ETF Battles: TQQQ vs. FNGU – A Duel Between Leveraged High Tech ETPs

  • TQQQ and FNGU go against each other in key categories, including cost, performance and a mystery category
  • Both products track technology stocks with 300% or 3x daily leverage
  • Both products have enjoyed an up-surge from the outpeformance of internet, software, and tech stocks

Ron: This is ETF Battles. I’m Ron Delegge, where the chief concern of this program isn’t 200 day moving averages, or National GDP or asset flows. It’s none of that noise! The chief concern of this program is A) who’s about to get beat up, and B) how can we help you to make informed investment choices in an overcrowded ETF marketplace that resembles a Costco parking lot on a Saturday morning?

I’m thrilled to have you with us because today’s ETF battle is a historical moment for this program because it’s the first appearance of leveraged ETFs on our weekly show. Yes, these are funds that attempt to magnify their gains by using pre-set leverage points. For example, if 200% or 300% daily leverage or some other pre-determined figure. Today’s scuffle is between two technology focused equity products.

We’ve got the ProShares UltraPro QQQ ETF (TQQQ) versus the MicroSectors FANG PLUS 3x ETN (FNGU). You can think about this bout as a sword fight between two high-powered technology products. In culinary terms, today’s match up is like habenero chile peppers versus habenero chile peppers. And let me tell you, friends, it’s about to get muy caliente, amigos, as you’re about to see.

Helping us to judge this match up between TQQQ and FNGU is Dave Kreinces, with ETF Portfolio Management, and Mike Akins, CEO at ETF Action, the best in the business! Guys, welcome back to the program. Great to see ya.

So the four battle categories are cost, exposure strategy, performance, and a mystery category. So my score card is ready and so is our shot clock. We’re gonna go through the four battle categories, one at a time. Each of you are gonna pick TQQQ or FNGU as the winner in each respective battle category. You’ve got 30 seconds to do that. We’re gonna start with Mike. Let’s begin with the first category, cost.

Mike: All right, so cost on three times leverage products is pretty irrelevant, but they’re both 95 basis points. So I would say the cost is a coin flip. The one thing to note is structure. TQQQ is going to be an actual ETF exchange traded fund, where the FNGU is more concentrated and therefore doesn’t meet diversification as structured as an exchange traded note which means it brings with it counter-party risk. So for that simple fact, I’m gonna give the nod to TQQQ because of the more straight forward structure of the ETF.

Ron: That’s a good start. How ’bout you, Dave? What’s your take on cost?

Dave: Hey Ron, before I get into cost, I just wanna say this battle is incredible. It’s really Michael Jordan versus LeBron James. In full disclosure ETF PM is trading both of these incredibly innovative ETFs and on cost, I agree with Mike, the 95 bps is equivalent, but I also give the win on cost to TQQQ, both for structure and border diversification.

Ron: Let’s move on to the next category which is exposure strategy. Dave, continue.

Dave: Investors should be extremely cautious with leveraged ETFs. Both of these securities crashed by over 70% last quarter and leveraged ETFs don’t always work as expected. As for FNGU, the concentration in 10 positions may outperform long-term, but the higher portfolio concentration is a bigger risk. The FNGU security is an ETN and FNGU’s position rotation process is another big variable. As for the unleveraged NASDAQ 100, in many respects, QQQ is the next generation S&P 500. QQQ is now one of just four ETFs to surpass a $100 billion in assets. So the unleveraged NASDAQ 100 ETF is a top core index holding, and it’s a much bigger net of portfolio positions to increase your chance of catching the next Amazon and maintaining appropriate exposure. So we give the win on strategy to TQQQ.

Watch the full episode of #ETFBattles between TQQQ vs. FNGU at ETFguide TV

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