TQQQ vs QQQ - What Is The Difference

TQQQ vs QQQ - What Is The Difference

Are you keen on knowing more about TQQQ vs QQQ then you have many reasons to find this article informative and useful? Both QQQ and TQQQ are known as ETFs or Exchange Traded Funds. There are a few things common about them and at the same time they also have a few things that set apart one from the other.

What is QQQ?

QQQ also is known as Invesco QQQ Trust. It is a popular and well-known ETF. It can track the 100-share index of NASDAQ. This index basically is made up of the top 100 stocks. They are ranked by market capitalization and are a part of the NASDAQ Composite Index. While it has shared from all sectors and industries, the top ones are from the technology, consumer discretionary, and communication sectors.

Most of the stocks that are a part of QQQ have heavy weightage. Therefore, when you choose QQQ you are being a part of an aggressive stock fund. While the returns for the investor could be quite impressive, you also could have to face short-term volatility and risk when you compare it with a broader stock index. For those who want to play safe, choosing funds that are part of the S&P 500 could perhaps be a much better option. But based on empirical evidence, there are reasons to believe that QQQ could offer you a better return because of the higher risk that the investors are ready to take.

Pros of QQQ

  • Though the concentration of QQQ is towards technology stocks, you can also look at stocks in the other 8 sectors.
  • The ETFs under QQQ are priced low and as an investor, you will have to spend only 0.20% for every $10,000 that you invest.
  • You have a chance to get high returns because past performance is not taken into account. While this indeed is risky, the returns are also substantially better.

Cons of QQQ

  • If you are looking for a diversified fund with representation from more companies, stocks, and industries then choosing a fund that has S&P 500 would be a better option.
  • Most of the QQQ stocks focus on technology and therefore the risk is much higher. You can expect the market to be highly volatile when you compare it with the S&P 500.

What is TQQQ?

TQQQ is also known as ProShares UltaPro and it is a leveraged ETF. You can expect daily returns here and this is perhaps one of the biggest takeaways. However, the daily returns are grossed before expenses and fees. The fee structure is a bit higher when compared to the ETFs that are based on NASDAQ 100. However, the returns could be quite exciting as far as TQQQ is concerned. To cite an example, if the QQQ ETF goes up 1% in a day, in most cases TQQQ will go up by almost 3%. The downside should also be taken into account.

Pros of TQQQ

High performance. Since this is an ETF that comes with 3x leverage, the chances of getting high returns are quite bright when compared to QQQ. Hence, in terms of popularity and acceptance, many people prefer TQQQ over QQQ.

You have the capacity of gaining smart short-term gains. Further, these types of ETFs can be traded daily in the same manner as stocks. Further, this ETF also allows investors to go in for limit orders and he can sell at a specified price. This while improving profits can also help in limiting losses quite substantially.

Cons of TQQQ

  • the Market risk is a problem and this also applies to QQQ.
  • The expenses for TQQQs are higher when compared to other ETFs.

Which is better, QQQ or TQQQ?

Both QQQ and TQQQ have their features and specialties. However, it depends on the end-users because they are the ones who decide on the risk appetite. If you are risk-averse, then you should stay away from QQQ and go for TQQQs.

Which has better coverage of stocks?

There is no doubt that TQQQs are better because of the wider stock portfolio. Hence, when we look at the whole thing in perspective, TQQQs will certainly be safer and perhaps more result-oriented. You will be able to spread your risk wider when compared to QQQ.

Which is more cost-effective?

TQQQ is more cost-effective because of the wider portfolio that it offers.

Conclusion

While TQQQs and QQQs have some unique features and options, if you are a conservative and not too keen on taking risks, then go in for TQQQ based ETFs. Though the cost factor is higher, the returns could be better and you will be free from stress and tension.