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Hello, this is Rich Oppa. Today, I would like to explain why TQQQ is a jackpot stock. If you look at a brand-new article from today, the headline reads: "Because it is Big Tech, Cyber and Cloud are on the rise. As the so- called 'Magnificent 7'—Apple, Microsoft, Amazon, Alphabet, Nvidia, and Tesla—continue their dominance, the market is curious about when the supply and demand from these leading stocks will spread to the minor stocks." So, what does this mean?
It means that Big Tech stocks have risen as much as they can—or to put it more bluntly, they have already made enough money—so they are essentially saying, " You guys should stop rising, and is n't it time for the stocks that have been overlooked to rise?" That is a valid point. No matter how good earnings or prospects are, it does n't make sense for stocks to keep rising indefinitely.
They are bound to undergo a correction, and while they are indeed trending upwards in the long term, there can certainly be a significant bubble in the short term. For example, even though Nvidia broke through $700 in late-night trading yesterday and set a new all-time high, it has surged too rapidly in a short period.
It wouldn't be surprising at all if it were to be cut in half at any moment. Of course, reaching $9,900 without a correction... It could break through $1,000, but it is true that a strong correction is more likely than that possibility. As you know, TQQQ is a leverage ETF that tracks the Nasdaq 100 at three times the leverage.
In other words, if the Nasdaq 100 rises by 1%, it rises by 3%, and if it falls by 1%, it falls by 3%. So, what kind of stocks make up the Nasdaq 100? Is it made up only of Big Tech companies? No, that is not the case. As the name suggests, it is an index composed of 100 non-financial companies listed on the Nasdaq that have large market capitalization and high trading volume.
Among the ETFs that track the Nasdaq 100, the most popularly known is Q-in-a QQQ. Since the underlying index is the same as the Nasdaq 100, it does not matter at all if you just look at QQQ. Now, if we look at the top 10 stocks in QQQ, Microsoft, Apple, Amazon, Meta, Nvidia, Broadcom, Tesla, Alphabet, AC, and Costco—the top 10 stocks account for about 46% of the weighting, and the remaining approximately 9 billion stocks are It accounts for 53%, and while the Nasdaq Backbone has a high weighting in tech stocks, it is not 100% tech.
It is true that it is roughly 63%, which is quite high, but it is not an index that is all-in on tech stocks. About 37% is diversified into defensive stocks or other sectors. For example, the Philadelphia Semiconductor Index is composed 100% of semiconductor companies, so it has the disadvantage of being extremely sensitive to economic conditions, and it only has 30 stocks.
Naturally, its volatility is bound to be higher compared to the Nasdaq Backbone. High volatility means there is a lot of potential for stress when investing for the long term. No matter how certain we are investing, high volatility inevitably creates a psychological burden. Especially in a bear market, it is not just a one-fold leverage, but a whopping three-fold leverage.
If the Nasdaq Backbone drops 3%, the TQQQ plummets by almost 10%. It is truly terrifying to imagine this continuing for several consecutive days. Tech stocks, in particular, are very sensitive to the economy, but fortunately, the investment is not 100% all-in on tech, but at a level of about 60%. Because it is being managed, it is less affected by market sentiment compared to the Philadelphia Semiconductor Index.
Furthermore, the number of listed stocks is much larger at 100. While a small number of Big Tech companies have led the bull market until now, an article came out stating that looking at the outlook, it seems it is time for them to take a breather, and there is a high possibility that the stocks that have been overlooked will surge forward.
Would n't that also be welcome news for TQ investors? The top 10 companies combined account for just over 50%. The remaining 90 companies make up almost half. So, if the small and medium-sized stocks that have been silent until now are highly likely to surge forward, that would be beneficial for me again, since they account for more than half.
If I excitedly list these strengths but the actual returns are poor, I would have nothing to say. I am someone who always speaks with data. Actual data is important. So, the results were good—they were good—that is why I am making this video. TQ has been listed since around 2010; if we look at the cumulative returns from then until now, it is 12.45 Pro.
Tesla is 96% ( though Tesla subsidies drop significantly), Apple is 268%, and the semiconductor index Google is 1200%, Nasdaq is 989%, and TQQQ is 100%. The only one with a better return was Nvidia, which was 179%. However, since Nvidia has skyrocketed recently, I think that is understandable. You absolutely cannot say that TQQQ is a terrible stock or has low returns just because it has dropped a little.
So, let's look at the final summary. The reason TQQQ is a jackpot stock is, first of all, its returns are excellent. Because it invests with a weighting of 46% in the top 10 Big Tech stocks and 53% in other stocks, it guarantees profits in Big Tech-led markets and also brings profits in SME-led markets.
It is truly well-balanced. It is not even an index that goes 100% into tech stocks. With a tech weighting of about 63% and the remaining 37% invested in various sectors including defensive stocks, it is a stock designed to provide a certain level of defense without easily plummeting even during periods of rapid interest rate hikes.
Hey, the index itself is designed very smartly. The returns are not disappointing, there is a great balance between mega-caps and small-caps, and even the sectors are evenly distributed. On top of that, the returns are fantastic. Honestly, would n't you say this is a jackpot stock? I think so. That's all for today's video. Thank you.
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