>>12419592TQQQ would have dropped by 99.9% in 2008/09. See pic related, if you held these 3x leveraged ETFs since the 80's, your model would have peaked during the dot com bubble 20 years ago, and you'd never return to that point. That's a catastrophe, and if you hold just a 3x leveraged stock ETF you are asking for it.
A much smarter way to do this and what I do is combine TQQQ/TMF based on their volatilities using a risk parity strategy.
I'm up 64% this year, which underperformed both an equal weight portfolio of TQQQ/TMF and TQQQ alone
However, in terms of risk adjusted returns, this strategy works better. Lower max drawdown of -15% compared to an equal weight portfolios drawdown of -18% and TQQQs horrible -50% drawdown in March.
For more info see Hedgefundies excellent adventure on the Bogleheads forum. They've compiled excellent simulations of UPRO and TMF going back to the 50's.
You can verify this info yourself by going to portfolio visualizer and testing an adaptive allocation market timing model with a 3 month volatility period (this can vary) and allocation weight by risk parity
What this strategy does is measure the volatility for each asset in the last 90 days and assign it a risk based on that, and the result will be a higher allocation to bonds during times of market troubles. Volatility tends to cluster, so lowering an allocation of an asset when volatility starts to go up mostly avoids the brutal drawdowns.
