Have you tried to long-term invest in QQQ, but you find it hard to keep it long?
Actually, I have met many people who give up on long-held it, as it’s harder than they thought, the longest time they hold is no more than 3 months.
Why it is so hard for people to do it?
So here, I will share my findings about the cause of this, based on my experience and feedback from others. And, I will also share my ways to hold it longer, so you can earn the longest-term profit from it, if you follow my way.
Why can’t you keep QQQ long?
According to my acknowledge of QQQ, combining experience, here are the main causes to let you give up:
The volatility of QQQ
The first reason is its volatility.
In QQQ ‘s composition, over 50% weights on information technology companies. One of the traits for these companies is higher volatility than other industries, so as in QQQ.
You may ask, how do you prove this?
Here, we can observe it from Portfolio lab’s figure, and we will compare it with VOO, the S&P 500’s ETF.
As indicated in below, QQQ has higher volatility than VOO constantly in these 10 years:
VOO owns the averaged risk of the US market, QQQ’s higher volatility, means its risk and fluctuation are higher than the market.
If VOO rises 1%, for example, then QQQ will rise 1.7% at the same time. In contrast, when VOO falls 1%, QQQ loses 1.7%.
When you invest in an ETF that has greater turmoil than the market, you can get more, but also you can lose more, in a short time. That’s one of the reasons most people cannot hold it long, it’s hard to treat it peacefully.
The highest potential loss to bear
The second reason is, they cannot bear the greatest loss that QQQ brings.
With QQQ’s higher volatility, compared to VOO, it can bring you more profit, but also can make you lose more.
But to what extent can it damage your wealth?
Here, we quote Portfolio lab’s figure again. In the past 10 years, the greatest loss from QQQ was 35% from high point, when FED continuously increase rate in 2022:
Except the Covid-19 broke out in 2020, most of the time, QQQ’s drawdown is larger than VOO, or the market.
At this point, you may be wondering where the maximum drawdown 82.98% comes from, mentioned in the beginning of the chart?
It occurred in the beginning of 2000, when the internet bubble broke out, causing Nasdaq to fall over 80%, and S&P also lost over 50% at that time.
If QQQ has a higher possibility to make you lose more than VOO, your fear and stress come out, letting you think it’s not wise to hold it long, as you don’t know where it can draw you down.
Tips to hold QQQ more longer
Most of your fear comes from its higher fluctuation, but does it mean it should not hold it long?
I don’t think so, QQQ is still a good ETF that is worth you to long-invest it.
Here, I provide my 3 ways for you, they can help to comfort your mind, making long-investing easier:
Re-assess if you’re suitable to hold QQQ, and adjust your portfolio allocation
First, you need to re-assess if you’re suitable to invest in it, and make some corresponding adjustment in your portfolio.
Many people invest in QQQ, just merely eye on its high return. However, they don’t notice that such high returns can bring some risk they cannot bear, like the volatility just mentioned.
So, you need to know if you can endure such high fluctuations, especially when the market is in turmoil.
If you can still eat and sleep well, enjoy your life, like the turmoil doesn’t exist, then you should keep on this, cause you have already got used to it.
Conversely, if the price changes in QQQ, even if a little portion, maybe 0.2%, can still make you feel nervous and uncomfortable, then you should lower your holding of QQQ, and change to another relatively stable ETF, like VOO or SPY.
Understanding to what extent you can endure is the key if you can keep it long.
Put less focus on price, and increase your patience
The second thing is, put less focus on price changes, and increase your patience.
Let’s talk about less focus on price first.
When you eye on the price change, there will be many thoughts and ideas coming out from your mind, and then, they turn into your emotion, and finally, become your pressure.
If it’s a one-time activity, that is fine. However, if you do it everyday, then your pressure will accumulate, and force you to sell your QQQ in the end.
All of these things happen without your conscious, it’s dangerous!
You can change the price checking frequency from several times a day to monthly basis, it can greatly reduce your pressure, lower the possibility of making mistakes.
Now, let’s talk about how to increase your patience.
When investing index ETFs, like QQQ and VOO, the most important thing is patience, because it has a positive relationship with your profit.
How can we prove this?
If you look at the maximum trend of Nasdaq (through it’s not 100% tied to QQQ), over the 50 years, it’s trend is still upward:
In an upward trend, the longer you hold QQQ, the more profit you will earn from it. For example, if you invest QQQ since 1973 (of course it’s just an assumption, QQQ was invented in 1999) with $100, until now, the $100 enlarges to $18429, you earn 184 times your cost!
And I believe, if you are patient enough, you can earn more from it, with the wave of AI or other new technology in the future.
You now understand the importance of patience, let’s find out what’s the best way to increase it.
Here, I recommend using “milestone incentive”.
You can set some points in time or amount, like 6 months, 1 year, $100, and $10000. Once you get the point, you can enjoy some gifts, like fine dining, a small trip, to celebrate you do it.
The more points you reach, the more wealth grows, so will your confidence.
Continues reading and learning
The last one is, continuous reading and learning.
Precisely saying, learn from the experts or some experienced seniors, to get more skill and technique on long-holding investment, not only QQQ.
From getting their experience, you can understand their view on long-term investment, and how they build-up their mind, how to execute, and if their way works.
Then, you can think about yourself, if their experience can apply to yourself? Are there points you can use in your current investment? How can you do better than them?
Personally, the most effective way is reading books, not via video clips, shorts or posts in social media. You can have the best stimulation on your thinking, and deeply memorize it.
The more you get and transfer from others’ experience, the longer you can hold.
These tips may not be as easy as you think, cause they do take time to execute. You can choose the easiest one to try, and then extend to another way, making your QQQ investment journey better and smooth.