Putting all of my savings in TQQQ?

I feel like at least as an analyst I want to be aggressive with my investing. At $100k per year, I would bring home $5.8k per month in NYC post tax. I could spend $2k per month on rent and all other expenses (I have some help with rent which brings the cost down to $1k/month).

I could just save $800 in cash per month then put the remaining $3k in TQQQ which would add to $36k as a first year. Then I could just yolo my whole bonus into it and do something similar in following years. My time horizon is long term (10+yrs) before I would ever even consider a large payment such as a home. I can stomach draw backs, but am looking for some advice on how to hedge. Obviously tech isn't something thats not going to not surprise over the next decade and a half, but you never know. I also don't feel like it's super worthwhile trying to time it and wait for the next drawback to lump sum into it. 

Edit: I forgot to include NYC local tax, so actual figures would be a few hundred dollars lower.

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Comments (52)

Nov 1, 2021 - 1:27pm

Honestly, if you are 23 years old there's literally no downside to doing this. Your time horizon is 35+ years so the amount of time that the capital you invest today has to compound, that time element alone outweighs the risk of getting blown up in TQQQ. Even if you blow up 50K or 100K in TQQQ in the first couple years of your career, that will be a fraction of your earning power 5+ years into your career assuming you stay in finance. If the tech supercycle continues which IMO it will, that initial 100K could 10-20X in 10-20 years. That's even ignoring future contributions and long-term continued dollar-cost averaging.

If you're looking for a hedge, track the SPY 200 and 100 SMA. Historically when SPY crosses those moving averages is when most market volatility occurs and volatility absolutely crushes TQQQ so might be a good time to go cash.

Nov 1, 2021 - 1:44pm

"Due in part to QQQ's popularity, issuers of leveraged ETFs tapped traders' thirst for more exotic ways to play the Nasdaq-100. That includes the ProShares UltraPro QQQ (TQQQ). TQQQ's objective is simple: To deliver triple the daily returns of Nasdaq-100.8 So if that index rises by 1% on a particular day, TQQQ should jump by 3%."

https://www.investopedia.com/investing/qqq-vs-tqqq-difference-and-which…
 

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  • Associate 1 in ER
Nov 1, 2021 - 2:05pm

TQQQ is super underrated.

I agree on your entire premise I think. I wouldn't do TQQQ unless I had the steady job for future DCA and dip buying, which you should have both. 
 

My PA is about 20% TQQQ right now. If we have a Fed interest rate fiasco this month and markets drop. I'll double my TQQQ allocation and let it sit.

100% TQQQ is a bit more riskier than I can personally handle 

  • Associate 1 in IB - Gen
Nov 2, 2021 - 2:20pm

Have you DCA? When did you start and what's been your gain? 

  • Associate 1 in ER
Nov 1, 2021 - 2:07pm

Also check out /r/LETFS

they have some write ups on portfolio allocation and hedging. I just keep my non QQQ/TQQQ allocation in SPY for beta exposure, and rotate in/out as needed depending on market vol

  • Associate 1 in ER
Nov 1, 2021 - 3:42pm

What do you mean rotate? Isn't that poor for taxes?

What are you talking about intern

rather than being 100% TQQQ, or 60% TQQQ/40% cash, just use x% TQQQ and have y% in SPY. When markets tank, sell SPY and buy TQQQ (rotating)

  • Analyst 1 in IB-M&A
Nov 1, 2021 - 2:52pm

Exactly- I don't know what is in the water but for some reason recently everyone thinks TQQQ is some genius idea. 

It's great if you can time the market properly, but none of us have a crystal ball. Even looking at the 1987-nowish simulation, a CAGR of 18% isn't anything amazing for the risk you are carrying.

Nov 1, 2021 - 2:32pm

I've thought about doing this myself, but I think I'm going put some money each month into a 80 TQQQ and 20 short term treasuries, since I don't want to lose everything. Only reason I'm doing this is because I'm just weary of even a minor downturn wiping me out (an edict of my investing philosophy is to ensure I don't get wiped out). 

Also, TQQQ is somewhat expensive so look into other things too, but seriously, do what you want. It presents a huge opportunity for growth, so if you feel comfortable with it, I say go for it. 

Most Helpful
Nov 1, 2021 - 4:25pm

To the OP - Maddie has the right perspective on this. You are taking a massive risk by using a leveraged product like this - not to say it is destined for failure, but just be clear eyed about the risks (and costs) embedded in products like these. In raging, long term bull markets they work - but you'll get annihilated if you get down trends, bearish, chop, etc. 

As far as execution goes - that's at least half the battle here. I'd recommend at a minimum setting a position size - say 25% - that you leg into immediately. Get dollars in and working for you. Then I would leg into it over time - you can be more or less aggressive - but my suggestion is to use consistent sizing, aggressive on red days and less so on green. Dumping in at all time highs, day after day, 100% of your portfolio - last thing you want is a 3% move on the QQQ's (easy nowadays) to get you a nice 10% draw down. That's where you want to be able to deploy cash - while keeping your core position. You might consider part of it in a ROTH IRA (for cap gains concerns - 6k a year, into this, over 20 years and you are correct - nothing to sneeze at). 

Another thought is expressing thins through options - you clearly like risk, why not add that in? You can get leaps on TQQQ - I've not looked too hard, but I'm sure you could amplify results if you add those in as well. 

Last - and I might be a bit... harsh on this piece - be honest with yourself. This isn't really investing, or a diversified portfolio, or something you hedge - frankly, the hedging costs probably start to negate the value of the leverage at a certain point. You are placing a massive, concentrated bet. Would I do this? No. I would not. There are better ways, IMO, to express a hyper bullish view on technology that diversifies you, gives you a lot of upside and manages risk - these types of products simply aren't designed for the long term. It might work, and I might look like a boomer, but who knows. Good Luck. 

  • Associate 1 in ER
Nov 1, 2021 - 5:13pm

Addinator

To the OP - Maddie has the right perspective on this. You are taking a massive risk by using a leveraged product like this - not to say it is destined for failure, but just be clear eyed about the risks (and costs) embedded in products like these. In raging, long term bull markets they work - but you'll get annihilated if you get down trends, bearish, chop, etc. 

As far as execution goes - that's at least half the battle here. I'd recommend at a minimum setting a position size - say 25% - that you leg into immediately. Get dollars in and working for you. Then I would leg into it over time - you can be more or less aggressive - but my suggestion is to use consistent sizing, aggressive on red days and less so on green. Dumping in at all time highs, day after day, 100% of your portfolio - last thing you want is a 3% move on the QQQ's (easy nowadays) to get you a nice 10% draw down. That's where you want to be able to deploy cash - while keeping your core position. You might consider part of it in a ROTH IRA (for cap gains concerns - 6k a year, into this, over 20 years and you are correct - nothing to sneeze at). 

Another thought is expressing thins through options - you clearly like risk, why not add that in? You can get leaps on TQQQ - I've not looked too hard, but I'm sure you could amplify results if you add those in as well. 

Last - and I might be a bit... harsh on this piece - be honest with yourself. This isn't really investing, or a diversified portfolio, or something you hedge - frankly, the hedging costs probably start to negate the value of the leverage at a certain point. You are placing a massive, concentrated bet. Would I do this? No. I would not. There are better ways, IMO, to express a hyper bullish view on technology that diversifies you, gives you a lot of upside and manages risk - these types of products simply aren't designed for the long term. It might work, and I might look like a boomer, but who knows. Good Luck. 

Care to share?

  • Associate 1 in IB - Restr
Nov 2, 2021 - 12:42pm

Ah yes, the insecure CFA Level 1 try hard who has a useless piece of paper which entitles him to think he is smarter than everyone else.

If you used all that CFA knowledge and backtested with QQQ through the pre-dotcom era, yes you would have some pretty aggressive drawdowns. However, OP suggests building his position over time and adding to it every year. Even if you deploy capital on the same day every single year, completely ignoring where TQQQ is priced, you will still see ridiculous gains that far outpace any benchmark.

Also, who gives a fuck about generating alpha? I can have a low beta strategy that ekes out 4% net returns every year and I can be "generating alpha." The only thing that matters is how much you have in the end. I'd rather die a poor man and say that I tried rather than make decisions that are perceived to be "safe".

Nov 2, 2021 - 12:49pm

The fuck, low volatility 4% CAGR isn't alpha, it's sharpe ratio or smartbeta or whatever the buzzword for risk adjusted returns is.

TQQQ isn't alpha, it's cheap beta. If you backtest "cheap beta" on equity markets that are more indicative of the average equity performance over 45 years (assuming normal "working" lifespan), say MSCI Italy or FTSE 100 for example, you'd be getting assfucked 7 ways to high heaven if you tried something as autistic as DCAing into some triple beta fund.

  • Analyst 1 in IB - Gen
Nov 2, 2021 - 1:43pm

I just love that people are waking up to this. Yes, fucking do it OP or crypto if you want, but this is a nice way to simplify things. Fuck everyone who says otherwise block their noise. 

Also amazing how clueless some these people in here are. Realize, they DON'T HAVE YOUR INTERESTS AT HEART. They want you chained to the fucking desk. FUCK them. If these people actually cared, they would at least bring up QLD which is the 2x variant of QQQ which is by far SAFE for long term holds no question. If you really want, fucking sell when it cross below the 200 MA for exit and entry.

  • VP in IB - CB
Nov 3, 2021 - 11:22pm

Thinking about putting another $50K into ETH instead of $VTI. Tempting.

Dec 16, 2021 - 11:13am

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