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TQQQ vs. QQQ

The best choice for your portfolio depends on your risk tolerance.

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While these exchange-traded funds (ETFs) boast similar names and track the same index, the QQQ is better suited to passive investors, while day traders and otherwise active investors may be better off trading the TQQQ. But the best choice for you will ultimately depend on a myriad of factors.

What is the TQQQ?

The ProShares UltraPro QQQ (TQQQ) is a leveraged ETF that tracks the Nasdaq 100. It was created in 2010 and as of June 2020 had over $4.31 billion in assets under management. The fund uses a complex combination of futures, swaps and borrowed money to amplify the movement of the index tracks — in this case, the Nasdaq.

The TQQQ is designed to triple the daily returns of the Nasdaq so that a 1% gain by the Nasdaq would theoretically result in a 3% gain for TQQQ investors.

The fund’s expense ratio is 0.95% and returns quarterly distributions to investors.

What is the QQQ?

The Invesco Trust (QQQ) is an ETF that passively tracks the Nasdaq 100. The fund was created in 1999 and as of June 2020, was the second-most traded ETF in the US. Between 44% and 47% of its holdings are tech stocks, with the rest of the fund divided up between communications, healthcare, consumer discretionary and industrial stocks.

The fund’s expense ratio is 0.2% and returns quarterly distributions to investors.

Is TQQQ a good investment?

By its very nature, the TQQQ is a riskier investment than the QQQ. It aims to amplify the daily returns of the Nasdaq-100 by a factor of three. This means that if the Nasdaq does well, the TQQQ does really well. And if the Nasdaq drops? Well, the TQQQ plummets by three times as much.

Because of its volatility, the TQQQ is best used as an intraday investment, which means you buy and sell the fund over the course of a single trading day. This often makes the TQQQ a strong fit for active traders with a high degree of risk tolerance.

Another drawback to consider before you invest is the TQQQ’s expense ratio. Most ETF expense ratios sit at 0.2% or below — like the QQQ. But the TQQQ’s expense ratio is 0.95%. You’ll pay more to invest in this fund, and while it may potentially magnify your gains, it may also widen your losses.

TQQQ performance

The past performance of an ETF is no guarantee of what the fund will do in the future. But tracking the TQQQ may help you compare it to other funds.

The past performance of an ETF is no guarantee of what the fund will do in the future. But tracking the TQQQ may help you compare it to other funds.

Is QQQ a good investment?

The QQQ is considered an aggressive growth fund and is disposed to higher short-term volatility than larger indices like the S&P 500. That said, it’s still considered a viable buy-and-hold investment that has a history of compensating its investors for taking on increased risk with above-average returns.

Historically, the QQQ has outperformed the S&P 500, with 10- and 15-year returns of 19.8% and 12.8%, beating out the S&P’s 15.4% and 9.1% returns over the same period.

The QQQ is a way to incorporate tech stocks into your portfolio while also adding exposure to large-cap industrial and healthcare companies. You don’t need to hand-pick or monitor individual stocks — the index does that for you. And the QQQ is typically a more stable investment than the TQQQ, which means it’s suitable to be held long-term.

That said, the QQQ is limited in its scope. Unlike the S&P 500, it only tracks 100 stocks, nearly half of which are tech stocks. Should anything happen to the tech sector, your investment in the QQQ will be put at risk.

QQQ performance

What the QQQ has done in the past is no guarantee of future performance. But tracking this fund can help you see how it compares to other ETFs.

How to choose

Before you add either of these funds to your portfolio, consider the following:

  • Risk tolerance. The TQQQ is exponentially riskier than the QQQ and is only suitable for investors with a high degree of risk tolerance.
  • Timeline. The QQQ may work as either a short- or long-term investment, but the TQQQ is typically an intraday trade.
  • Amount of capital. Since the TQQQ uses leverage to amplify returns, you could earn as much or more than a QQQ investment with less capital.
  • Investing experience. If day trading isn’t a routine part of your investment strategy, it may be prudent to skip out on the TQQQ.

Compare brokerage accounts

To invest in either of these ETFs, you’ll need a brokerage account. Review your options below.

Name Product Stock trade fee Asset types Option trade fee Annual fee
Vanguard
$0
Stocks, Mutual funds, ETFs, Forex
$1
$20 per year
Get a personal advisor when you open an account with at least $50,000.
Robinhood
$0
Stocks, Options, ETFs, Cryptocurrency
$0
0%
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Interactive Brokers
$0
Stocks, Bonds, Options, Mutual funds, Index funds, ETFs, Futures, Cash
$0 + $0.65/contract, $1 minimum
0%
IBKR Lite offers $0 commissions, and IBKR Pro offers advanced tools for professional traders.
Sofi Invest
$0
Stocks
N/A
0%
A free way to invest in stocks, ETFs and crypto.
TD Ameritrade
$0
or $25 broker-assisted
Stocks
$0 + $0.65/contract,
or $25 broker-assisted
TD Ameritrade features $0 commission for online stock, but watch out for high short-term ETF and broker-assisted trading fees.
Tastyworks
$0
Stocks, Options, ETFs, Futures
Stocks & ETFs: $1/contract to open, $0 to close, $10 max/leg
Futures: $2.50/contract to open, $0 to close
0%
Trade stocks, options, ETFs and futures on mobile or desktop with this advanced platform.
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Compare up to 4 providers

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

Bottom line

Both the QQQ and TQQQ track the Nasdaq and depend on its performance for returns. But before you add either fund to your portfolio, consider your time horizons and risk tolerance.

Review your account options with multiple brokerages to find the platform that best meets your needs.

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