By David Kreinces, 11/21/23 (updated)
This holiday season, consider giving loved ones cash to buy as little as one share of the world’s top hyper-growth assets. For roughly $17 (ETHE) to $45 (TQQQ) per share, you can gift exposure to leading exchange-traded funds (ETFs) and cryptocurrency trusts. All are great gifts that may keep giving for decades to come.
Technology Exposure
Technology stocks have been the best long-term global trend, and recent advancements in artificial intelligence suggest that is likely to continue. To participate, investors must choose the right portfolio holdings. While many favor the S&P 500 index (VOO, IVV or SPY) for core equity exposure, we believe the Nasdaq-100 (QQQ or QQQM) is the “next-generation.” While both indexes have many of the same top mega-tech holdings, the Nasdaq-100 has larger positions in each.
Having more index technology exposure has increased long-term total return. Over the past decade, the S&P 500 delivered 205%, while the Nasdaq-100 returned 416%. However, the extra return also comes with additional risk at times. When the financial markets crashed in 2022, the S&P finished the year down by 18% while the Nasdaq-100 fell by 33%.
The American Dream ETF
As we explain in our book, “Investable Benchmarks,” machines are expected to ascend to thousands of IQ points, so people may need to clone their investment income to replace labor income. With the application of leverage this past decade, the 3x Nasdaq-100 (TQQQ) returned just over 20x.
While past performance can never guarantee future results, or even positive results, investors should know the historical trends and own the technology matrix. At the current 10-year growth rate of 35.8%, TQQQ would turn $500 into $2 million in 28 years. Even if the growth rate falls by half to 18% annualized, a $500 seed investment in TQQQ could still reach $2 million in 51 years. Given the phenomenal growth potential in leveraged technology indexing long-term, we call TQQQ the “American Dream ETF.”
Leverage and Cryptocurrencies
The top leveraged technology funds and leading cryptocurrencies may be the future of investing. Just as Max Planck explained that “science progresses one funeral at a time,” we believe that “finance progresses one index at a time.” A few other top leveraged technology funds include Semiconductors 3x (SOXL), Technology 3x (TECL), and FANG+ 3x (FNGU).
Bitcoin and Ether
The only asset class to outperform TQQQ this past decade is cryptocurrency. Over the past 8.6 years, the Bitcoin Trust (GBTC) delivered almost 64x (or 63% annualized), which was well ahead of TQQQ. In fact, bitcoin currently holds the world speed record to a $1 trillion market capitalization at just 12 years, and Ether could break bitcoin’s record.
Risk Control
It is important to know that all these hyper-growth assets can crash or go “on-sale” quickly at times, with discounts well over 50% from prior price levels. It may make sense to collect some of these securities long-term, but be very careful, go slowly, and take baby steps.
Leveraged ETFs and cryptocurrencies are extremely volatile and do not always work as expected. Over just five weeks during the Coronavirus Crash in 2020, TQQQ fell by 73% while the unleveraged QQQ lost 31%. As for cryptocurrency, in the crash of 2022, the Bitcoin Trust (GBTC) fell by 76% and the Ethereum Trust lost 85%. Regardless of your portfolio strategy, components, or balance, investors should always be prepared to sell positions and raise cash to protect principal as needed.
Free Retirement Nest Egg
Clearly, the extraordinary performance potential in TQQQ, GBTC, and ETHE warrants extra volatility at times. Just a $500 investable benchmark gift today, evenly divided between these three securities, could grow into a $2 million retirement nest egg within 30 to 50 years. Perhaps each person should own the technology matrix and have geniuses like Elon Musk, and the top cryptocurrencies, working for them. As we explain in our book, diversification is a free lunch, and leveraged diversification can be a free retirement nest egg.
Happy Holidays!
ETF PM has long positions in TQQQ, QQQM, QQQ, FNGU, GBTC, ETHE, SPXL, and IVV.
See prior notes: 11/22, 2/22, 8/21, 5/21, 4/21, 10/20, 8/20b, 8/20, 6/20c, 6/20b, 6/20, 12/19, 7/18, 4/18, 12/17, 10/17, 9/17, 3/17.
