By David Kreinces, 6/25/24 (updated)
Many investors are searching for the world’s best exchange-traded fund (ETF) or investable benchmark. If you think the answer is the S&P 500 (SPY), or the Nasdaq 100 (QQQ), you may be surprised.
Technology and bitcoin have both been top trends this past decade. As the world races towards super-intelligent automation, we believe these momentum leaders may have a long way to go.
American Dream ETF
The historical performance data strongly favors the technology heavy Nasdaq-100 3x (TQQQ) for core equity exposure. The unleveraged Nasdaq 100 (QQQ) is the “next-generation” S&P 500 and adding moderate leverage can be priceless at times. In fact, over the past decade, TQQQ returned 24x in total return or 38% annualized. The S&P 500 delivered just 2x in total return or 13% annualized.
This means TQQQ returned more than 10x the S&P 500 through a low-cost, liquid, and diversified ETF. Thus, investing will never be the same.
3x Nasdaq-100 (TQQQ)
Past performance can never guarantee future results, or even positive results. However, investors should know that the current growth rate in TQQQ would turn $500 into $2 million in 26 years. Even if this growth rate falls by half to 18% annualized, a $500 seed investment in TQQQ could still reach $2 million in 48 years.
Given the potential technology growth long-term, we call TQQQ the “American Dream ETF.” Other top leveraged technology ETFs include Technology 3x (TECL) and Semiconductors 3x (SOXL), as both had spectacular returns this past decade. Still, we prefer the Nasdaq-100 3x overall due to its combination of broader diversification and extra liquidity, as well as a technology focus.
Cryptocurrency
Recently, the only asset class that outperformed TQQQ was cryptocurrency. Over the past 9.2 years, the Bitcoin Trust (GBTC) delivered 118x or 61% annualized, which was well ahead of TQQQ. In fact, bitcoin holds the world speed record to a $1 trillion market capitalization at just 12 years and Ether could break bitcoin’s record.
Risk Control
Leveraged ETFs and cryptocurrency can be extremely volatile and many do not always work as expected. For example, over just five weeks during the Coronavirus Crash in 2020, TQQQ fell by 73% while GBTC fell by 76%. Regardless of your portfolio strategy, components, or balance, investors should always be prepared to sell positions and raise cash to protect their principal as needed.
Free Retirement Nest Egg
In my opinion, leveraged ETFs and cryptocurrencies are the future of investing in many respects. Just as Max Plank explained that “science progresses one funeral at a time,” we believe that “finance progresses one index at a time.”
Clearly, the extraordinary performance potential in TQQQ and the leading cryptocurrency justifies extra volatility. In addition, the technology sector benefits greatly from the strong trends in artificial intelligence. Over 14.4 years since the inception of TQQQ (2/9/10), this 3x Nasdaq-100 fund returned 187x or 44% annualized.
As machines ascend to thousands of IQ points, people may need to clone their investment income to replace labor income. Therefore, it seems that each person should own the technology matrix and have some exposure to the top cryptocurrencies. As we explain in our book, “Investable Benchmarks,” diversification is a free lunch, and leveraged diversification can be a free retirement nest egg.
ETF PM currently has long positions in TQQQ, QQQM, QQQ, GBTC, IBIT, BITU, MSTR, and ETHE.
Contact us today to learn more.
