Reporting of flows for the fund lags a day behind because of how TQQQ settles, but the end of last week saw investors pouring $1.47 billion into the fund as they bet big on market rebounds. This bet has paid off, as the fund continues to be a top performer heading into trading today.
Image source: Bloomberg
While most investors tend to shy away from growth type investments in periods of higher interest rates and higher yields because these environments equate to less returns, tech has typically been a haven as investors seek out the mega-caps during economic uncertainty.
Last week saw TQQQ charting inflows every single day as investors bought and held onto the fund, reports Eric Balchunas, senior ETF analyst for Bloomberg, on his Twitter. Trading volume last Friday alone was $16 billion for the fund, and it clocked $64 billion for the week, over twice its old trading volume record.
TQQQ is a fund that offers three times its benchmark’s performance by using options, and as such it is made for short-term trading. Leverages only apply to individual daily performances, not in aggregate, but Bloomberg points out that investors who might have bought and sat on the fund over the last five years would have experienced returns of roughly 1,400%.
Due to its leveraged nature, even though the Nasdaq didn’t gain as much as other major market indexes, TQQQ still rose 2.3%. Futures had increased 1.8% for the Nasdaq as of premarket trading, and TQQQ was already up 5.4% in trading before market open.
Leveraging the Nasdaq With ProShares
The ProShares UltraPro QQQ (TQQQ ) is a leveraged ETF that seeks a 3x return on the daily performance of the Nasdaq 100 Index before fees and taxes.
The exposure resets daily and does not provide a simple 3x multiplier on the return of the underlying index.
As such, TQQQ should be monitored at least daily by investors.
As a leveraged fund, TQQQ carries greater risks than non-leveraged benchmarked funds.
If the fund is held over a period of time longer than a single day, and the underlying Nasdaq-100 index remains trendless, oscillating without establishing a clear upward or downward trend, TQQQ can lose money.
However, in times of a clear upward trend, TQQQ can outperform the index due to compounding.
TQQQ has an expense ratio of 0.95% with a contractual waiver that ends on September 30, 2022.
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