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Hello, this is Noblesse. Today, I would like to explain TQQ, which tracks the NASDAQ 100 index at 3x leverage. Currently ranking first in net purchases by South Korean retail investors, TQQ is such a famous stock that there is likely no one in South Korea who invests in US stocks who is unfamiliar with it.
First, let's check the return rate, which you are likely most curious about. Over the course of just over 10 years, from 2010 to the present, it has generated a return of 6,000%. That is truly incredible. It means that if you had invested 100 million won in 2010, it is worth 6 billion won today. What is even more surprising is that this return was achieved after experiencing a massive market downturn caused by the 2020 pandemic, the quantitative tightening that has continued since last year, the Russia-Ukraine war, and the resulting massive inflation.
If such a return had been achieved without any crises, one might simply dismiss it as luck; however, the fact that such returns were generated even after a severe market crash indicates that the index contains truly exceptional and excellent stocks. So, just how great are these stocks, and what kind of stocks are they that they can generate such high returns and withstand market crashes?
How did such amazing returns come about by enduring? Let's take a look at the detailed specifications of TQQQ now. First, TQQ is a stock that tracks the Nasdaq 100 at 3x leverage. While QQ simply tracks the Nasdaq 100, TQQ is designed to have the exact same underlying index; therefore, if QQ rises by 1%, TQQQ rises by 3%, and conversely, if QQQ falls by 1%, TQQQ falls by 3%.
Now, looking at the constituents of TQQQ's base index, the Nasdaq 109, over 98% are U.S. companies, with technology stocks accounting for a whopping 70%. As the Second Industrial Revolution—including augmented reality, artificial intelligence, and the metaverse— becomes in full swing, these technology stocks will receive particularly more attention.
You can consider its potential for future growth to be enormous. Although it has grown significantly so far, I personally believe it will rise just as much in the future. Now, let's take a look at the truly important individual stocks. Apple is the highest invested holding at 11.3%, followed by Microsoft accounts for 10.1%, Amazon 7.8%, Alphabet and Google together 8%, Facebook 4%, Tesla 3.9%, and Nvidia 3.7%, among others.
Together, these top 10 stocks account for a whopping 53% of the portfolio, representing more than half of the total investment weight. Just looking at these top 10 companies, they are truly world-class firms that you have likely used or heard of at least once. The NASDAQ PAC is an average of approximately 100 companies grouped in this way, and TQQ, which showed such amazing returns earlier, tracks the index at 3x leverage.
If you have heard this explanation, you probably have a sense of why the returns were so high. Since the top 100 companies, which make up more than half of the portfolio, have grown significantly over the past 10 years, it was only natural that such high returns were achieved. However, some of you may still be wondering if 3x leverage investing is risky.
Of course, that is not wrong. But if you look at the chart, the US market performs much better in a bull market than in a bear market. There were more. A bear market signifies a downward trend, while a bull market signifies an upward trend. Looking at the trends over nearly 100 years, the blue graph extending upward represents the bull market, and the orange graph extending downward represents the bear market.
Even at a glance, you can see that an upward market is much longer and more powerful than a bear market. The strength that has allowed us to endure this dreadful bear market for over a year, from the end of 2021 until now, likely stems from the expectation that a major bull market will inevitably arrive in the US market, which is why we are probably investing.
And so far, the Nasdaq has undoubtedly broken through its previous highs and trended upward without a single instance of doubt. If historically, bear markets were much longer than bull markets and the stock market itself trended downward, we would n't have invested in the US stock market in the first place.
I mean, we aren't fools, so I do n't see any reason to bet on a game with low odds. However, looking at the past 150 years of US stock market history, the S&P 500 and the Nasdaq 100, in particular, have consistently drawn beautiful upward price charts. As long as the US maintains its position as the world's leading hegemonic power, the probability that the US stock market will trend upward in the future is very high.
This is an undeniable fact. And TQQQ invests in an average index tracking 100 NASDAQ companies rather than investing in a single stock, so it does not hold the risk associated with any single stock. It is a systematized mechanism where if a company fails due to risk or other circumstances, the failed company is automatically removed from the top 100 and replaced by the 101st-ranked company.
Therefore, we do not need to worry about separate company analysis or the risks of individual firms. This can be a huge advantage for retail investors. Now, companies like Apple, Microsoft, and Google, which are leading the Fourth Industrial Revolution, are currently the world's top 1, 2, and 3 companies, but there is no guarantee that they will remain in the top ranks 10 years from now.
That is why investing in individual companies is truly risky. Of course, if one had discovered a company like Apple early on 10 or 20 years ago, hundreds of times the return would have been possible. However, realistically, we cannot select companies like Apple or Netflix early on and invest in them for decades.
That is absolutely impossible based on probability. We must invest in products with a probability of winning. Even if we were to find a company like Apple, the volatility is too high... Because we lack conviction, we will grow weary and drop out, and even the initial conviction we held will likely vanish like dust.
We do not have the time to analyze companies every day, and even if we did, the probability of having the eye to discern whether a company is good or not is even lower. That is why we invest in TQQQ, a NASDAQ ETF that mechanically rebalances the portfolio from the top 100 companies on the Nasdaq. Regardless of which company leads global technological innovation, we simply need to adopt a "beat anyone" investment strategy and make steady, regular long-term investments in TQQQ.
Now, stocks are not gambling. Even if the probability of failure is not zero, we must participate in a game with at least the lowest possible risk. Nevertheless, if the U.S. were to fail, South Korea would likely have already collapsed and gone bankrupt before that. South Korea is an economic vassal state of the U.S., while China is merely a partner.
Now, in the era of the Fourth Industrial Revolution, we must invest in industries that will lead the new future. That is why I believe we should invest in the NASDAQ 100, which represents U.S. technology, being safe and possessing abundant potential for future growth. We live in a capitalist era. In capitalism, one cannot discuss anything without investment.
Our future cannot be built solely on earned income... I cannot take responsibility. I am sure everyone is well aware of this. Even if you save a portion of your salary or work hard to accumulate wealth, it is difficult in this day and age to afford a 30-pyeong apartment in Seoul. That is why I believe we must invest and take action as soon as possible while we are still young.
We need to invest in U.S. stocks—a hegemonic nation that will never collapse, a country that uses the dollar, a currency that will never fail, and a country home to the world's best companies that will never fail—to achieve the financial freedom we ideally envision and a comfortable retirement in the future.
Well, that is all for today's video. If you enjoyed it, please subscribe and like. I will continue to support your successful investments. Thank you.
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