Disclaimer: The information in this article is intended for informational purposes only and should not be taken as personal financial advice.

With the recent AI momentum in the stock market, TQQQ (3x leveraged QQQ) has soared to new all-time highs.

Investing in leveraged ETFs like TQQQ requires a clear plan and an understanding of the risks involved. The leverage that drives strong gains in bull markets can also lead to deep losses during downturns.

Here are the 3 lessons that I have learned from holding TQQQ over the last 3 years.

1. Keep At Least 10% Cash On Hand

Keeping cash on hand will allow you to welcome drops in the stock market instead of dreading them. If you invest in TQQQ, you need to understand that your account will drop by -95% or more during a deep recession similar to the 2000s dot-com bubble or the 2008 financial crisis. 

Since leveraged ETFs, such as TQQQ, are subject to volatility decay (which is what occurs when ETF value declines over time even though the underlying asset it tracks does not lose any of its value) it is extremely important to keep cash on the sidelines. 

When you invest in leveraged ETFs without a cash reserve, it is like you are playing roulette with your entire bankroll on the table. If you lose, there is no coming back for more. 

The bright side of leveraged ETFs after a deep recession is that there is tons of money to make as their recovery is exponential. For example, if you bought $1,000 worth of TQQQ at the bottom of the 2008 financial crisis, your account would be worth approximately $114,000 today! 

I do not even bother trying to predict when the next recession will happen as it is virtually impossible. However, I am not naive enough to think that a recession in the US stock market will never happen, as it most certainly will at some point. I have a self-imposed rule to not add to my position of TQQQ unless it is -95% from its peak.

2. Expect Large Drops in Price, Even During Bull-Markets

Stock market pullbacks (-5% to -10%) and corrections (-10% to -20%) are common. According to Kiplinger, “Between 2008 and 2021, the S&P 500 suffered through nine pullbacks, ranging from -5.2% to -9.9%… Over that same period, the market entered correction territory five times.”

The data above almost guarantees that you will see a drop ranging from -20% to -70% every single year you hold TQQQ. In the last 3 years, which have been mostly a bull-market, this has proved to be true. In 2023, TQQQ had a drop of -30% due to lingering inflation concerns; 2024 had another drop of -30% due to election uncertainty; 2025 had a drop of -57% due to tariff worries.  

In hindsight, it is easy to see that TQQQ has recovered from any dip that has happened. However, I want to stress that when you are actually going through a market pullback, you really do not know if the drop in the stock market is just a minor pullback or the start of a deep recession. Hence, why people typically panic sell at the bottom.

Before you invest in something as risky as TQQQ, you really need to be honest with yourself. If you cannot handle this type of volatility with your hard-earned money, then you may want to consider investing in a safer alternative such as SPY or QQQ. 

3. You Need to Believe in the Long-Term Performance of the US Stock Market

Investing in TQQQ is essentially placing a bet on US technology stocks since the underlying asset, QQQ, tracks the NASDAQ-100. 

If you are a believer that US technology will continue to dominate the stock market decades out from now, then there is really no need to worry about any volatility that occurs with TQQQ. Having a strong conviction will allow you to psychologically handle any sharp losses during a temporary market pullback.

Conclusion

TQQQ can be an excellent tool for building wealth over time, but only if you manage risk properly. Keeping at least 10% cash on hand gives you flexibility when markets fall and helps you avoid forced losses. If you believe in the long-term growth of U.S. tech, then volatility becomes significantly easier to handle psychologically. Stay patient, keep cash ready, and let time work in your favor.