EMB vs. TQQQ: What’s The Difference?

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. EMB is a iShares Emerging Markets Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between EMB and TQQQ? And which fund is better?

The expense ratio of EMB is 0.56 percentage points lower than TQQQ’s (0.39% vs. 0.95%). EMB is mostly comprised of BBB bonds while TQQQ has a high exposure to the technology sector. Overall, EMB has provided lower returns than TQQQ over the past 10 years.

In this article, we’ll compare EMB vs. TQQQ. We’ll look at performance and holdings, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss EMB’s and TQQQ’s annual returns, fund composition, and portfolio growth and examine how these affect their overall returns.

Summary

EMB TQQQ
Name iShares J.P. Morgan USD Emerging Markets Bond ETF ProShares UltraPro QQQ
Category Emerging Markets Bond Trading–Leveraged Equity
Issuer iShares ProShares
AUM 19.76B 12.41B
Avg. Return 6.43% 61.22%
Div. Yield 3.85% 0.0%
Expense Ratio 0.39% 0.95%

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.

The ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

EMB’s dividend yield is 3.85% higher than that of TQQQ (3.85% vs. 0.0%). Also, EMB yielded on average 54.79% less per year over the past decade (6.43% vs. 61.22%). The expense ratio of EMB is 0.56 percentage points lower than TQQQ’s (0.39% vs. 0.95%).

Fund Composition

Holdings

EMB - Holdings

EMB Bond Sectors Weight
BBB 33.79%
B 21.97%
BB 16.92%
A 13.67%
AA 7.97%
Below B 4.49%
Others 1.11%
AAA 0.09%
US Government 0.0%

EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

EMB TQQQ
Mean Return 0.44 4.65
R-squared 23.34 83.64
Std. Deviation 8.44 50.08
Alpha 0.89 7.29
Beta 1.36 3.37
Sharpe Ratio 0.55 1.1
Treynor Ratio 3.24 15.65

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Alpha of 0.89 and a Mean Return of 0.44. Its Standard Deviation is 8.44 while EMB’s Treynor Ratio is 3.24. Furthermore, the fund has a Beta of 1.36 and a R-squared of 23.34.

The ProShares UltraPro QQQ (TQQQ) has a Standard Deviation of 50.08 with a Beta of 3.37 and a Treynor Ratio of 15.65. Its Mean Return is 4.65 while TQQQ’s Alpha is 7.29. Furthermore, the fund has a Sharpe Ratio of 1.1 and a R-squared of 83.64.

EMB’s Mean Return is 4.21 points lower than that of TQQQ and its R-squared is 60.30 points lower. With a Standard Deviation of 8.44, EMB is slightly less volatile than TQQQ. The Alpha and Beta of EMB are 6.40 points lower and 2.01 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

EMB vs. TQQQ - Annual Returns

Year EMB TQQQ
2020 5.48% 109.85%
2019 15.57% 133.93%
2018 -5.67% -19.65%
2017 9.98% 118.65%
2016 9.41% 11.04%
2015 0.43% 17.41%
2014 6.69% 56.82%
2013 -7.42% 139.98%
2012 17.64% 51.95%
2011 7.2% -7.77%
2010 11.47% 0.0%

EMB had its best year in 2012 with an annual return of 17.64%. EMB’s worst year over the past decade yielded -7.42% and occurred in 2013. In most years the iShares J.P. Morgan USD Emerging Markets Bond ETF provided moderate returns such as in 2014, 2011, and 2016 where annual returns amounted to 6.69%, 7.2%, and 9.41% respectively.

The year 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

EMB vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
EMB $10,000 $17,309 6.43%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in EMB would have resulted in a final balance of $17,309. This is a profit of $7,309 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.43%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

EMB’s CAGR is 54.79 percentage points lower than that of TQQQ and as a result, would have yielded $575,703 less on a $10,000 investment. Thus, EMB performed worse than TQQQ by 54.79% annually.


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