SQQQ vs TQQQ: One is a better Nasdaq 100 ETF by far

on May 21, 2024
  • The TQQQ ETF has jumped by over 27% this year while the QQQ is up by 11%.
  • The SQQQ ETF has tumbled by the same amount.
  • A look at the fundamentals shows that the TQQQ fund is a better investment.

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The UltraPro Short QQQ (SQQQ) and UltraPro QQQ (QQQ) ETFs have diverged this year as American tech stocks surged. The Nasdaq 100 index, which tracks the biggest technology companies in the US, has jumped by 11% while the TQQQ rose by 27%. On the other hand, the SQQQ fund has plunged by over 27% this year.

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SQQQ vs TQQQ: what’s the difference?

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TQQQ and SQQQ are popular ETFs among short-term-oriented investors who love their returns potential. They have over $22 billion and $2.2 billion in assets and charge an expense ratio of 0.88% and 0.91%, respectively.

The two are leveraged ETFs that aim to generate 3x the daily returns of the Nasdaq 100 index. Ideally, if the index rises by 1% within a day, the TQQQ fund will gain by 3% while the SQQQ fund will drop by the same amount.

The two funds are not created to mirror the performance of the Nasdaq 100 index in the long term. However, their historic performance shows that there is a close correlation. For example, the QQQ ETF has jumped by 152% in the past five years while the TQQQ has jumped by over 359%. 

The SQQQ has plunged by over 99% in this period because America’s technology companies have done well over the years. The Nasdaq 100 index has done well since its launch in 1985 when it was trading at $250. 

It has jumped to over $18,600 as many technology stocks have surged. 6 of the biggest American companies have seen their market cap jump to over $1 trillion.



TQQQ is a better investment than SQQQ

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There are several reasons why the TQQQ is a better ETF to buy than TQQQ by far. First, judging by history, there is a possibility that American technology stocks will rise in the long term. These stocks have emerged from past dips such as during the dot com bubble and the Global Housing Crisis unscathed. 

Second, the Nasdaq 100 index has some of the most forward-looking companies in the world. For example, Microsoft and Amazon leads the cloud computing industry, powering most of the top global companies. Nvidia leads the GPU market, Uber is the biggest ride-hailing firm, while Amazon leads the e-commerce sector.

Third, there are chances that the Federal Reserve will start cutting interest rates later this year, a positive thing for stocks as investors will shift their funds from money market funds. Jerome Powell and other Fed officials have pointed to rate cuts.

Finally, as shown above, the TQQQ ETF has a long history of beating the SQQQ. While past performance is not always a good indicator of what to expect in the future, it can help you predict what will happen.

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