Up over 100% this year! What is the secret behind TQQQ's surge?

On May 30th, the TQQQ stock price hit a new high for the year, rising by 1.40% in a single day, while the cumulative increase for the year reached 106.22%!

To introduce TQQQ, we must also introduce the index it tracks: the Nasdaq 100 Index.

The Nasdaq 100 Index represents the "real" high-tech industry and includes the most influential companies in the technology sector.

It is characterized by high technology, high growth, and non-financial features, making it a representative of US technology stocks. TQQQ is closely related to the technology industry because of this.

When investing in leveraged ETFs like TQQQ, investors need to be aware of the impact of volatility decay.

For example, in a volatile market, if the Nasdaq 100 Index drops by 10% in a day, TQQQ will drop by approximately 30%.

If the Nasdaq 100 Index rises back to its original price the next day with an increase of only 11.1%, TQQQ will also track this movement and rise by 33.3%.

However, for TQQQ to return to its original price, it would need to rise by 42.9%!

Therefore, when the Nasdaq 100 Index returns to its original price, TQQQ may still be in a loss position due to the volatility decay effect.

The main risk of holding TQQQ is not the holding period, but rather the assessment of future market trends: whether the trend is upward, downward, or volatile.

Short-term stock market fluctuations are difficult to predict, but over a longer observation period, such as from January 2018 to the end of 2020, when the Nasdaq 100 Index was in a one-sided bull market, QQQ increased by 106.60% over three years, while TQQQ increased by over 293%！

However, from January 2020 to the end of 2022, the Nasdaq 100 Index was in a volatile market. Over the three years, QQQ increased by 27.71%, but TQQQ fell by nearly 20%, significantly underperforming QQQ.

Of course, over a longer-term period, the Nasdaq 100 Index has been in a long bull market for the past 20 years. From TQQQ's listing in February 2010 and performance until the end of 2022, it has significantly outperformed QQQ in terms of returns.