#243: Hold it for 1 year, this ETF is positive 80% of the time
In this email:
What “any given 1-year” holding period means
TECL vs TQQQ
TECL, a stats breakdown
What does “any given 1-year” holding period mean?
A "1-year holding period" refers to all possible consecutive 12-month periods in an investment's history, rather than just calendar year returns.
Instead of only looking at January-to-December returns, this examines every possible 12-month stretch (1/1 to 1/1, 1/2 to 1/2, … 12/31 to 12/31) throughout an asset’s entire trading history.
It helps investors understand the range of potential outcomes they might experience during any random 12-month period they choose to hold the investment
252 trading sessions is how we define a standard 1-year period (excluding weekends and holidays), which forms the basis for calculating these rolling annual returns across all possible starting points
TECL vs TQQQ
In the above chart, blue is TECL, and yellow is TQQQ. Both ETFs are 3x leveraged products that reset daily and exhibit similar volatility patterns during major market movements.
A few key differences:
TECL tracks the Technology Select Sector Index (pure tech focus), while TQQQ tracks the broader Nasdaq-100 Index (includes non-financial companies beyond just tech)
TECL has delivered higher long-term returns (27.47% annualized over 10 years vs TQQQ's 25.27%) but with slightly higher sector concentration risk due to its narrower tech-only focus.
TECL, a stats breakdown
The distribution shows all possible 252-sessions (1-year) holding period returns for TECL since 2015, revealing the wide range of outcomes investors could have experienced.
The data demonstrates that while the mean return was 58.98% and median was 62.40%, the distribution spans from losses nearing -100% to gains over 300%.
Positive Skew: The majority of 1-year periods clustered around the 50-100% gain range, with the median (62.40%) slightly above the mean (58.98%), indicating more frequent positive outcomes despite extreme negative outliers
Fat Tail Risk: The long left tail toward -100% shows that catastrophic losses, while less frequent, are a real possibility that investors must consider when holding this leveraged product.
💡 IMO:
Despite the fat tail risk showing potential catastrophic losses, I still think TECL is worth including in a diversified portfolio given the positive skew and median returns of 62.40% over any 1-year period.
The key is position sizing appropriately - treating it as a high-conviction satellite holding rather than a core position to capture the asymmetric upside while limiting downside exposure.
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