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Disclaimer: The content of this blog is for informational and entertainment purposes only. We are not providing financial advice. Please consult a certified financial advisor before making investment decisions.
Introduction
As TQQQ nears its all-time high, it’s a great opportunity to analyze how dollar-cost averaging (DCA) returns compare between QQQ and TQQQ. For those new to leveraged ETFs, it’s essential to understand the associated risks, including volatility drag and potential for significant losses during market corrections. If you're unfamiliar with these concepts, we recommend checking out our beginner's guide linked below.
TQQQ is a triple-leveraged ETF that magnifies the performance of the Nasdaq 100. While this can lead to spectacular gains during bullish trends, it also means sharp declines during corrections. Let’s dive into the numbers to see how these ETFs performed over the past year with a DCA strategy.
Recent Performances
1-Year Dollar-Cost Averaging Returns
Here’s a snapshot of how $12,000 invested over the past 12 months through DCA performed for QQQ and TQQQ:
| Period | Total Invested | QQQ Final Value | QQQ % Return | TQQQ Final Value | TQQQ % Return |
|---|---|---|---|---|---|
| 1 Year | $12,000.00 | $13,477.93 | 12.32% | $15,590.89 | 29.92% |
From the table above, we see that both ETFs provided positive returns, but TQQQ’s leverage amplified the gains significantly compared to QQQ. However, it’s important to note that this higher return comes with much greater risk.
Investment Comparison: QQQ vs. TQQQ
Find below the investment performance of QQQ and TQQQ over different time periods, highlighting their returns and growth.
| Period | Total Invested | QQQ Final Value | QQQ Percentage Return | TQQQ Final Value | TQQQ Percentage Return |
|---|---|---|---|---|---|
| 1 Year | $12,000.00 | $13,477.93 | 12.32% | $15,590.89 | 29.92% |
| 5 Years | $60,000.00 | $96,624.70 | 61.04% | $145,064.00 | 141.77% |
| 10 Years | $120,000.00 | $338,269.16 | 181.89% | $890,841.09 | 642.37% |
Disclaimer: Past performance is not indicative of future results. Investments in QQQ, TQQQ, and other ETFs carry risks, and you should carefully consider your investment objectives, risk tolerance, and seek professional financial advice before making any investment decisions. The numbers presented are indicative and may not factor in dividend yield or other potential factors affecting total return.
Key Considerations
- Leverage Amplifies Risk: TQQQ’s triple-leverage can magnify both gains and losses. For instance, while it performed exceptionally well in this 1-year period, it experienced a 70% drop in 2022 during a Nasdaq 100 correction.
- Volatility Drag: Leveraged ETFs like TQQQ are subject to volatility drag, which erodes returns during sideways or volatile markets. This makes them more suitable for short-term strategies or trending markets rather than long-term holding.
- Comparative Simplicity: QQQ offers steady exposure to the Nasdaq 100 without leverage, making it a less risky option for long-term investors.
When to Use Leveraged ETFs
- Short-Term Gains: TQQQ may be suitable for experienced traders aiming to capitalize on short-term bullish trends.
- Hedging Strategies: Advanced investors sometimes use leveraged ETFs to hedge other positions or portfolios.
- High-Risk Appetite: If you can stomach significant volatility and are aware of the risks, TQQQ might fit as a small part of your portfolio.
TQQQ 1K$ monthly SIP return in last 5 years
Conclusion
Both QQQ and TQQQ have their unique advantages and risks. While TQQQ’s amplified returns can look enticing, it’s vital to consider your risk tolerance, investment horizon, and understanding of leveraged ETFs before diving in. A well-informed strategy is the key to successful investing.
Pro Tip: Always diversify your portfolio and stay updated on market trends to make informed decisions.
Watch the Video Lecture
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