The ProShares UltraPro QQQ ETF (TQQQ 0.36%) is one of the most popular ETFs among growth-focused investors, and it’s easy to see why. A $10,000 investment in the ETF at its 2010 inception date would be worth more than $2 million today.
The short explanation is that the ProShares UltraPro QQQ ETF aims to produce three times the daily return of the Nasdaq-100 index. So, if the Nasdaq-100 gains 2% in a day, this ETF should rise by about 6%. It does this through the usage of derivative securities and is known as a leveraged ETF.
However, this level of performance is not a typical result of investing in a leveraged ETF like this one, and it’s important to carefully weigh the reward potential and risks before investing. So, here’s a rundown of the reasons you might want to consider the ProShares UltraPro QQQ ETF, and a few good reasons you might want to avoid it — or at least limit your investment size.
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Reasons to buy ProShares UltraPro QQQ ETF
The most obvious reason to buy shares of the ProShares UltraPro QQQ ETF is for the performance potential. The ETF was established in 2010, and as you can see from the chart, its performance since that time compared to the popular Nasdaq-100 benchmark index (using Invesco QQQ Trust as a proxy) has been stellar:
|
Time Period |
Nasdaq-100 Total Return (QQQ ETF) |
TQQQ Total Returns |
|---|---|---|
|
One year |
11.7% |
3.2% |
|
Three years |
95% |
232% |
|
Five years |
120% |
213% |
|
10 years |
453% |
1,830% |
|
Since inception (February 2010) |
1,360% |
20,010% |
Data source: yCharts. Returns through 7/7/2025.
There are a few things to unpack here. First, it’s important to point out that the ETF is the beneficiary of fortunate timing. It was formed in the wake of the financial crisis, when the market was still well off the highs, and its primary focus (tech stocks) has essentially been in a bull market ever since then, with the 2022 bear market the only significant bump in the road.
Second, notice that the one-year returns of the ETF are about 3%. The Nasdaq-100 is up 12% during that time. The reason for the discrepancy is that the ProShares UltraPro QQQ ETF returns three times the daily returns of the index, not its long-term performance. I won’t get too deep into the mathematics of daily compounding, but the takeaway is that this ETF can underperform its benchmark index even when it’s going up.
In addition to the performance potential, another reason to buy is that it’s easier than setting up a 3X leveraged investment manually. It can be done through various derivatives like options and futures contracts, but it isn’t easy.
Reasons to be cautious
Like all ETFs, the ProShares UltraPro QQQ ETF has fees, and the 0.91% expense ratio is on the higher end. But that isn’t the only reason you might want to steer clear of this ETF. In fact, the biggest reasons to avoid the ProShares UltraPro QQQ ETF are volatility and the daily nature of the ETF’s investment strategy.
As far as volatility goes, the Nasdaq-100 itself can be rather volatile over short periods. So, imagine how an ETF that amplifies this volatility could look. In fact, the ProShares UltraPro QQQ ETF has declined by 60% or more from its previous high three times in the past five years, including an 81% drawdown in the 2022 bear market.
And without turning this into a math lesson, the mathematics of daily compounding do not favor long-term investors, unless the underlying index goes essentially straight up. Although this one has worked out, that isn’t common. For example, the triple-leveraged Direxion Daily Small Cap Bull 3X Shares ETF (TNA 2.15%) has produced a negative 3.8% annualized return over the past decade, even though the Russell 2000 benchmark index on which it is based has gained 6.3% annually in the same period.
So is ProShares UltraPro QQQ ETF a buy?
Before you invest in the ProShares UltraPro QQQ ETF, it’s important to know exactly what you’re getting into. It’s likely to be a volatile investment, and although it has delivered strong performance for long-term investors so far, that isn’t likely to be the case if you hold it for the long term. If you do invest, it would be wise to limit your position size, and to expect significant volatility along the way.
Matt Frankel has positions in Direxion Shares ETF Trust – Direxion Daily Small Cap Bull 3x Shares. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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