I would not have titled my book “Earn Twice the S&P” if I did not think this was true. This is not like I have a slightly different opinion about what is possible. Our difference of opinion is 100%.

TQQQ is what produces all of the outperformance of the Stars buy and hold story. Over the past 25 years there have been three different types of markets. For 12 years the S&P did not rise but had two 40% corrections. Next came 9 years of the market rising. After that there were 5 years of a rising volatile market. The outperformance of the market was 8, 15, and 27 percentage points per year respectively.

Volatility, rebalancing, and automatic stock selection of the best stocks in TQQQ produces the outperformance. In a rising market TQQQ acts like 4 SPY positions. In the year after a correction TQQQ acts like 24 SPY positions. This is the result of rebalancing increasing the shares at a greatly discounted price and a higher volatility of TQQQ.

In my book and on my website there is a graph of the outperformance of Stars versus the S&P year by year. You will see there is outperformance 75% of the time. In corrections the drawdown is 10 – 20 percentage points below the market. Most of the time the outperformance is 0 – 20 percentage points above the market. In the two years after a correction the outperformance is about 40 percentage points.

The key to outperformance is volatility. Most financial advisors hate TQQQ because of drawdown that occurs. Until the financial services industry embraces volatility, it will be very difficult for the development of new products that outperform the S&P.