Over the past decade, certain technology companies and cryptocurrencies, have delivered extraordinary gains and risk. Nvidia (NVDA) actually returned almost 84x, which was roughly 3x Tesla’s gain of 28x. Still, we believe long-term investment portfolios should mainly be comprised of leading diversified index ETFs, either with or without leverage.
The best way to ensure that you catch the next Nvidia or Tesla, is to own the leading equity indexes. In the past, top investors such as Warren Buffett and Jack Bogel strongly recommended the S&P 500 for core portfolio diversification. However, at ETF PM, we explain in our book, “Investable Benchmarks,” that the Nasdaq-100 (QQQ) is the “next-generation” S&P 500. These two diversified, large-cap indexes have many of the same technology companies as top holdings although QQQ has roughly double the position size.
Over the past decade, the Nasdaq-100 returned 387%, which was almost double the 201% gain in the S&P.
It is also impressive to note that, over the same period, the top diversified leveraged ETFs in the 3x S&P 500 (SPXL) and 3x Nasdaq-100 (TQQQ) delivered 587% and 1,841%, respectively. This means that TQQQ returned almost 5x the unleveraged QQQ, and 9x the unleveraged S&P. However, amplified index returns also come with amplified index risk. In fact, over the past 16.5 months since January 2022, SPXL and TQQQ were still down by roughly 48% and 65%, respectively.
Investors should always use extreme caution and risk controls when investing.
See our prior posts on QQQ and TQQQ: 3/23, 11/22, 2/22c, 2/22b, 2/22, 11/21, 8/21, 3/21, 12/20, 11/20, 10/20, 9/20b, 9/20, 8/20d, 8/20c, 8/20b, 8/20, 6/20c, 6/20b, 6/20, 4/20, 3/20, 1/20, 12/19, 4/19, 10/18, 7/18, 4/18, 7/17, 6/17.