Settling the debate over TQQQ as a long-term investment

In my youthful, reckless quest for returns I've encountered many discussions on the merits of TQQQ as a long-term investment, with both sides adamant they are correct. As a novice investor myself, I'd love to hear some expert opinions on if TQQQ is in fact a wise long-term investment.

The primary argument against it seems to be that 1. It takes a ~30% drop in price to wipe out your entire investment. And 2. Something about the use of leverage and rebalancing of holdings creates decay, which in the long-run diminishes returns. 

On the contrary, many have stated that it is still a viable long-term holding due to the ever-bright future of tech (despite current high valuations as well?) and use of leverage to obviously amplify returns.

Can anyone educated on the subject please clarify this for myself and the numerous other noobs clearly too uneducated to get to the bottom of this?

Apologies for my potentially irritatingly simple questions; Just a youngster trying to make sure I'm making wise decisions while learning as much as I can! Thanks guys.

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Comments (56)

  • Analyst 1 in IB - Gen
Oct 21, 2021 - 12:03am

Listen, if I could find the other post of this last week I would copy my response but here's the brief of it. YES, if you want to invest in equities longterm and especially DCA I think TQQQ is the best longterm investment. I think this is especially apparent if your someone who wants to get in on crypto-esque volatility but want that through a traditional brokerage or IRA.

I personally have 100% of my Roth IRA in TQQQ. It's a very long time horizon for my young age and it's capped at $6k a year anyway which isn't really much money at risk in the first place and the outsized gains over the decades will be tax-free. No brainer. 

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Oct 21, 2021 - 12:24am

2x leveraged QQQ and some of the portfolio in 2x leveraged bonds offers a solid risk/reward ratio so you can relax a little.  If you'd had such a portfolio during the 2008 you wouldn't have even lost that much.  Good lord, I need to get a better brokerage than fucking vanguard ASAP!  Thanks for the reminder

Oct 22, 2021 - 9:14am

Not OP but many of the fixed income CEFs on the market use leverage to at least some extent. I have a ton of my PA in PIMCO ETFs that use leverage on various strategies - that said, many of these funds tend to target income rather than capital appreciation (since why else would you own levered fixed income securities). My personal approach has been to use a lot of margin (1.5-1.9x levered) and set up dividend reinvestments to get a sort of pseudo-growth portfolio via fixed income securities.

  • Analyst 1 in IB - Gen
Oct 21, 2021 - 9:55am

Same I'm DCA every two weeks rn. although I won't lie trying to find the time around the next market correction and jumping in heavy could be a serious life changer. I'm not talking about trying to time a bottom, but just jumping in after a 30% fall in the index (just a 10% market correction) could prove major. Obviously no one can exactly time it. My guess would be some point Q1 2022...wondering if you had any thoughts?

  • Associate 1 in IB - Restr
Oct 21, 2021 - 12:49pm

I've done a fair amount of backtesting on this strategy (basically from the start of QQQ) and you are right, timing can play a huge role in overall long-term returns. It could be the difference of you ending up with $1mm or $50mm in highly volatile instruments like this. Ideally, the more incremental you can be with your DCA the better, but I imagine you work at a bank, and doing daily buys is super cumbersome and annoying with trading restrictions/approvals. 

I don't have much dry powder at all right now, and I am waiting for my bonus to buy again. Like you said, a great buying opportunity is most likely on the horizon whether its next month, in 6 months, or 2 years - but no one really knows. In my opinion, equity markets are pretty much directly tied to fed policy, and they are showing no signs of raising rates any time soon. Low rates are inflating asset prices higher and higher, which is not bad at all for TQQQ, but when rates are raised I expect a sizable amount of downward pressure and an interesting entry point if anything. In the short term, I'll reevaluate in January and probably build my position over 1Q22, and in the long term I'm just going to continue to shovel cash in. 

  • Analyst 1 in IB - Gen
Oct 21, 2021 - 2:53pm

I've seen this very intriguing but my question is simple: how the hell is TMF going to spike on the downturn if rates are already at 0 am I missing something obvious??

Oct 21, 2021 - 3:07pm

I guess it's just viewed as a safety asset. During a crash, people freak out, sell equities and there are only so many places that money can go. TMF performed well during the covid crash. 

Rates rising could be more of an issue though imo.

Oct 21, 2021 - 7:33pm

Okay this strategy seems very compelling after reading through the backtests and general theory. But what are thoughts on TQQQ vs UPRO (or the 2x leveraged equivalents)? Is there just a higher risk of TQQQ going to 0 due to the higher risks, betas, and valuations of tech?

Thank you all for your thoughts, this is very helpful information to work through and I'm loving all these sources to read through!

Oct 22, 2021 - 2:30am

lmao i bet you failed cfa l1 at least twice

only do shit like this if youre ok with having  a 95% chance of 0$ liquid when you retire, except you wont be able to retire and will work until youre 84, then spend 3 years forcing your family to go in debt as you rot away in a nursing home

  • Associate 1 in IB - Restr
Oct 22, 2021 - 11:19am

Have fun getting 3% returns a year with your portfolio of safety stocks, IG bonds, and treasuries

Oct 23, 2021 - 1:23pm

I am a 21 year old who has saved $40k ($26k in Roth IRA) without a dime of contributions from anyone other than my own wages worked part time since I was a teenager, with a job lined up in tech M&A. Not sure what you're on about "failing cfa l1 at least twice" (by the age of 21!), but I'm not too worried about retiring broke or working til 84 given where I'm already at! Thanks for the insights though

Oct 22, 2021 - 12:25pm

Just buy bitcoin - 100,000 is going to happen. Also you already know its going to hit 69420 from the meme guys. But long term 100,000 is so realistic. Also just buy GBTC, once it converts to an ETF the NAV discount will go away. Thats a free 20% right there. 

  • Prospect in IB-M&A
Nov 16, 2021 - 5:21pm

You seem like the only voice of reason on this thread. All this talk about crypto and TQQQ seems too good to be true.

Oct 23, 2021 - 1:33pm

I am pretty sure that when times gets large enough an equity etf leveraged 3x that have admin costs has a 0 value with close to 100% probability, the questions is what is "large enough". Maybe you could invest a part of your wealth as a lottery ticket for a decade or two? A casino or binary options could be a lot more fun, though.

  • Analyst 1 in IB - Gen
Nov 11, 2021 - 1:35pm

That's ridiculous. I'm in IB no such restrictions on ETFs....leverage or not...their damn ETFs what knowledge could you possibly have

  • Analyst 1 in IB - Gen
Nov 16, 2021 - 5:09pm

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  • Prospect in IB-M&A
Nov 16, 2021 - 5:17pm

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Nov 30, 2021 - 11:18am

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