With the NASDAQ-100 Index and the Invesco QQQ Trust (NASDAQ: QQQ), the ETF tracking that benchmark, entering rarefied air, some traders may be looking to amplify their upside.
The ProShares UltraPro QQQ (NasdaqGM: TQQQ) is a prime avenue for doing just that.
The ProShares UltraPro QQQ tries to reflect the daily investment results that correspond to three times or 300% of the daily performance of the NASDAQ-100 Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
While leveraged ETFs like TQQQ aren’t designed to be long-term plays, some market participants extol the controversial opinion of small positions in TQQQ over long holdings periods.
“The historical performance data strongly favors the Nasdaq-100 3x (TQQQ) for core equity exposure. The unleveraged Nasdaq-100 (QQQ) appears to be the “next-generation S&P 500” and adding moderate leverage can be priceless at times,” writes David Kreinces of ETF Portfolio Management. “In fact, TQQQ returned 80x your money over the past 10-years, while the S&P 500 delivered just under 3x, or 285% in total return.”
Traders have dived into the mega-cap technology trade in recent months as many looked to companies with solid balance sheets and those that benefited from the new stay-at-home economy, which included tech names. The underlying Nasdaq-100 includes heavy tilts toward many prominent names in the space, including Microsoft, Apple, Amazon, and Google’s Alphabet.
Historical data, emphasis on “historical,” confirm TQQQ has been a winning ticket for those with the fortitude to hold for lengthy periods.
“Past performance can never guarantee future results, but a continuation of the TQQQ growth rate above would turn $500 into $2 million within 19 years,” writes Kreinces. “Even if the TQQQ rate of return falls by half, to 28% annualized, a $500 investment could still reach $2 million in 34 years. Given this extraordinary long-term growth potential, we named TQQQ the ‘American Dream ETF.’”
Traders can hedge long NASDAQ-100 bets with inverse or bearish ETF strategies. For example, the ProShares UltraShort QQQ ETF (NYSEArca: QID) tracks the double inverse or -200% performance of the Nasdaq-100, and the ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ) reflects the triple inverse or -300% of the Nasdaq-100.
For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.