Both SPY and TQQQ are cap weighted ETFs. These two ETFs are not limited in their choice of stocks. They have 500 to choose from. Management does not have to make decisions because cap weighting selects the weighting in each ETF. These two ETFs on a long term performance basis hold the best 1.5 % of all stocks. No management could pick as good of a portfolio as the cap weighting process.

All the outperformance of Stars is due to the volatility of TQQQ. It is not due to the difference in stock holdings of SPY and TQQQ. Rebalancing the volatile TQQQ against the market (SPY) allows selling at a profit in a rising market. On major corrections many more shares of TQQQ are purchased at cents on the dollar.

The volatility of TQQQ varies significantly depending on where TQQQ is in the market cycle. The average annual volatility of TQQQ which is a triple is 4. The volatility varies between 1 and 8. The variation is caused by the sequence of up and down days. In a sideways market the volatility drops to 1. In a rapidly rising market with few corrections the volatility rises to a maximum of 8.

In the lost decade Stars outperformed the market by 8 percentage points per year. In the subsequent 9 years of rising prices the outperformance was 15 percentage points above the market. In the next 5 years (‘20-‘24) the market rose with the COVID correction in it. The outperformance rose to 27 percentage points per year.

Although Stars holds the same two ETFs forever, the performance is not adversely affected by concentration, management, or market conditions.