 1957 was rough) but I thought it was worth mentioning that theoretically it would've have five down years in a row as that could be so depressing as to cause someone to give up at the exact point--late 1941 to mid-1942--when they should've instead been aggressively buying.
Topic Author
RichIn7Years
Posts: 62
Joined: Fri Oct 20, 2023 3:37 pm

Re: Investing 100% into TQQQ

Post by RichIn7Years »

OohLaLa wrote: Tue Nov 28, 2023 5:31 pm
HomerJ wrote: Tue Nov 28, 2023 1:32 pm
RichIn7Years wrote: Tue Nov 28, 2023 1:05 pm
Valuethinker wrote: Tue Nov 28, 2023 7:57 am
james22 wrote: Mon Nov 27, 2023 8:43 pm

Yeah, it could only save your life.
[...]
If you don't have the patience & willingness to invest time in reading a 30 page thread, on the very subject upon which you are basing your investment strategy, what do you have time for?
[...]
Because this is not relevant to my situation. It's probably not clear, but the leverage used in that thread (margin) is very different from the leverage I use.
This is true. Richin7years can't go negative using TQQQ, just to zero. He, at least, is investing money he already has, instead of borrowing money to invest.
Proshares and Direxion are doing it for us, at only 10%+! How nice of them! :wink:
I’ve read the prospectus. Rates are 1% + LIBOR. (Although you are paying that twice if that’s what you meant)
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RichIn7Years
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Re: Investing 100% into TQQQ

Post by RichIn7Years »

BAM! wrote: Thu Nov 30, 2023 12:27 am
watchnerd wrote: Sat Oct 21, 2023 8:00 pm
RichIn7Years wrote: Sat Oct 21, 2023 6:30 pm 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.
Can you explain how this happens in simple terms? It's easy for me to look at the graph, see it go up and up over the long term and think, why aren't I invested in this!? I suspect I'm missing something where money is taken away from your investment somehow.
Psychology is a big thing. I’ve tried to get my friends to invest and they sold after going through 10-30% drawdowns. It’s easy to look at the graph and not realize you’ll be down 50-80% at times.
er999
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Re: Investing 100% into TQQQ

Post by er999 »

RichIn7Years wrote: Thu Nov 30, 2023 10:23 am
BAM! wrote: Thu Nov 30, 2023 12:27 am
watchnerd wrote: Sat Oct 21, 2023 8:00 pm
RichIn7Years wrote: Sat Oct 21, 2023 6:30 pm 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.
Can you explain how this happens in simple terms? It's easy for me to look at the graph, see it go up and up over the long term and think, why aren't I invested in this!? I suspect I'm missing something where money is taken away from your investment somehow.
Psychology is a big thing. I’ve tried to get my friends to invest and they sold after going through 10-30% drawdowns. It’s easy to look at the graph and not realize you’ll be down 50-80% at times.
Yes, hard to do. Here’s my thread with experimenting with tqqq last year with small amount of money ($10-15k):

viewtopic.php?t=378161

I gave up but if I kept going would have been up almost 80% Tory from my selling price 2/2023. Would be stressful with a large portion of my portfolio.
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nisiprius
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Re: Investing 100% into TQQQ

Post by nisiprius »

Alpha4 wrote: Thu Nov 30, 2023 2:57 am ...Although I should like to add to your post that--assuming your source is the same as mine which I'm pretty certain it is since that's the only place I know of to get daily NASDAQ-100 data back to late 1972--the "even further back" simulated NASDAQ-100 proxy they used back to 1926 is also available...
How would that even work? That would mean the Curb Exchange (which actually was conducted on the curb, it was too sketchy to have a building). It was so disreputable that its number were literally published with a warning label:
It should be understood that no such reliability attaches to transactions on the "Curb" as to those on the regularly organized stock exchanges... it is out of the question for anyone to vouch for the absolute trustworthiness of the record of "Curb" transactions, and we give it for what it may be worth.
And the Cowles Commission decided that it was too unreliable to include in their monumental compilation of common stock returns from 1871 to 1938.
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halfisglassfull
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Re: Investing 100% into TQQQ

Post by halfisglassfull »

BAM! wrote: Thu Nov 30, 2023 12:27 am
watchnerd wrote: Sat Oct 21, 2023 8:00 pm
RichIn7Years wrote: Sat Oct 21, 2023 6:30 pm 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.
Can you explain how this happens in simple terms? It's easy for me to look at the graph, see it go up and up over the long term and think, why aren't I invested in this!? I suspect I'm missing something where money is taken away from your investment somehow.
Imagine you have $100 invested in a 3x fund and $100 invested in an equivalent 1x fund. Then you have a sequence of daily returns in the underlying fund that goes like this:

Up 1%: 3x fund is at 103; 1x fund at 101
Trading day ends, the 3x fund resets its leverage so it is now 3x 103
Down 1%: 3x is at 99.91; 1x is at 99.99
Trading day ends, 3x fund resets
Up 1%: 3x is at 102.9073; 1x is at 100.9899

The 3x fund has now earned $2.907 while the 1x fund has earned $0.9899. Thus, the 3x fund has not earned you three times the return of the 1x fund, it's only earned you 2.94 times the return of the 1x fund. But you're paying for 3x leverage and not getting 3x returns. If the volatility persists, your gains further erode. This is volatility drag.

Seems bad, right?

That's only half the story.

What happens when the sequence of returns is in the same direction?

$100/share underlying:

Up 1%: 3x is at 103; 1x is at 101
Trading day ends, 3x fund resets
Up 1%: 3x is at 106.09, 1x is at 102.01
Trading day ends, 3x fund resets
Up 1%: 3x is at 109.2727; 1x is at 103.0301

So now the 3x fund has earned $9.2727 and the 1x fund has earned $3.0301. This the 3x fund has actually earned 3.06 times the return of the 1x fund, but you're only paying for 3x leverage! Check the math, you also lose less than 3x if there are multiple down days in a row.

Depending on the sequence of daily returns, these two phenomena will offset each other to some extent over time. Thus, it should be clear that there is some amount of daily return volatility above which volatility drag eats into your returns such that you are taking on 3x risk but receiving less than 3x reward. But, conversely, with low enough volatility, you are only taking on 3x risk while gaining more than 3x reward.
DiploInvestor
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Re: Investing 100% into TQQQ

Post by DiploInvestor »

I’m only weighing in here because I like TQQQ and have used it with a value averaging strategy since around 2018 in my Roth IRA. Currently I have about 10% of my and DW’s combined retirement savings in there. This vehicle (granted, in good times) took me from $40k to over $400k in about three years, including maxing my IRA contributions each year. Right now, because of my investing rules for this account, I am almost 100% in TQQQ in this IRA, but it’s ready to reset at the next quarterly sell signal to its base allocation of 60/40, TQQQ/BND. I won’t go into value averaging here, since there is plenty of info out there to find (see Jason Kelly in particular), but despite the volatility drag, it has been a great long term hold for me. That said, I wouldn’t put all my eggs in this one basket, but I’ve been pleased with the account’s performance. Honestly, with the rise in AI investment by all the tech giants and AI’s ubiquitousness and fast development, I am very bullish on this fund taking off over the next couple/few years.
"History doesn’t repeat itself, but it often rhymes." -- Mark Twain // "If you have a garden and a library, you have everything you need." — Cicero
jarjarM
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Re: Investing 100% into TQQQ

Post by jarjarM »

keith6014 wrote: Wed Nov 22, 2023 9:13 am In my opinion, 100% is too high. FWIW, I have 20% of my net worth in 3x ETFs.
Yup, I hold significant amount of 3x ETFs and I would not do 100%. And this is after seeing some of the holding going 10x and down 80+%. Human psychology made it hard to hold and volatility will eat up significant part of the return with these daily reset funds.
Kbg
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Re: Investing 100% into TQQQ

Post by Kbg »

Alpha4 wrote: Thu Nov 30, 2023 2:57 am but I thought it was worth mentioning that theoretically it would've have five down years in a row as that could be so depressing as to cause someone to give up at the exact point--late 1941 to mid-1942--when they should've instead been aggressively buying.
Indeed it would be...but I think we could say something similar about most if not all (?) stock indexes at some point in their history. Looks like a couple of other folks who actually invest in TQQQ long term have weighed in and a have mentioned that they aren't investing 100% in TQQQ and most are way short of that as am I. My approach assumes going to zero and I am very slow to rebalance in a down market. One absolutely must have a good store of dry powder in order to rebalance.

There's a ton of good info in the hedgefundie threads on leverage...so by design I have not dove into any of that here. In multi-year down markets I actually think 3x ETFs are better than other alternatives as you aren't going to be called on for increased margin deposits through the entire down turn.

Mostly I just wanted to post some historicals on the Nasdaq. If one is looking for growth and can deal with the extra volatility, I think it's superior to the S&P 500.
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