Poking holes in TQQQ
I've seen this ETF floating around this board for a bit now, and after looking at it back to '99 (using QQQ *3 daily returns as a proxy for the days before it actually existed), I'm now becoming a believer. To the skeptics, if this thing can survive 3 of the worst crashes in history, what are the real downsides assuming you personally never have to sell? Could you theoretically see a run on the ETF even if on paper it's not bankrupt that would force it to go bankrupt? Is counterparty risk a significant factor that was somehow not an issue in the 2020 crash? What other risks am I not seeing that make this a terrible investment?
Don’t bother asking here. You’re going to get the same old asshats telling you why it’s a “bad” idea because misery loves company. Won’t be working when I’m 50 and aching I can fucking guarantee that unlike these guys. Rather live on my feet than die on my knees. It’s not even fucking crypto or something.
If it all crashes immensely, you’ll have to worry more about stocking up on guns and ammo than fiat currency. Live a little people, you’re only here once I can promise you that.
the same people who love boomer safety stocks and will be happy with their portfolio growing 5% a year
As someone who directly works in this space and understands the leverage decay etc I use this instrument. The only downside is the crazy volatility. I've said this about leverage in other posts, it's a different beast when you have this position moving 10%+ daily in your PA like it was through the covid crash.
I don't care about volatility, I don't need the money for decades. And nice!
I've been all in on it and will continue to be. Not checking it until I get another bonus and then I'll put all of that in too. I'm not good at picking stocks and I don't reasonably think anyone else can be without the resources and capital backing of a hedge fund - just my opinion. I'd rather be a rich middle aged man with the possibility of losing it all than someone who has to budget out every year of retirement.
Agree on stock picking. It's fun to pretend it's possible, but without insider information, the data doesn't lie, and pretty much everyone sucks at it lol. And I like your take.
TQQQ by itself is great, I invest in it. However, chucking your money into the fund and forgetting about it isn’t the best strategy. Look at 2020. Despite surviving, the fund itself was running into severe liquidity issues and there was a very real risk equityholders would be left holding the bag.
I’ve looked into this combo thoroughly on Reddit and I believe having a split (60/40, 50/50, whatever) with TMF that you DCA quarterly is the best choice to pursue. Running extensive backtests, you can see that this actually surpasses an only-TQQQ portfolio, reason being that TMF will spike when TQQQ crashes and when TQQQ crashes, it goes down deep and despite its insane ability to run, it takes a long time to recover
Happy investing
For back testing, how often did you assume rebalancing? Also, did you take into account tax implications?
There’s a toggle that lets you play around with quarterly, semi-annual, etc, DCA in most legit back-testers.
For all the small but important stuff like capturing taxes, expense of the fund, I can’t find it right now but there was an extensive backrest done from 1985 that captured all of it (obv cap gains is looking rough for a few years now but we’re all young rn) that said something like ~29% IRR if DCA quarterly at a 55/45 split and optimizing DCA (impossible in real life but still fun, was nearly 37% IRR. 37!!!!
I’ll try and find it right now but tldr is DCA
the classic hedgefundie parity style
I agree with you mostly. The UPRO-TMF/TQQQ-TMF parity strategy is great in theory as it essentially offers leverage on market returns with a built in downside hedge. Sharpe ratio when backtesting on these strategies over the past 20+ years is outstanding. The Achilles heel in this play however is interest rate risk. When you back test through the 70's and 80's when rates were 15%+, it just gets dragged down. Not saying that this is at all likely again with the Fed's absolute disdain for raising rates and the economy's crippling addiction to cheap credit, but just something to consider.
I'm doing pure-play TQQQ just because idgaf about drawdowns and I'm in it for the long haul. I figure I have at least 15-20 years to just plow cash into it and see what happens before I truly have to worry if things go south. Some people risk it all and start a business when they're young, this is my "big risk" if you want to call it that. Cheers fellas
I agree with you as well... meant to mention the sharpe ratio stuff as well. I'm not an economist but what the fuck even performed well when rates were that high? I would just buy that lol
are you worried tech is priced to perfection and rates have hit bedrock?
How did you backtest to the 70s when the NDX as an index was created in 1985?
The decay on this is insane. Wouldn't it be better to use rolling call options
I've just about read enough about this over the last 24h. Just yeeted $20k, see you guys on the moon
this makes the 2 of us. just poured 10k looking forward to pouring many more
Have you guys been dollar cost averaging? Hedging? What is the plan for 2022?
Aaaaaaaand it's gone
Woah woah woah where the FUCK were all you people when I was out on my own in that "manage my investments" thread advocating the hell out of TQQQ lol.LFG.
Edit: 6 responses and not one SB 😂.
Love you guys
Alright who threw the MS 😂
Your thread was my inspiration to look further into this tbh, and thanks for it, but I just assumed you were full of it like most people.
Tough to be full of it when it’s easily verifiable information. Would be an odd hill to die on trolling haha. But I appreciate it. My portfolio thanks you as well.
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Dude you were the inspiration wdym lol
lol you put so much enthusiasm into it I wanted to see how much pushback you can take. I've put all of my NW in it since 2017 but am still evaluating critiques, etc
I had a good chunk of my PA in TQQQ but after reading what you had to say and researching it, I went in 100%
Please tell me your not actually fucking with us - how much did you start with??
Cost basis of $1.3m. I can see the skepticism but not really cuz it’s not that much money I put in relative to what people have/make on WSO. Why would I waste this much time fucking with everyone and trolling, I’m trying very hard to actively evangelize because if I get you all on board then my position goes up up up (assuming you guys tell your friends & fam and so forth).
How can I read your thread? You posted anon and I’m genuinely curious on learning more
Just look up "how do you manage your money wso" on Google, find the thread and it's the top comment or something
Do not fret, your demonstrated chutzpah was also a key contributor to my decision to yeet. Also, put more in this morning
bump
Look up “volatility drag”
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That’s a well known issue but not nearly as impactful if the underlyer is not a normally distributed function
Lol get owned kid
Just think about from the perspective of a stochastic process. If the underlying process (stock movement) has a positive drift term, then the expectation is that the volatility drag won't have a negative impact, and may even have a positive impact depending on the true drift term.
I like the UPRO+TMF risk parity idea, but prefer futures over those ETFs. They don't have the issues with fees or volatility drag, and I believe there are now perpetual futures that you don't have to roll and pay tax on.
How does one even access these futures
I can buy eminis through my TD ameritrade account. Just have to get approval
I worked for a bit in commodity risk management on a rotation, and I don't think I could comfortably invest in futures directly unless I were super wealthy. Since you are such a small player, I would think the counter party risk goes through the roof since your counter party knows you probably don't have the funds to go after them in court especially in a down market (I'd be surprised if TD or whoever would pay your legal fees to sue the opposite end of the contract, not 100% sure on this though), also margin calls at the brokers discretion could screw you bad in a down market if they raised capital requirements. Also, I imagine you would have to constantly monitor your leverage ratio as the market moves. Seems like you're just exchanging a minor constant risk for a potentially bankrupting risk in a down market on top of adding headache to constantly maintaining your desired leverage.
You have a point about them raising the maintenance requirement during a crash, it happened last year. It's normally pretty low though (IB gives 8%), and you can keep the cash way above that level anyway. It's also true that the large contract sizes are harder to rebalance, unless you are super rich.
Is TQQQ a better option over an S&P 3x ETF (such as UPRO)? I guess the differentiator would be how much you believe in large cap tech over the next 1-2 decades
They're both better than the norm but TQQQ is a better pick for the long-term
Out of curiosity, why do you say that? Convinced FAANG will outperform heavily over the long-term?
Aped into TQQQ a couple weeks ago after reading this.. Honestly, I'm dumb when it comes to the stock market so I just blindly follow advice. How will an increase in rates affect TQQQ? Negatively right? https://www.marketwatch.com/story/bill-ackman-says-fed-should-taper-imm…
Aaaaaaand it's gone
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