ETF Battles: TQQQ vs. FNGU - Which High-Octane 3x Technology ETF Wins? - YouTube

- This is ETF Battles.

I'm Ron Delegge, where the chief concern of this program isn't 200 day moving averages,

or National GDP or asset flows.

It's none of that noise.

The chief concern of this program is A) who's about to get beat up, and B)

how can we help you to make informed investment choices in an overcrowded ETF marketplace

that resembles a Costco parking lot on a Saturday morning?

I'm thrilled to have you with us because today's ETF battle is a historical moment for this

program because it's the first appearance of leveraged ETFs on our weekly show.

Yes, these are funds that attempt to magnify their gains by using pre-set leverage points.

For example, if 200% or 300% daily leverage or some other pre-determined figure.

Today's scuffle is between two technology focused equity products.

We've got the ProShares UltraPro QQQ ETF.

That's TQQQ versus the MicroSectors FANG PLUS 3x ETN.

That sticker symbol FNGU.

You can think about this bout as a sword fight between two high-powered technology products.

In culinary terms, today's match up is like habenero chile peppers versus habenero chile

peppers.

And let me tell you, friends, it's about to get muy caliente, amigos, as you're about

to see.

So helping us to judge this match up between TQQQ and FNGU is Dave Kreinces, with ETF Portfolio

Management, and Mike Akins, CEO at ETF Action, the best in the business.

Guys, welcome back to the program.

Great to see ya.

- Hey, Ron.

- Good to be here.

- So the four battle categories are cost, exposure strategy, performance, and a mystery

category.

So my score card is ready and so is our shot clock.

We're gonna go through the four battle categories, one at a time.

Each of you are gonna pick TQQQ or FNGU as the winner in each respective battle category.

You've got 30 seconds to do that.

We're gonna start with Mike.

Let's begin with the first category, cost.

- All right, so cost on three times leverage products is pretty irrelevant, but they're

both 95 basis points.

So I would say the cost is a coin flip.

The one thing to note is structure.

TQQQ is going to be an actual ETF exchange traded fund, where the FNGU is more concentrated

and therefore doesn't meet diversification as structured as an exchange traded note which

means it brings with it counter-party risk.

So for that simple fact, I'm gonna give the nod to TQQQ because of the more straight forward

structure of the ETF.

- That's a good start.

How 'bout you, Dave?

What's your take on cost?

Hey Ron, before I get into cost, I just wanna say this battle is incredible.

It's really Michael Jordan versus LeBron James.

In full disclosure ETF PM is trading both of these incredibly innovative ETFs and on

cost, I agree with Mike, the 95 bps is equivalent, but I also give the win on cost to TQQQ, both

for structure and border diversification.

- Let's move on to the next category which is exposure strategy.

Dave, continue.

- Investors should be extremely cautious with leveraged ETFs.

Both of these securities crashed by over 70% last quarter and leveraged ETFs don't always

work as expected.

As for FNGU, the concentration in 10 positions may outperform long-term, but the higher portfolio

concentration is a bigger risk.

The FNGU security is an ETN and FNGU's position rotation process is another big variable.

As for the unleveraged NASDAQ 100, in many respects, QQQ is the next generation S&P 500.

QQQ is now one of just four ETFs to surpass a 100 billion in assets.

So the unleveraged NASDAQ 100 ETF is a top core index holding, and it's a much bigger

net of portfolio positions to increase your chance of catching the next Amazon and maintaining

appropriate exposure.

So we give the win on strategy to TQQQ.

- Let's move on to Mike.

What's your take?

- First off, I can tell I'm in over my head when it comes to leveraged products today.

A hat tip to my battle partner, there.

I would argue that from an exposure strategy perspective it comes down to what you're trying

to achieve.

TQQQ which tracks the NASDAQ 100 is going to give you a broader diversification exposure.

It's a more traditional index metrics, captures that innovative side of the U.S. economy,

whereas, FNGU is a little bit more of a mixed bag of 10 names.

So, I'll give it to TQQQ, but mostly I'll just add onto what my battle partner here

had to say.

- Going back to you, Dave, you mentioned TQQQ and exposure strategy versus FNGU.

When you said FANGU, I got distracted, and I was thinking Ragu gravy, like the pasta

gravy.

So what was your winner on exposure strategy?

- It was TQQQ.

- I just wanted to make sure of that, 'cause I was thinking Ragu, for some reason, Ragu

gravy.

- That's good sauce.

- We need to move on to performance.

Why don't you take it away.

What's your battle winner on performance between TQQQ and FNGU?

Dave.

- So for performance, this is a priceless lesson for everyone.

Some people say Einstein called compounding, the eighth wonder of the world and here's

why.

Hold onto your seat, because this past decade through mid-June, TQQQ delivered 4,313% or

43 times your money.

That's $10,000 growing to almost $440,000 in just 10 years.

And this return is also nine times larger than the unleveraged NASDAQ 100 return of

466%, this past decade.

So, on an annualized basis, TQQQ gained 46% annualized which was roughly two times, two

and a half times larger than the unleveraged index, which delivered 19% annualized.

So what you see here, is the magic of compounding.

Over just one decade, a double in annualized return, produced a nine times increase in

the total return.

So leveraged ETFs, specifically on the largest asset classes do not need to deliver the exact

multiple return every year and because of their mechanics, they don't.

They compound daily which distorts annual returns.

But this is all just part of new tools that work differently.

Clearly strategic leveraged diversification in TQQQ produced a carton of extra retirement

nest eggs.

TQQQ's 43 times your money in its rookie decade is also 18 times the return of the S&P 500

which delivered 235%.

Most investors can't beat the S&P.

So this is well beyond historic.

Because of the unbelievable performance, we're now calling TQQQ the American dream ETF.

At the current return rate, listen to this, this is crazy.

At the current return rate, a $500 seed investment could grow to $2 million in 22 years, but

even if the rate falls to 26% annualized, $500 would still reach $2 million in 36 years.

So future returns can never be guaranteed.

Even positive returns can't be guaranteed, but investors should know that TQQQ has been

virtually impossible to beat this past decade.

As for FNGU, it actually did beat TQQQ, by 11% over the past two and a half years, since

FNGU's inception, returning 68% versus 57.

But FNGU's concentration and position rotation process are higher risk and while I love FNGU's

extra exposure to Tesla, Invidia, and Netflix, the performance win on a risk adjusted basis

still goes to TQQQ.

- We've had numerous shock clock violations thus far.

They've been all duly noted and will probably continue to go unenforced.

Mike, your last take on performance before we recap this battle and who wins.

- Oh my, okay.

Let's start with this idea of the American dream.

I would just remind people of how that worked out during the financial crisis and the doctrines

that led to the financial crisis.

I definitely agree that used properly, these strategies can provide enormous compounding.

Compounding works on the way up, just like it works on the way down.

Just want that fully disclosed out there.

I would use my Home Depot example for this, perhaps, in that, just because I can buy certain

tools at Home Depot doesn't mean I have any business using them.

I think the same thing applies to strategies like this.

If you don't know what you're doing, they can be extremely dangerous.

That aside, from a performance perspective, the simple fact that FNGU has exposure to

Tesla, has exposure to Amazon, a lot of the FANG names, widest named, it's crushed it

recently, even relative to triple Qs.

So I'll give the nod to FNGU on shorter term relative performance.

- And thank you for pointing out those exposures, too.

This is the FANG plus index that FNGU follows.

So that's a little bit different than the traditional FANG index as it's noted.

So let's move onto the final battle category.

This is the mystery category where our judges get to choose a factor or maybe several factors

that are important and crucial to their analysis.

Mike, take it away.

My mystery chart is going to be very recent.

Starting on February 18th, and going through March 18th, of this year.

Triple Qs and FNGU respectively lost two-thirds your money and three-quarters of your money.

Unless you have the stomach to roll with that strategy and see it back through on the upside,

it's a stark reminder of how quickly that can go.

Now, obviously, if you held it for 10 years, it's still killin' it over that time period.

But it's important to note how quickly that can happen.

Had we rolled into a longer draw down period, that 75% could have easily compounded into

90% to 95%.

What goes up, must come down is very true in a volatile market though I will definitely

give that tip to the battle partner, Dave, in pointing out that if you believe markets

are going to go up over a full life cycle and you have the right strategy in place,

you're going to benefit from the use of leverage.

- So which of these two ETFs, you've got one or the other, or split decision on the mystery

category?

- I'm gonna give it a split decision, just because they're so unique.

- Excellent, and last up is Dave.

What is your mystery category and who wins it?

So Ron, as usual, I agree with Mike.

This is experts only trail.

My mystery category is always portfolio weighting.

Our most aggressive strategies typically cap portfolio exposure to TQQQ at 60%.

While FNGU we cap closer to 10%.

So the border diversification and more efficient index process enable TQQQ to be a much larger

holding.

So I give the portfolio weighting win to TQQQ, but our exposure is always with active risk

controls, typically with balance, with long term treasuries.

So I completely agree with Mike.

This is an experts only instrument.

- So TQQQ is your mystery battle category winner?

- Correct.

- Before we declare a final winner, we're gonna let our judges recap their overall winner

between TQQQ and FNGU.

Let's start with Dave.

Who's your overall battle winner?

So Ron, just to recap, FNGU is spectacular and it would beat most other ETFs, but three

times NASDAQ 100 is the Michael Jordan of ETFs and the American dream ETF, so TQQQ wins

in a sweep.

But let me add that other Hall of Fame 10 year data points for three times leveraged

ETFs, like technology TECL, semi-conductors, SOXL, and long term treasuries, TMF.

They all strongly outperform the S&P 500 by historic margins and the data suggests that

leveraged ETFs are the future of investing and once people see how they can be combined

right and that leveraged diversification can be a carton of retirement nest eggs, they'll

be dancing like MC Hammer and it's all in our new book, "Investable Benchmarks," and

it's a must-read.

- Let's finish off with Mike.

Who's your overall battle winner between these two products?

I cannot pick a winner.

I'll say the overall battle winner is the person that bought it 10 years ago versus

bought it in 1999 and rode it those 10 years.

- Jane Doe!

- So just remember that your timing of 10 years also means a lot.

With this particular example, it can be very impressive, but it can go south in hurry.

Use with caution.

I can't speak that enough.

Just one comment on the future of investing being leverage.

I'm not on that camp.

- Well, we're gonna have to leave it there and according to my battle score card, today's

ETF battle winner is TQQQ beating FNGU in most categories with the exception of performance.

We had a split decision there between Mike and Dave and also a split decision also on

the final battle winner, overall battle winner.

In all the categories, when we add it up, it's TQQQ comin' across as the winner.

Put this ETF on your radar screen.

If you're looking for a leveraged play on technology stocks then this should definitely

be part of the conversation and at least a starting point for further research.

One final point and I hope we emphasize this.

If you're gonna buy leveraged ETFs always, I repeat, always do it within a disciplined

framework.

That means sizing your trades correctly.

It also mean controlling your emotions and also having an exit strategy.

That does it for this round of ETF battles.

A big thanks to Mike and Dave for their excellent work at judging today's match up.

It was an uncomfortable conversation for some of us, but one that we had to have and one,

by the way, that isn't regularly discussed amongst our peers.

We have a public duty, I should say, not just to inform the investing public, but to educate

you.

At the end of the day, you're gonna have the responsibility for making those final investment

choices and decisions and that's not something we or anyone else can do for you.

Before signing off, which ETF battles would you like to see in our next episode?

Post your thoughts on our YouTube comments section or hit us up on Twitter.

Be sure to hashtag ETF Battles.

Thanks for watchin'.

I'm Ron Delegge and until next time watch the battle before you invest right here on

ETF Guide TV.