QQQ3 – the ETF which acts like a share, a really exciting share!

Wisdomtree Nasdaq 100 3x Daily Leveraged Buy @ $147.50 Listed in London but priced in US$ New entry

I know what you are wondering. Why is an ETF being feature in Quentinvest for Shares. I am doing this because this is no ordinary ETF. QQQ3 is so special it behaves more like a share in a single company (ETFs are shares too but shares in portfolios so normally more staid in their performance). It has been featured in Quentinvest for ETFs, 15 times altogether, starting in October 2017 and it is showing enormous gains. QQQ3 is a phenomenon.

I featured QQQ3 in Great Stocks in November 2019 and it has already more than trebled since then. As you can see from the chart above it is up almost 50-fold since it was launched in December 2012. How many shares in even the most exciting individual companies have matched that performance?

Most advisers warn against making long term investments in QQQ3 partly because it is so volatile. A 10pc move in a day is nothing for QQQ3 and if the Nasdaq 100 index falls 20pc, as happens from time to time, QQQ3 will fall 60pc. They also point out that the ETF is rebalanced daily, unlike the index, which is rebalanced quarterly, so there is no guarantee that it will track the index although they do move closely in line.

What has struck me about QQQ3 though is that for all the cautionary noises simple observation suggests that it does make a very good long-term investment. It goes up – a lot. What more could you want?

The volatility can also be turned to your advantage as it has been in QV for ETFs. When share prices generally collapsed in March 2020 because of the virus I was certain they would recover, which made this a brilliant moment to buy a leveraged investment like QQQ3, which plummeted during this period. I recommended the shares five times between 17 March and 29 April at prices between $30.50 and $50.

QQQ3 may be leveraged but ultimately it traces the performance of 100 of the world’s most exciting business. This means it will ALWAYS recover; that is good to know, when you are buying a severely depressed share.

It is not depressed now but my guess is that the next decade is going to see more incredible progress by this ETF so I don’t mind climbing on board now. If it does crash that will provide an opportunity to add to a position, which is odds-on to win in the end.

By the way, if you think this is an ad for QV for ETFs you may be right. I am very pleased with how well that service is going and would recommended it to anyone.

ETFs are supposed to be safer than shares. At first sight QQQ3 does not look like a safe investment because it is so volatile. Since launch in 2012 it has more than halved on three occasions. Nevertheless, I think it is a safe investment because it always wins in the end – so far anyhow. I don’t see that changing unless the global technology revolution suddenly comes to an end because of some incredible black swan event like the sun going out or earth colliding with a meteor. If that happens finance will be the least of our problems.

There has been one other dramatic event in the life of QQQ3. Last November the shares had a 30:1 share split. The pre-split price had reached a heavyweight $4,000-plus, which was putting off the very investors to whom it was supposed to appeal.

The leverage is built in so you cannot buy these shares in a CFD account, only in a share account.