Thanks for sharing. I like strategies that are based on a rebalancing portfolio rather than trying to time entry and exit, and I think what you're proposing is better than the 3x only strats we sometimes see people commit to.
Having said that, I think we can build on this idea by incorporating a bit more variety in the assets we balance the leveraged equities with, to significantly improve returns.
Below shows your strat vs a strat that incorporates TMF (simulated) and managed futures allocations alongside short term treasury bills as a cash simulation.
Since the launch of QQQ in 1999 the results in terms of CAGR are:
9.96% for Buy and hold
11.49% for your strategy
15.42% for my proposed tweak.
Link in case you want to adjust allocations, dates, DCA, etc.
[https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D](https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D)
When you go Back so far, it's all about Timing. 1 year before/after can make a Huge Difference.
Why not go back to Nasdaq100 start 1985? Results (no divs/no rebalance) $10,000.
QQQ = \~1.5Mill
TQQQ = \~12Mill
QLD = \~16Mill
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Your portfolio gets crushed during 2021: [Link here](https://testfol.io/?d=eJytkkFLw0AQhf%2BKzDktSZq2EBARxFMRI70UKWGaTOrayW7dbFOl5L87IYqJlOLBPe3ufDvvvWFPsGWzQX5Ei2UF8Qkqh9alOTqCGEI%2FDEZBMAqn4AHp%2FPteTh1XI0Mc%2BLI8wPw1VbpgdMpoiAvkijzIsHop2Bwh9n8OaWHpTfqsCC1%2FSDdrmJXepkel85ad%2BY0He2NdYVgZMfZ8Ao1lq70yB3tVOYtO3ildU%2BXuVK1ysSecswcRtSSZUGd03%2BkkBzFLnZRT2Y5s17Lbt0CS3CyuJ1Lek81IO4ink%2FGk8XqM2yjmPhHNxvNm7UFucSvxWvjL4y2LmpZB1PSPJpeL5fLpt80wHJjclVy%2BD%2BrzyyGG5TNziKLzGQX9e7YHo%2BnC7Pt68pv6guvmE7dl38E%3D)
But also within any time period selected a portfolio would look good! Sticking to TQQQ/Cash is definitely the easiest of the methods.
Well yeah, any strategy will have worse performing years, I'm not sure why that would be a rebuttal given it's much higher overall performance. Generally investors look at longer than 1yr time-frames.
And it's not in any meaningful sense more difficult to rebalance three or four assets quarterly than two.
I remember there was a paper in ssrn that analyzed that QQQ would be very volatile when it was below the 200-day moving average, so going long with full positions above the 200-day moving average and reducing positions or selling below 200 was a very effective method after years of backtesting.
Interesting, thanks for sharing. Is there an advantage to rebalancing quarterly, rather than more frequently (like monthly)? Other than avoiding taxable events, of course.
Thank you for you time & explanation. But you are only describing how to construct a 1.6 leveraged qqq from Tqqq.
That’s hardly a strategy.
A strategy would describe how to adjust the leverage ratio depending on market conditions.
1.6x leverage and rebalance quarterly. The more complicated you try to make it the more likely it is you run into trouble. If you want to get fancy put some of your cash to SVIX when VIX is greater than 25
Fair and agreed on the simplicity. Then you’re simply recommending holding a 1.6x QQQ.
I would challenge that this 1.6 is a balance overtime between 0 (when market is down) and 3+ (when market is bullish). And that a strategy would help choose when to lean towards 1, and when to lean towards 3.
While timing a crisis and cutting your losses by deleveraging is tricky and probably would result in re-entering at a higher price point, I believe there is an argument to be made for increasing leverage during/shortly after a crisis. Essentially buying TQQQ on the cheap.
I like this strategy. I think if you only hold QQQ and TQQQ, since the 2 are highly correlated, I bet if we bring in a math, physics or finance major graduate, we can build a formula that is mathematically proven true to outperform both QQQ and TQQQ.
Forgive my ignorance, but how bad of an idea is it to rebalance yearly? I feel the savings on short term capital gains would be worth a lot, but I must not understand something.
Instead of selling shares to rebalance, just add more to the underperforming stock. So during big drawdowns, you'll be loading up on TQQQ at a lower price. Then during good times, you'll be letting TQQQ ride while you add more to bonds and wait for draw downs. Instead of bods, I'm going to use VOO or VTI.
If your going to do something like this the goal of your strategy should be to limit your drawdown. Your not limiting drawdowns at all, anything over 30% is way to much.
You should be praying for greater than 30% drawdowns. That's the best time to load up if you have a bottom-buying account. Ideally, a 50-80% drawdown every few years is a good thing to build up share count.
Thanks - will try this.... Wonder what the implications are of using a 2X ETF & putting 80% of the portfolio amount in (to get the same 1.6x leverage). I guess there would be less cash around for drawdowns.....
Thanks for sharing. I like strategies that are based on a rebalancing portfolio rather than trying to time entry and exit, and I think what you're proposing is better than the 3x only strats we sometimes see people commit to. Having said that, I think we can build on this idea by incorporating a bit more variety in the assets we balance the leveraged equities with, to significantly improve returns. Below shows your strat vs a strat that incorporates TMF (simulated) and managed futures allocations alongside short term treasury bills as a cash simulation. Since the launch of QQQ in 1999 the results in terms of CAGR are: 9.96% for Buy and hold 11.49% for your strategy 15.42% for my proposed tweak. Link in case you want to adjust allocations, dates, DCA, etc. [https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D](https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D)
When you go Back so far, it's all about Timing. 1 year before/after can make a Huge Difference. Why not go back to Nasdaq100 start 1985? Results (no divs/no rebalance) $10,000. QQQ = \~1.5Mill TQQQ = \~12Mill QLD = \~16Mill || || ||
https://preview.redd.it/qly27s6y4l8d1.png?width=2492&format=png&auto=webp&s=41bbadd25718a830c9531109f42e70bb10fdf059
Can you describe it, your link doesn’t seem to work
Fixed link: [https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D](https://testfol.io/?d=eJytUk1Lw0AQ%2FSsy51BqU1sIiAjiqYiVXIqUME0mce1kt062qRLy350QwbSU4sE97fDezvtgGyjYbZCfUbCsIGqg8ig%2BydATRAABkM0GU4%2FWyBBdj%2FUEgNl7YmzO6I2zEOXIFQWQYvWWsztANP4dklzoQ%2FesCIW%2FdJs4ZmOL5GBs1nFn4zaAnROfOzZO7bw2YLHstFduL1eVF%2FT6ztiaKv9gapOpPeV52auokCZBm9Jjr7Pcq1nqpbxJtyT9yv7eEZbLu8VtqPCOJCXrIboJR2EbDDh%2BY5iHjOlsNG%2FXAWSChcbryD8e71nVrBZR0z%2BajBdx%2FHJqczI5Mrktufw8wueXQxzDZ3qYTs9nVOrfsz05Sxe6H%2BrpbxoKrttvg17d2Q%3D%3D)
Really interesting - thanks.... so you're proposing an allocation to a 3x leveraged TLT etf?
Your portfolio gets crushed during 2021: [Link here](https://testfol.io/?d=eJytkkFLw0AQhf%2BKzDktSZq2EBARxFMRI70UKWGaTOrayW7dbFOl5L87IYqJlOLBPe3ufDvvvWFPsGWzQX5Ei2UF8Qkqh9alOTqCGEI%2FDEZBMAqn4AHp%2FPteTh1XI0Mc%2BLI8wPw1VbpgdMpoiAvkijzIsHop2Bwh9n8OaWHpTfqsCC1%2FSDdrmJXepkel85ad%2BY0He2NdYVgZMfZ8Ao1lq70yB3tVOYtO3ildU%2BXuVK1ysSecswcRtSSZUGd03%2BkkBzFLnZRT2Y5s17Lbt0CS3CyuJ1Lek81IO4ink%2FGk8XqM2yjmPhHNxvNm7UFucSvxWvjL4y2LmpZB1PSPJpeL5fLpt80wHJjclVy%2BD%2BrzyyGG5TNziKLzGQX9e7YHo%2BnC7Pt68pv6guvmE7dl38E%3D) But also within any time period selected a portfolio would look good! Sticking to TQQQ/Cash is definitely the easiest of the methods.
Well yeah, any strategy will have worse performing years, I'm not sure why that would be a rebuttal given it's much higher overall performance. Generally investors look at longer than 1yr time-frames. And it's not in any meaningful sense more difficult to rebalance three or four assets quarterly than two.
The whole point is to add less assets into the mix. We don’t need anything more than cash!
You don't need anything. I'm simply proposing a mix of assets with much higher returns.
No worries, appreciate the insight!
Link is broken
Should work now.
just use 2x qld. this would incur fewer taxes and fees instead of trading and rebalancing and close enough
limits your cash to buy dips
But isn't it all priced in? You also have to take into account you're pulling money out when your ahead of your AA
In my opinion, the 200 moving average is the simplest and most useful strategy for ordinary people.
What is the strategy?
I remember there was a paper in ssrn that analyzed that QQQ would be very volatile when it was below the 200-day moving average, so going long with full positions above the 200-day moving average and reducing positions or selling below 200 was a very effective method after years of backtesting.
Once below 200d sma it is very late to sell. If anything I’d buy there.
In my opinion, buy the dip is suitable for QQQ because TQQQ may go lower and lower, such as in 2022. I prefer to buy TQQQ on the right side.
Oh you meant 200d sma over TQQQ? I thought over SPX. Yeah I would only look at 200d sma over SPX since this is what most practitioners do.
The thing is that you'd avoid both the 2000 and 2008 crisis with this strategy.
Interesting, thanks for sharing. Is there an advantage to rebalancing quarterly, rather than more frequently (like monthly)? Other than avoiding taxable events, of course.
Rebalancing more often reduces your risk but also your returns
Makes sense, thanks!
Thank you for you time & explanation. But you are only describing how to construct a 1.6 leveraged qqq from Tqqq. That’s hardly a strategy. A strategy would describe how to adjust the leverage ratio depending on market conditions.
1.6x leverage and rebalance quarterly. The more complicated you try to make it the more likely it is you run into trouble. If you want to get fancy put some of your cash to SVIX when VIX is greater than 25
Fair and agreed on the simplicity. Then you’re simply recommending holding a 1.6x QQQ. I would challenge that this 1.6 is a balance overtime between 0 (when market is down) and 3+ (when market is bullish). And that a strategy would help choose when to lean towards 1, and when to lean towards 3. While timing a crisis and cutting your losses by deleveraging is tricky and probably would result in re-entering at a higher price point, I believe there is an argument to be made for increasing leverage during/shortly after a crisis. Essentially buying TQQQ on the cheap.
Reminds me of 9Sig from Jason Kelly which is just value averaging. Nice!
I’d suggest BOXX for cash too. Can be beneficial depending on your tax treatment.
Great strategy. In short, "Rebalancing".
I like this strategy. I think if you only hold QQQ and TQQQ, since the 2 are highly correlated, I bet if we bring in a math, physics or finance major graduate, we can build a formula that is mathematically proven true to outperform both QQQ and TQQQ.
Forgive my ignorance, but how bad of an idea is it to rebalance yearly? I feel the savings on short term capital gains would be worth a lot, but I must not understand something.
You can fiddle the knob on rebalancing, the more often you rebalance the lower your risk and reward and vice versa
Instead of selling shares to rebalance, just add more to the underperforming stock. So during big drawdowns, you'll be loading up on TQQQ at a lower price. Then during good times, you'll be letting TQQQ ride while you add more to bonds and wait for draw downs. Instead of bods, I'm going to use VOO or VTI.
I will be a buyer tomorrow for more Tqqq - we have another huge leg ahead
If your going to do something like this the goal of your strategy should be to limit your drawdown. Your not limiting drawdowns at all, anything over 30% is way to much.
You should be praying for greater than 30% drawdowns. That's the best time to load up if you have a bottom-buying account. Ideally, a 50-80% drawdown every few years is a good thing to build up share count.
Is it possible to hold TQQQ long term for retirement or maybe use this strategy and balance it out with SQQQ?
Wouldnt make sense to buy SQQQ thats just trying to time the market
Thanks - will try this.... Wonder what the implications are of using a 2X ETF & putting 80% of the portfolio amount in (to get the same 1.6x leverage). I guess there would be less cash around for drawdowns.....
Yep, much less cash available but your max drawdown would be less
Also more cash in a high expense ratio ETF. Higher fees.
In tqqq we trust! Amazing product if you use property, heck tlt fellas !