In this article, we compare TQQQ vs QQQ.
However, it can be challenging to assess if you should invest in TQQQ or QQQ.
This article has compared these ETFs in basic information, performance evaluation, holding, and related facts.
Let's start with the main difference between TQQQ vs QQQ.
TQQQ vs QQQ
The primary difference between TQQQ and QQQ is that TQQQ is a leveraged ETF, while QQQ is non-leveraged. TQQQ uses debt and financial derivatives to seek higher returns.
However, both of these ETFs track the NASDAQ 100.
Further, QQQ is more suitable for long-term investors that want exposure to NASDAQ 100.
On the other hand, TQQQ is suitable for someone who intends to trade. QQQ is highly liquid and actively traded in the market. Hence, a daily trader should invest in TQQQ.
TQQQ stands for triple QQQ, which means it seeks to earn a return three times that of QQQ. Hence, it's only suitable for investors with a higher level of risk tolerance.
So, it's essential to understand that TQQQ contains an additional leverage risk.
Further, there is a compounding element in terms of return calculation. Therefore, you can expect higher volatility from TQQQ.
TQQQ
- Inception Date: 2010
- Tracks 3 x the Nasdaq-100 Index
- Expense Ratio: 0.95%
- Number Of Stocks: 113
- Top 10 Holdings: 53%
QQQ
- Inception Date: 1999
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Number Of Stocks: 103
- Top 10 Holdings: 53%
The expense ratio of TQQQ is 0.95%, while QQQ has an expense ratio of 0.20%. This means TQQQ has a higher management fee and higher volatility.
The managing company of TQQQ is Proshares, while the managing company for QQQ is Invesco.
TQQQ and QQQ differ in risk, capital, timeline, strategy, and price. The element of risk carried by TQQQ is three times as it seeks to generate a return threefold of a traditional QQQ.
TQQQ requires a lower initial investment to reach specific money goals as it's aggressive.
However, the loss may also be threefold.
TQQQ is not suitable for long-term retention as it's a speculative instrument, while QQQ is comparatively stable. In addition, TQQ charges a higher amount as a management fee.
Let's continue our detailed comparison of the performance of these ETFs.
TQQQ vs QQQ Performance
Understanding the performance of ETFs is an excellent idea for understanding earning potential of the security. Although, past performance does not reflect future performance.
However, it helps to understand the nature of the fund.
The given chart shows the performance of TQQQ and QQQ:
The monthly analysis reveals that the return generated by TQQQ is three times that of QQQ. The monthly return generated by QQQ is 6.94%, and the return by TQQQ is 18.63%.
TQQQ seeks to generate three times the return of QQQ.
Further, the loss potential of TQQQ is similar. As we can analyze, the quarterly loss of TQQQ is almost threefold.
So, it's proven that TQQQ is three times more aggressive and volatile than QQQ.
In the long term, both ETFs have performed well.
TQQQ vs QQQ Holdings
Let's analyze the holding structure for TQQQ and QQQ. First, TQQQ includes cash positions, while QQQ does not.
Here are TQQQ and QQQ holdings side-by-side:
Further, it's important to note that leverage funds have been invested in the Treasury bills and other debt instruments.
These debt instruments make TQQQ an aggressive portfolio.
QQQ is a well-diversified ETF as it is invested in different industry sectors.
The sectors include information technology, automotive, energy generation, e-commerce, and electronics.
The total number of holdings for QQQ amounts to 103, and the top ten are 53.58% of the total assets.
This means the performance of these companies significantly impacts the return generated by QQQ.
Similarities Between TQQQ and QQQ
The following are some of the similarities between TQQQ and QQQ:
- First, both are ETFs, meaning their value depends on the underlying securities.
- Both track the NASDAQ 100 exchange.
- They depend on the performance of U.S. large-cap companies.
- Both ETFs are stable.
However, there are massive differences between TQQQ and QQQ, as discussed below.
TQQQ and QQQ Speculation
If you are a speculative trader, there is no better option than investing in TQQQ. The chances of profit or loss for an investment in TQQQ are three times that of the traditional QQQ ETF.
If you expect the NASDAQ 100 index to increase, it can be an excellent choice to opt for TQQQ.
Again, this is speculation since no one knows how to time the market.
Further, if you want to invest for a more extended period, the better option would be QQQ.
Conclusion: TQQQ is for a day trader. In contrast, QQQ is for an investor.
TQQQ vs QQQ Comparison
The primary difference between TQQQ and QQQ is their expense ratio. QQQ has an expense ratio of 0.20%, while TQQQ has a higher expense ratio of 0.95%.
Another significant difference is that TQQQ is a leveraged ETF, while QQQ is non-leveraged.
A summarized comparison of TQQQ and QQQ is given below:
The given chart helps us to understand the following:
- Different financing companies issue both ETFs.
- Both ETFs deal in large caps. However, ProShares is leveraged.
- QQQ is older than TQQQ.
- The daily trade volume for TQQQ is twice as high.
- TQQQ does not pay a dividend.
- The is no minimum investment with either ETF.
TQQQ Profile
- Tracks 3 times the Nasdaq-100 Index
- Expense Ratio: 0.95%
- Number Of Stocks: 113
- Top 10 Holdings: 53%
- Leveraged Technology Weighted
ProShares UltraPro QQQ (TQQQ) is a leveraged ETF launched in 2010. TQQQ is designed to return three times (3x) the daily performance of the Nasdaq-100 Index with an expense ratio of 0.95%.
Since daily returns compound, holding periods greater than one day can result in significantly different returns than the target return.
The Nasdaq 100 index includes securities of 100 of the largest domestic and international non-financial companies listed on the Nasdaq.
TQQQ Performance
Proshare's TQQQ has volatile performance returns because it is a leveraged ETF. However, it has performed well over the last 5 years with a return of 50.16%. The gains are 3 times more than QQQ, but so are the losses.
Here is how TQQQ compares in performance to its underlying index:
In addition, here is a chart of TQQQ's performance:
The fund has $18 billion in total assets.
TQQQ Holdings
TQQQ is focused on top technological companies. A large portion of its holdings is U.S.-based growth companies.
These companies cut across various industries, including:
- Cloud Computing
- Payment Services
- Electric Vehicles
- Data Collection
TQQQ excludes financial companies.
Here are the top holdings for TQQQ:
TQQQ is primarily made up of leveraged products.
No Minimum Investment
TQQQ and TQQQ are exchange-traded funds (ETFs), so there is no minimum investment.
The only requirement is the need to purchase at least one total share.
Typically, fractional shares are unavailable for ETFs unless you use M1 Finance. (Get $50 When You Use This Link)
M1 Finance allows you to purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. You won't have to keep your money idle until you have enough to purchase a total share.
This is especially beneficial when buying QQQ. It is not recommended to hold TQQQ long-term.
Here is your guide to ensuring you get the M1 Finance $50 Bonus.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital's free tools allow you to quickly find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
QQQ Profile
- Tracks the Nasdaq-100 Index
- Expense Ratio: 0.20%
- Number Of Stocks: 103
- Top 10 Holdings: 53%
- Technology Weighted
Invesco (QQQ) is a growth ETF launched in 1999 by Nasdaq as the Nasdaq 100 Trust. QQQ is designed to track the Nasdaq 100 index.
The name was changed in the early 2000s after PowerShare and Invesco acquired the index.
The fund closely tracks the standards and performance of the Nasdaq 100 Trust to replicate its return results.
The Nasdaq 100 Index adopts a modified capitalization methodology that uses individual weights of included items according to their market capitalization.
Weighting allows constraints to limit the influence of the largest companies and balance the index with all of its members.
To accomplish this, Nasdaq reviews the index's composition each quarter and adjusts weightings if the distribution requirements are unmet.
QQQ Performance
Over the last 10 years, QQQ has outperformed the S&P 500 with an average return of 20.34% per year.
Here is the growth of $10,000 over 10 years with QQQ:
QQQ has performed well over the last 10 years, but there is no guarantee that the next 10 years will look the same.
Since its inception, QQQ has shown outstanding performance, consistently outperforming the S&P 500 benchmark index.
The fund ranks in the top 1% of large-cap growth funds.
Due to QQQ's outstanding performance, the fund has become one of the most popular funds among long-term investors.
It now has $135 billion in total assets.
QQQ Holdings
QQQ is the fourth-most popular ETF globally, with 103 securities holdings, most of which are top technological companies.
These companies cut across various industries, including:
- Cloud Computing
- Payment Services
- Electric Vehicles
- Data Collection
QQQ excludes financial companies. Invesco's QQQ is a large capitalization index focused on technology companies.
Here are the top holdings for QQQ:
QQQ is primarily made up of Apple, Microsoft, Amazon, and Tesla.
Which Is Better TQQQ or QQQ?
TQQQ and QQQ are well-known ETFs in the U.S. market. In addition, large-cap NASDAQ companies back these ETFs.
Both ETFs are well-known and managed by Proshares (TQQQ) and Invesco (QQQ).
TQQQ is an ETF dependent on the NASDAQ and leverages as well.
On the other hand, QQQ is a traditional ETF dependent on the NASDAQ and does not include leverage.
TQQQ stands for triple QQQ. The triple in TQQQ means it seeks to get a triple return on the investment portfolio.
This is why the management fee/expense ratio charged by TQQQ is higher than QQQ. It's because fund management needs to manage the portfolio actively.
The performance evaluation of TQQQ and QQQ reflects that TQQQ has been volatile in generating a return.
For instance, the monthly profit for TQQQ is three times that of QQQ.
Similarly, the quarterly loss is three times that of QQQ.
TQQQ is volatile and brings additional risk. Therefore, only experienced and active investors should opt for it.
Related Posts:
Winner: QQQ
Based on the facts and information, we conclude that TQQQ and QQQ are stable funds.
However, the element of risk in TQQQ is three times that of QQQ.
If you are looking to invest for a more extended period and want to hold an ETF, QQQ is a much better option.
QQQ carries a lower risk, and the expense ratio is lower.
Frequently Asked Questions (FAQs)
Does TQQQ Generate The Return Dependent On The NASDAQ?
Although TQQQ tracks the NASDAQ 100 index, it's not entirely dependent on the movement of the index. The reason is that it also invests in debt securities and instruments.
It makes TQQQ aggressive in terms of return generation and performance.
Why Was TQQQ Created?
TQQQ was created to provide investors with higher returns. Some investors have a higher risk appetite.
It means they are ready to take risks to make their fortune. So, to satisfy their investment needs, TQQQ was introduced in the market.
Does TQQQ Use Futures and Swaps?
Yes, TQQQ uses futures and swaps to amplify the impact of returns made through NASDAQ. As a result, it helps manage risk and seek returns three times more than the traditional QQQ.
What Are The Pros Of Investing In TQQQ?
The following are some of the pros of investing in TQQQ:
- Unmatchable potential to generate a return.
- Excellent choice for day traders.
- Highly liquid instruments.
What Are The Cons Of Investing In TQQQ?
- A high expense ratio of 0.95%
- They are not tax-efficient instruments.
- Higher exposure to loss.
- Highly volatile.
Why Is The Expense Ratio Higher For TQQQ?
The expense ratio is higher for TQQQ because the fund manager must actively manage the investment strategy. It helps set a portfolio that seeks a return three times the traditional QQQ.