Is ProShares UltraPro QQQ (TQQQ) the Best Performing ETF of the Last 5 Years?

ProShares UltraPro QQQ (TQQQ) has been a standout performer in the ETF landscape, consistently delivering impressive returns over the past five years. As a leveraged ETF that aims to triple the daily returns of the NASDAQ-100 Index, TQQQQ has capitalized on the strong performance of the tech sector and the NASDAQ-100 Index. This article will delve into TQQQQ's exceptional performance, the factors contributing to its success, and how it compares to other leveraged ETFs.

TQQQQ's Exceptional Performance

TQQQQ's total return over the past five years has been an astonishing 327%, significantly outperforming the NASDAQ-100 Index and other major indices. This impressive performance can be attributed to several factors:

1. Leveraged exposure to the NASDAQ-100 Index: TQQQQQ aims to provide three times the daily returns of the NASDAQ-100 Index. This leverage amplifies both gains and losses, leading to higher returns when the index performs well.
2. Strong performance of the NASDAQ-100 Index: The NASDAQ-100 Index has been one of the best-performing major indices over the past five years, driven by the strong performance of technology and growth stocks. TQQQQQ's leveraged exposure to this index has resulted in significant gains.
3. Low volatility: Despite being a leveraged ETF, TQQQQ has exhibited relatively low volatility compared to other leveraged ETFs. This is due to the low volatility of the underlying NASDAQ-100 Index and the fund's passive management strategy.
4. Positive market sentiment towards technology stocks: The technology sector has been a significant driver of market performance over the past five years. Investors' positive sentiment towards technology stocks has contributed to the strong performance of the NASDAQ-100 Index and, consequently, TQQQQQ.
5. Low expense ratio: TQQQQ has a relatively low expense ratio of 0.95%, which helps to minimize the impact of management fees on the fund's performance.

Comparing TQQQQ to Other Leveraged ETFs

TQQQQ's performance can be compared to other leveraged ETFs, such as ProShares UltraPro S&P500 (UPRO) or Direxion Daily S&P500 Bull 3x Shares (SPXL), by analyzing their returns, risk-adjusted performance, and other relevant metrics. While TQQQQQ has delivered impressive returns, UPRO and SPXL have also performed well, with 5-year annualized returns of 48.34% and 70.54%, respectively.

In terms of risk-adjusted performance, TQQQQQ, UPRO, and SPXL have similar Sharpe Ratios, Sortino Ratios, Omega Ratios, Calmar Ratios, and Martin Ratios, indicating comparable risk-adjusted performance. However, TQQQQQ has a slightly lower 1Y Return and 5Y Return (Ann) compared to UPRO and SPXL. In terms of volatility and drawdowns, TQQQQQ, UPRO, and SPXL have identical metrics, indicating that they have similar risk profiles.

The Role of the Tech Sector's Outperformance

The tech sector's outperformance has played a significant role in TQQQQQ's strong performance. As a leveraged ETF that tracks the NASDAQ-100 Index, TQQQQQ is heavily exposed to the tech sector, which has been a major driver of market returns in recent years. The NASDAQ-100 Index is dominated by tech stocks, with the top five holdings accounting for over 50% of the index's weight. These tech giants, such as Apple, Microsoft, and Amazon, have consistently delivered strong earnings growth and market-beating returns, contributing to TQQQQQ's impressive performance.

Looking ahead, the tech sector's outperformance is likely to continue to influence TQQQQQ's performance. As the global economy becomes increasingly digital, tech companies are well-positioned to benefit from long-term growth trends, such as the rise of cloud computing, artificial intelligence, and the Internet of Things. Additionally, the tech sector's strong fundamentals, such as high earnings growth and strong balance sheets, make it an attractive investment destination for both institutional and retail investors.

However, it is essential to note that the tech sector's outperformance may not be a one-way street. Market cycles and sector rotations can lead to periods of underperformance for the tech sector, which could impact TQQQQQ's performance. Moreover, geopolitical risks, regulatory pressures, and competition from other sectors may pose challenges to the tech sector's dominance. Therefore, investors should remain vigilant and monitor the tech sector's performance closely to make informed decisions about their investments in TQQQQQ.

Conclusion

ProShares UltraPro QQQ (TQQQQ) has been the best-performing ETF of the last five years, delivering impressive returns driven by the strong performance of the tech sector and the NASDAQ-100 Index. While other leveraged ETFs, such as ProShares UltraPro S&P500 (UPRO) and Direxion Daily S&P500 Bull 3x Shares (SPXL), have also performed well, TQQQQQ's exceptional performance can be attributed to its leveraged exposure to the NASDAQ-100 Index, low volatility, positive market sentiment towards technology stocks, and low expense ratio. As the tech sector continues to outperform, TQQQQQ is well-positioned to maintain its strong performance. However, investors should remain aware of potential risks and monitor the tech sector's performance closely.