TQQQ ETF Could Be A Nice Addition To Your 2022 Portfolio

TQQQ is a leveraged ETF designed to provide 3x the daily ... (HFEA) using risk parity of UPRO/TQQQ and TMF (various percentages) with ... BeanKounterCapital2.51KFollowersFollowSummaryTQQQisaLeveragedETFdesignedtoprovide3xthedailyperformanceoftheNasdaq100Index,QQQ.Forbelieversinbigtech,TQQQistheultimatebuy-the-diptool.TQQQisnearthetopofmyshortwatchlistforaseriouscorrectioninthemajorstockmarketindices.Urupong/iStockviaGettyImagesInvestmentThesisThereareplentyofinterestingindexfundsandETFsoutthere,butIfindthevastmajorityofthemareinferiortobuyingindividualequities.However,oneETFIhaveonmywatchlistfor2022istheProSharesUltraProQQQ(NASDAQ:TQQQ).TQQQusestotalreturnequityswapstomeetits3xtargetforthedailyperformanceofInvesco'sNasdaq100Index(QQQ).WhileleveragedETFsaren'tforeveryone,TQQQhasprovidedmassivereturnssinceitsinception,andIwillbelookingtostartasmallpositionifweseeamarketcorrectionin2022.QQQQQQisoneoftheETFsintheinvestmentuniversethatneedslittleintroduction.However,forthepurposesofthisarticle,IwilllayoutabriefsummaryofQQQsoinvestorscanunderstandTQQQ.Withafeeat0.20%,QQQprovidescheap,diversifiedexposuretosomeofthebestcompaniesintheworld.QQQisInvesco'slargestETFbyfar,withover$217BinAUM.Thetop10holdingsinthefundareawho'swholistofbigtechcompaniesandmakeupapproximately50%ofthefund.Forinvestorslookingforbroadexposuretothedominanttechcompanies,QQQisthegoldstandard.Source:ProSharesThe30,000FootViewofTQQQTQQQistypicallyviewedasashort-termtradingvehicle,whichisthecasewithmostleveragedETFs(longorshort).However,Ihavenodesiretobeadaytrader,andthatwon'tbemyapproachwithTQQQ.TQQQwasinthenewsrecently,asProSharesrecentlyannounceda2:1spliteffectiveinJanuary2022.Thisseemstohappenevery2-3yearsforTQQQonaverage.Ithasalargerfeeof0.95%,whichisjustifiedinmyopiniongiventherelativecomplexityoftheETF.TQQQusestotalreturnequityswapstomeetits3xtarget.Iwon'tbegoingintofurtherdetailonleveragedETFs,butIwouldliketoencourageinvestorstodotheirownresearchtoseeifanoptionlikeTQQQisworthconsidering.RiskaverseinvestorsarelikelytoavoidTQQQ(forreasonsincludingvaluationoftheunderlyingstockstotheopacityofleveragedETFs),whileinvestorswhoarealittlemorerisktolerantmightdecidethatTQQQisworthasmallweightingintheirportfolio.FormoreonthenutsandboltsontheTQQQfund,IwouldstronglyrecommendreadingpastarticlesonTQQQbyAlpayKayaandWarwickLangebrink.WhileIprovideanoverviewonTQQQ,theygointomoredetailontheinnerworkingsofthisETF.MyPlanWhenitcomestoinvesting,Itrytoremoveallemotionfrommydecision-makingprocess.Investorswithacold,calculatingapproachtendtohaveanadvantageinmyopinion.Iwon'tbebuyingTQQQtoday,butIwillbekeepingacloseeyeonitin2022.IplantoaverageintoatinypositioninTQQQintheeventofasignificantmarketcorrection.Ithinkthatwearelikelytoseesometurbulenceinthemarketsin2022forvariousreasonsandbuyinga3xleveragedETFlikeTQQQisadouble-edgedsword.Itcanprovidesignificantoutperformanceinbullmarkets,buthugedrawdownsinshortperiodsoftime.I'mnotplanningtobottomtickthemarket(becauseit'salmostimpossibleinmyopinion),butIamplanningtobuysomeshares,lockthemup,andthrowawaythekey.Whileinvestorsallhavedifferentgoals,Ithinkthatinvestorsshouldtrytofindthingsthatwillcompoundtheiroriginalinvestmentoveralong-termtimehorizon.TQQQdefinitelyfitsthatbill.Forallthevisuallearnersoutthere,Ihaveincludedtheperformanceofa10kinvestmentinTQQQ,withacomparisontoQQQandtheS&P500Index(VOO).Source:PortfolioVisualizerTherearen'tmanyassetsouttherethathaveturned$10kinto$1Min10years.TQQQisoneofthem,butinvestorsmustbewillingandabletostomachlargedrawdownsandsignificantvolatility.Inmyopinion,thismakesTQQQaninterestingchoiceforasmallallocation.IwouldadvisecautionwhenbuyingTQQQ,butespeciallyforemotionalinvestorsthatmightpanicsell,asitcouldleadtoanexitattheworstpossibletime.TQQQhasbeenafantasticperformeroverthelastdecadeandcouldprovideexplosivereturnsforinvestorswiththestomachtobuythedipin2022.Conclusion"Luckiswhathappenswhenpreparationmeetsopportunity."-SenecaIplantomakealittleluckformyselfwithTQQQin2022iftheopportunitypresentsitselfwithamarketdrawdown.TherearecertainlydownsidestoaleveragedETF,whichiswhyresponsibleinvestorsshouldonlyallocateasmallpercentageoftheirportfoliotoapositionlikeTQQQ.Fortherisktolerantinvestorsoutthere,TQQQcouldbeaninterestingchoiceforthosethatareseekingalpha.Iwouldbefascinatedtohearyourthoughts.Feelfreetoleaveacommentbelow.ThisarticlewaswrittenbyBeanKounterCapital2.51KFollowersFollowCPAandformerBig4auditor.Ibreakdowninvestmentsinqualitativeandquantitativeterms,andIlookforinvestmentsthatwillcompoundmymoneyoverthelongterm.FollowmeonTwitterat@BeanKounterCapFollowDisclosure:I/wehavenostock,optionorsimilarderivativepositioninanyofthecompaniesmentioned,andnoplanstoinitiateanysuchpositionswithinthenext72hours.Iwrotethisarticlemyself,anditexpressesmyownopinions.Iamnotreceivingcompensationforit(otherthanfromSeekingAlpha).Ihavenobusinessrelationshipwithanycompanywhosestockismentionedinthisarticle.16Likes42CommentsToensurethisdoesn’thappeninthefuture,pleaseenableJavascriptandcookiesinyourbrowser.Isthishappeningtoyoufrequently?Pleasereportitonourfeedbackforum.Ifyouhaveanad-blockerenabledyoumaybeblockedfromproceeding.Pleasedisableyourad-blockerandrefres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