TQQQ vs QQQ confused about why not to pick TQQQ

While the TQQQ ETF appears to be an attractive option for investors seeking high leverage and potential for large gains, it is not without significant risks. Here are key considerations to weigh TQQQ against QQQ: 1. **Volatility and Risk**: TQQQ is a **triple-leveraged ETF**, which means it amplifies the daily returns of the Nasdaq-100 Index by 3 times. This leverage can lead to substantial gains but also increases volatility and drawdown risks. The ETF has a beta of 3.45, indicating higher volatility compared to the Nasdaq-100. 2. **Market Conditions**: TQQQ is designed for **daily trading** and is not intended for long-term investors. Its strategy of remaining fully invested at all times can lead to significant losses in prolonged market downturns. The ETF has experienced severe drawdowns, including an 81% decline in the 2022 bear market. 3. **Dividend Policy**: TQQQ has a higher dividend yield than QQQ, with an annualized dividend of $0.87, yielding 1.08%. However, it's important to note that TQQQ has a history of cutting dividends, and the dividend policy can be unpredictable. 4. **Expense Ratio**: TQQQ has a higher expense ratio than QQQ, with a 0.91% fee. This can eat into returns over time, especially for investors holding the ETF for an extended period. 5. **Leverage Decay**: Over longer holding periods, leverage can decay significantly, leading to underperformance. This is because TQQQ must rebalance its portfolio daily, which can result in selling high and buying low. In conclusion, while TQQQ can be a **potential home run** for bullish investors with a short-term focus and high risk tolerance, as described in the July 5, 2025, Seeking Alpha article, it is not a suitable option for investors seeking stable, long-term returns. The higher volatility, unpredictable dividend policy, and leverage decay make TQQQ a risky choice compared to the more stable QQQ ETF. Investors should consider their investment goals, risk tolerance, and time horizon carefully before choosing between these ETFs.