TQQQ ETF

Recently, tech stocks have not performed well because investors are changing their focus to different types of investments. Leveraged ETFs such as TQQQ can provide high returns, but they also carry considerable risks like price fluctuations and tracking errors. Even though TQQQ has gained 30% lately, I am changing my recommendation to hold, as I believe other asset classes will do better than tech stocks.

TQQQ amplifies daily changes in QQQ by three times and is most effective when QQQ is rising steadily with little volatility. Even though QQQ reached a new all-time high after the election, it has not performed as well as IWM and DJI, which could mean it might keep underperforming. Additionally, many top QQQ stocks are still below their peak values, indicating a weak trend, which makes TQQQ a less suitable option at this time.

ProShares UltraPro QQQ provides a leveraged investment in the top Mag 7 stocks, taking advantage of developments in AI and aiming for capital growth. Since it started in 2010, the ETF has achieved remarkable annual returns of 42.60%, with a strong emphasis on IT and AI companies. Its top 10 holdings, such as Apple, Nvidia, and Microsoft, make up 50.8% of the fund, which adds to its concentration and risk.

TQQQ is a 3x leveraged ETF that tracks the Nasdaq-100. When timed right, it gives investors the opportunity to generate excellent returns over a very short time period. Despite the potentially high risk, I therefore rate TQQQ a buy if investors manage risk accordingly. In this piece, I will break down how I am approaching this challenge and what potential and existing investors might need to look out for.

The ProShares UltraPro QQQ (TQQQ) and ProShares UltraPro Short QQQ (SQQQ) ETFs moved in different directions on the first trading day of September.  SQQQ surged by over 9.15% while the TQQQ fund crashed by a similar amount.

Leveraged ETFs are risky due to beta slippage and potential value erosion over time. However, SEC warnings about holding leveraged securities for longer than one day appear to have softened in recent years. Any trend is the friend of the leveraged ETF/ETN investor, while oscillation is the enemy.

Early investors in this tech-focused fund have made tons of money. Is it still a good long-term investment?

ProShares UltraPro QQQ ETF aims to replicate the performance of QQQ by 3x daily, making it risky and volatile. Despite the risks, it could be a great option for those seeking substantial capital appreciation through a simple, more hands-on approach to managing TQQQ's inherent risks. While there are concerns around sequence risk, beta erosion, and the ability for the fund's wild performance to induce investor mistakes, the upside is too enticing to pass on entirely.

ETFs are powerful investment tools that provide diversification and exposure to specific market segments.