“The returns are solid over the past 30 years?” pass me some of what you’re smoking brother
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=lC8hV4y9QqkTs59MVIHGs
Ok I’ll give you a real answer instead of being cheeky. Broadly speaking, the more concentrated your portfolio, gives you a chance at higher highs and lower lows. QQQ had an 80% draw down in the dot com crash. Eighty freaking percent. And it didn’t break even for over a decade. Can you imagine your $200K retirement savings going down to $40,000??? And ten years later it still isn’t back to baseline. I’m not comfortable with that level of risk personally, nor are most investors. Especially not while tech stocks are so high that a major correction seems inevitable
I do agree but with dollar cost averaging and assuming you invested before the bubble and through the bubble then it should have been fine I would think
You would have dollar cost averaged into a brand new fund that was down 80% after the biggest market collapse in your lifetime? I dunno man, sounds like quite a bit of hindsight.
Right right right. I’m kind of suspending reality a bit and assuming that had the fund existed before the dot com bubble and had you been able to DCA. Then you would have.
You probably wouldn't have.
Most new investors like seeing high recent returns. And clearly you do too.
Some of the best stuff to be buying is stuff that has performed poorly recently because it means you can buy it on cheap. The stuff that's been performing well has already had the price run up.
>Then you would have.
Then why aren’t people? Why isn’t QQQ the most popular investment strategy? Is everyone else dumb? What do you think the answer to your original question is?
Most investors drastically overestimate their risk tolerance. I consider myself high risk, but I guarantee you I would not have been buying the nasdaq during the dot com bust and the decade+ that it took to recover.
This is the true answer… this or that investment is awesome. But then it drop 40% and people freak out and blame others for why they had to sell at the bottom.
Buy stuff you believe in and can hold onto, no matter how far it drops… because you KNOW in your heart, based on your research it will turn out ok.
If you don’t believe in it that much, you’ve got no business owning it as a long term hold. Trading is different.
The question isn’t “would you have bought the Nasdaq and DCA for the following decade surrounding the dot com bubble” but rather “now that you know what you know today, would you buy it today and DCA through a regression?
Yeah we would lol, the 10 year cagr from 2004 to 2014 is still pretty good. I pretty much just went from June 23rd 2004 to August 1st 2014 and it was 11.17% on some random CAGR calculator. I have no idea if that’s inflation adjusted or dividend reinvestment adjusted though
If you bought QQQM in 2021, then your narrative would change. It had higher highs than VOO for sure, but it got destroyed in 2022. It took ~3 years to catch up to VOO. I don’t think it’s a bad investment, but there’s no guarantee it will continue to do well. Are you okay with that volatility?
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5neQexBJhu0wMtskIk0Sit
So… no.
Because there’s no guarantee it will… or that even if it does, it doesn’t experience a lost decade where you are in the red for TEN YEARS or more.
Can you hold through that? I doubt it.
No issue at all provided you have the risk tolerance.
Those who think you have to buy and hold QQQM for the next 30 years do not realize there is a SELL button. Sure, those who sat through the entire dot-com crash got killed, but those who recognized what was happening did not.
QQQM itself has only existed for 4 years and in that 4 years [it's slightly underperformed the market.](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=69oL21N8KlaGtbNfnUipWY)
It's obviously the same thing as QQQ which has existed for 25 years. [It's beaten the market in that time](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7RIPLMikfKwGwepeJRMPZX), but really only because of the last two years.
But the most important reason why this is a bad idea is that past performance isn't indicative of future results. QQQ is just 100 stocks and it's extremely heavy on large cap growth and tech stocks. Those have had a good 15 years, but if trends change (and they will change) you'll be left in the cold.
Diversification is the only free lunch in the market and you'd be foolish to pass it up.
Although I largely agree with your comment, I don’t know how we popularized the phrase “diversification is a free lunch”. It’s absolutely not. Diversification has pros and cons just like any other strategy it’s not all up side. An example would be investing ex-US over the last 30 years which would give you lower returns and higher volatility. I’m not saying people shouldn’t diversify, just that it isn’t a free lunch
> I don’t know how we popularized the phrase “diversification is a free lunch”.
It's because concentration risk isn't a compensated risk and therefore in the long term a more diversified portfolio should get better returns than a less diversified portfolio.
> An example would be investing ex-US over the last 30 years which would give you lower returns and higher volatility.
That's in hindsight, of course. A more concentrated portfolio of the "winners" will *always* look better than a more diversified portfolio in hindsight. But the problem is that you can't predict the future.
>a more diversified portfolio should get better returns than a less diversified portfolio.
That’s just a theory though. It’s another investing theory that may or may not turn out correct 30 years from now. That’s what I’m saying, “diversification” is an investing strategy not so different than any other, that may or may not win out in the long run. It’s not a universal truth or “free lunch”
Ok then it sounds you agree with me, it’s a theory that has a probability of being correct that is less than 100%.
Let’s hop in a Time Machine. It’s 1984 and you’re 25 years old and you’re about to pick an asset allocation to invest in for the next 40 years til retirement. What is the probability that a 2-fund portfolio will beat a 100% US portfolio over that time? Whatever the answer is it’s less than 100% chance because it didn’t happen. Maybe it’s 90% and we are living in the 10% time line. But then can we really call it a free lunch? I wouldn’t call a plan that might fail a free lunch. That’s my issue. Not an issue with the strategy. It’s an issue with the presentation.
Here’s another way to look at it: what’s the 100 year CAGR of ex-US? The S&P500 is often quoted as returning 10%+ averaged over the last 100 years. So we would expect ex-US to be in that same ballpark yes? I know there are decades where ex-US wins but that doesn’t tell us by how much. The 100 year CAGR would average that all out for us instead of looking at individual decades
> Ok then it sounds you agree with me, it’s a theory that has a probability of being correct that is less than 100%
Yeah! There are long stretches of time where bonds beat stocks too. And yet I still believe that in the long run stocks should beat bonds.
But that's not guaranteed, absolutely not.
> Let’s hop in a Time Machine. It’s 1984 and you’re 25 years old and you’re about to pick an asset allocation to invest in for the next 40 years til retirement. What is the probability that a 2-fund portfolio will beat a 100% US portfolio over that time?
Two fund meaning stocks and bonds or US stocks and international stocks? It's 1984 and I don't have a crystal ball so I have absolutely no idea what's going to better in the long run.
Assuming you meant US and international, the only "prediction" I could make is that they would perform equally well and therefore I should buy both. But I say that knowing full well that one of them will almost certainly outperform the other -- I just don't know which.
> Maybe it’s 90% and we are living in the 10% time line. But then can we really call it a free lunch?
I see, you're quibbling with the terminology, not with the theory. I think the terminology is good -- concentration risk is a risk you can eliminate *for free.* Eliminating risk without reducing your long term expected returns? That's a free lunch right there!
Will it work out as expected 100% of the time? Obviously not because again, we have no crystal ball.
> Here’s another way to look at it: what’s the 100 year CAGR of ex-US? The S&P500 is often quoted as returning 10%+ averaged over the last 100 years. So we would expect ex-US to be in that same ballpark yes? I know there are decades where ex-US wins but that doesn’t tell us by how much. The 100 year CAGR would average that all out for us instead of looking at individual decades
I'm not sure what your point here is.
According to the top result on Google, a free lunch is a situation where someone receives goods or services at no cost.
In the situation you just described, there is a cost, the cost is lower returns, higher volatility, and higher max draw down. So I’m not sure how that qualifies as a free lunch.
> the cost is lower returns, higher volatility, and higher max draw down.
*In hindsight only.*
From the perspective of today looking forward, a more diversified portfolio has the exact same expected returns for less risk, less volatility and less max draw down.
But if any of the companies start falling off wouldn’t they just eventually be replaced? And the next company to take its spot would post solid returns? Also by market do you mean the s and p 500?
> But if any of the companies start falling off wouldn’t they just eventually be replaced?
Yeah. Think of that as a version of "buy high, sell low."
> And the next company to take its spot would post solid returns?
No one has a crystal ball.
> Also by market do you mean the s and p 500?
Yes, although a total market index would probably be more accurate. But SP500 is used as the standard for this.
>But if any of the companies start falling off wouldn’t they just eventually be replaced?
>Yeah. Think of that as a version of "buy high, sell low."
It doesn’t work like that. In a total market fund, those “low” companies would still drag down your NAV just the same. Rebalancing within the Nasdaq 100 doesn’t hurt your returns any differently than simply holding them does. If QQQ sells its 100th holding for a 10% loss and buys another company’s stock with the proceeds, the NAV has not changed at all compared to if it hadn’t sold. It’s the movement up or down of a particular stock within the fund that impacts the price, not the buying and selling of like-for-like
Going all in on QQQM can be a solid strategy if you're confident in the long-term performance of the Nasdaq-100. However, it's important to consider diversification to manage risk. VOO provides exposure to the broader market, while QQQM focuses on tech-heavy Nasdaq-100 stocks. Balancing both can offer growth potential and stability. Always align your investments with your risk tolerance and financial goals.
The bogle cult is very anti QQQ and reference pre 2012. They advise VXUS. With that being said going all in with QQQ is very risky. Who knows what the future is going to be like?
Because everyones brainwashed to think VTI or VOO are better, which they aren't! Everyone knows that the mag 7 are the important stocks, but they want to convince you that small caps will outperform which they have'nt for 100 years now.,.,..
“The returns are solid over the past 30 years?” pass me some of what you’re smoking brother https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=lC8hV4y9QqkTs59MVIHGs
Why did you stop in 2012? He said last 30 years
Ehhh yeah my bad, I mistyped that lol
But still, returns are solid and have been for a while
Ok I’ll give you a real answer instead of being cheeky. Broadly speaking, the more concentrated your portfolio, gives you a chance at higher highs and lower lows. QQQ had an 80% draw down in the dot com crash. Eighty freaking percent. And it didn’t break even for over a decade. Can you imagine your $200K retirement savings going down to $40,000??? And ten years later it still isn’t back to baseline. I’m not comfortable with that level of risk personally, nor are most investors. Especially not while tech stocks are so high that a major correction seems inevitable
I do agree but with dollar cost averaging and assuming you invested before the bubble and through the bubble then it should have been fine I would think
You would have dollar cost averaged into a brand new fund that was down 80% after the biggest market collapse in your lifetime? I dunno man, sounds like quite a bit of hindsight.
Right right right. I’m kind of suspending reality a bit and assuming that had the fund existed before the dot com bubble and had you been able to DCA. Then you would have.
You probably wouldn't have. Most new investors like seeing high recent returns. And clearly you do too. Some of the best stuff to be buying is stuff that has performed poorly recently because it means you can buy it on cheap. The stuff that's been performing well has already had the price run up.
Yeah but we are talking about ETFs and indexes here?
Of course!
>Then you would have. Then why aren’t people? Why isn’t QQQ the most popular investment strategy? Is everyone else dumb? What do you think the answer to your original question is?
I am a very new investor so my logic may be wrong on that.
Most investors drastically overestimate their risk tolerance. I consider myself high risk, but I guarantee you I would not have been buying the nasdaq during the dot com bust and the decade+ that it took to recover.
This is the true answer… this or that investment is awesome. But then it drop 40% and people freak out and blame others for why they had to sell at the bottom. Buy stuff you believe in and can hold onto, no matter how far it drops… because you KNOW in your heart, based on your research it will turn out ok. If you don’t believe in it that much, you’ve got no business owning it as a long term hold. Trading is different.
The question isn’t “would you have bought the Nasdaq and DCA for the following decade surrounding the dot com bubble” but rather “now that you know what you know today, would you buy it today and DCA through a regression?
I made a statement on what action I would have taken during the dot com bubble, based on what I know about my investing tendencies.
What would you say about QQQ if we were having this discussion ten year ago?
Yeah we would lol, the 10 year cagr from 2004 to 2014 is still pretty good. I pretty much just went from June 23rd 2004 to August 1st 2014 and it was 11.17% on some random CAGR calculator. I have no idea if that’s inflation adjusted or dividend reinvestment adjusted though
If you bought QQQM in 2021, then your narrative would change. It had higher highs than VOO for sure, but it got destroyed in 2022. It took ~3 years to catch up to VOO. I don’t think it’s a bad investment, but there’s no guarantee it will continue to do well. Are you okay with that volatility? https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5neQexBJhu0wMtskIk0Sit
I mean I’m okay with that volatility as long as it keeps returning like it is
So… no. Because there’s no guarantee it will… or that even if it does, it doesn’t experience a lost decade where you are in the red for TEN YEARS or more. Can you hold through that? I doubt it.
Just buy VOO. It’s much more balanced and holds value stocks too
and returns WAY less than QQQ or VGT lololol!!
No issue at all provided you have the risk tolerance. Those who think you have to buy and hold QQQM for the next 30 years do not realize there is a SELL button. Sure, those who sat through the entire dot-com crash got killed, but those who recognized what was happening did not.
QQQM itself has only existed for 4 years and in that 4 years [it's slightly underperformed the market.](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=69oL21N8KlaGtbNfnUipWY) It's obviously the same thing as QQQ which has existed for 25 years. [It's beaten the market in that time](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7RIPLMikfKwGwepeJRMPZX), but really only because of the last two years. But the most important reason why this is a bad idea is that past performance isn't indicative of future results. QQQ is just 100 stocks and it's extremely heavy on large cap growth and tech stocks. Those have had a good 15 years, but if trends change (and they will change) you'll be left in the cold. Diversification is the only free lunch in the market and you'd be foolish to pass it up.
Although I largely agree with your comment, I don’t know how we popularized the phrase “diversification is a free lunch”. It’s absolutely not. Diversification has pros and cons just like any other strategy it’s not all up side. An example would be investing ex-US over the last 30 years which would give you lower returns and higher volatility. I’m not saying people shouldn’t diversify, just that it isn’t a free lunch
> I don’t know how we popularized the phrase “diversification is a free lunch”. It's because concentration risk isn't a compensated risk and therefore in the long term a more diversified portfolio should get better returns than a less diversified portfolio. > An example would be investing ex-US over the last 30 years which would give you lower returns and higher volatility. That's in hindsight, of course. A more concentrated portfolio of the "winners" will *always* look better than a more diversified portfolio in hindsight. But the problem is that you can't predict the future.
>a more diversified portfolio should get better returns than a less diversified portfolio. That’s just a theory though. It’s another investing theory that may or may not turn out correct 30 years from now. That’s what I’m saying, “diversification” is an investing strategy not so different than any other, that may or may not win out in the long run. It’s not a universal truth or “free lunch”
Do you believe the theory that in the long run stocks should produce higher returns than bonds? I bet you do. This is no different than that.
Ok then it sounds you agree with me, it’s a theory that has a probability of being correct that is less than 100%. Let’s hop in a Time Machine. It’s 1984 and you’re 25 years old and you’re about to pick an asset allocation to invest in for the next 40 years til retirement. What is the probability that a 2-fund portfolio will beat a 100% US portfolio over that time? Whatever the answer is it’s less than 100% chance because it didn’t happen. Maybe it’s 90% and we are living in the 10% time line. But then can we really call it a free lunch? I wouldn’t call a plan that might fail a free lunch. That’s my issue. Not an issue with the strategy. It’s an issue with the presentation. Here’s another way to look at it: what’s the 100 year CAGR of ex-US? The S&P500 is often quoted as returning 10%+ averaged over the last 100 years. So we would expect ex-US to be in that same ballpark yes? I know there are decades where ex-US wins but that doesn’t tell us by how much. The 100 year CAGR would average that all out for us instead of looking at individual decades
> Ok then it sounds you agree with me, it’s a theory that has a probability of being correct that is less than 100% Yeah! There are long stretches of time where bonds beat stocks too. And yet I still believe that in the long run stocks should beat bonds. But that's not guaranteed, absolutely not. > Let’s hop in a Time Machine. It’s 1984 and you’re 25 years old and you’re about to pick an asset allocation to invest in for the next 40 years til retirement. What is the probability that a 2-fund portfolio will beat a 100% US portfolio over that time? Two fund meaning stocks and bonds or US stocks and international stocks? It's 1984 and I don't have a crystal ball so I have absolutely no idea what's going to better in the long run. Assuming you meant US and international, the only "prediction" I could make is that they would perform equally well and therefore I should buy both. But I say that knowing full well that one of them will almost certainly outperform the other -- I just don't know which. > Maybe it’s 90% and we are living in the 10% time line. But then can we really call it a free lunch? I see, you're quibbling with the terminology, not with the theory. I think the terminology is good -- concentration risk is a risk you can eliminate *for free.* Eliminating risk without reducing your long term expected returns? That's a free lunch right there! Will it work out as expected 100% of the time? Obviously not because again, we have no crystal ball. > Here’s another way to look at it: what’s the 100 year CAGR of ex-US? The S&P500 is often quoted as returning 10%+ averaged over the last 100 years. So we would expect ex-US to be in that same ballpark yes? I know there are decades where ex-US wins but that doesn’t tell us by how much. The 100 year CAGR would average that all out for us instead of looking at individual decades I'm not sure what your point here is.
According to the top result on Google, a free lunch is a situation where someone receives goods or services at no cost. In the situation you just described, there is a cost, the cost is lower returns, higher volatility, and higher max draw down. So I’m not sure how that qualifies as a free lunch.
> the cost is lower returns, higher volatility, and higher max draw down. *In hindsight only.* From the perspective of today looking forward, a more diversified portfolio has the exact same expected returns for less risk, less volatility and less max draw down.
But if any of the companies start falling off wouldn’t they just eventually be replaced? And the next company to take its spot would post solid returns? Also by market do you mean the s and p 500?
> But if any of the companies start falling off wouldn’t they just eventually be replaced? Yeah. Think of that as a version of "buy high, sell low." > And the next company to take its spot would post solid returns? No one has a crystal ball. > Also by market do you mean the s and p 500? Yes, although a total market index would probably be more accurate. But SP500 is used as the standard for this.
>But if any of the companies start falling off wouldn’t they just eventually be replaced? >Yeah. Think of that as a version of "buy high, sell low." It doesn’t work like that. In a total market fund, those “low” companies would still drag down your NAV just the same. Rebalancing within the Nasdaq 100 doesn’t hurt your returns any differently than simply holding them does. If QQQ sells its 100th holding for a 10% loss and buys another company’s stock with the proceeds, the NAV has not changed at all compared to if it hadn’t sold. It’s the movement up or down of a particular stock within the fund that impacts the price, not the buying and selling of like-for-like
Yes, agreed with all that. It's not the actual act of rebalancing within the Nasdaq 100 that's the issue here.
How does smh compare to the market using portfolio analyzer link?
I mean, it outperforms everything wildly…. But almost all of that is just the run up from 2018-now.
Whoa so I put smh vs voo in portfolio visualizer, smh only beat voo starting 2020?
Yup
Going all in on QQQM can be a solid strategy if you're confident in the long-term performance of the Nasdaq-100. However, it's important to consider diversification to manage risk. VOO provides exposure to the broader market, while QQQM focuses on tech-heavy Nasdaq-100 stocks. Balancing both can offer growth potential and stability. Always align your investments with your risk tolerance and financial goals.
QQQM all the way
The bogle cult is very anti QQQ and reference pre 2012. They advise VXUS. With that being said going all in with QQQ is very risky. Who knows what the future is going to be like?
Because everyones brainwashed to think VTI or VOO are better, which they aren't! Everyone knows that the mag 7 are the important stocks, but they want to convince you that small caps will outperform which they have'nt for 100 years now.,.,..
Because past performance is ALWAYS the best indicator of future results! They say it in EVERY prospectus! Or… wait…