HYG vs. TQQQ: What’s The Difference?

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between HYG and TQQQ? And which fund is better?

The expense ratio of HYG is 0.47 percentage points lower than TQQQ’s (0.48% vs. 0.95%). HYG is mostly comprised of BB bonds while TQQQ has a high exposure to the technology sector. Overall, HYG has provided lower returns than TQQQ over the past 10 years.

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

Summary

HYG TQQQ
Name iShares iBoxx $ High Yield Corporate Bond ETF ProShares UltraPro QQQ
Category High Yield Bond Trading–Leveraged Equity
Issuer iShares ProShares
AUM 20.03B 12.41B
Avg. Return 6.42% 61.22%
Div. Yield 4.44% 0.0%
Expense Ratio 0.48% 0.95%

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

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%.

HYG’s dividend yield is 4.44% higher than that of TQQQ (4.44% vs. 0.0%). Also, HYG yielded on average 54.81% less per year over the past decade (6.42% vs. 61.22%). The expense ratio of HYG is 0.47 percentage points lower than TQQQ’s (0.48% vs. 0.95%).

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Fund Composition

Holdings

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) 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%.

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Risk Analysis

HYG TQQQ
Mean Return 0.46 4.65
R-squared 4.1 83.64
Std. Deviation 6.96 50.08
Alpha 3.58 7.29
Beta 0.48 3.37
Sharpe Ratio 0.7 1.1
Treynor Ratio 10.01 15.65

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a R-squared of 4.1 with a Treynor Ratio of 10.01 and a Mean Return of 0.46. Its Standard Deviation is 6.96 while HYG’s Beta is 0.48. Furthermore, the fund has a Alpha of 3.58 and a Sharpe Ratio of 0.7.

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

HYG’s Mean Return is 4.19 points lower than that of TQQQ and its R-squared is 79.54 points lower. With a Standard Deviation of 6.96, HYG is slightly less volatile than TQQQ. The Alpha and Beta of HYG are 3.71 points lower and 2.89 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

HYG vs. TQQQ - Annual Returns

Year HYG TQQQ
2020 4.12% 109.85%
2019 14.23% 133.93%
2018 -1.93% -19.65%
2017 6.09% 118.65%
2016 13.92% 11.04%
2015 -5.55% 17.41%
2014 2.0% 56.82%
2013 5.9% 139.98%
2012 13.83% 51.95%
2011 5.89% -7.77%
2010 12.07% 0.0%

HYG had its best year in 2019 with an annual return of 14.23%. HYG’s worst year over the past decade yielded -5.55% and occurred in 2015. In most years the iShares iBoxx $ High Yield Corporate Bond ETF provided moderate returns such as in 2011, 2013, and 2017 where annual returns amounted to 5.89%, 5.9%, and 6.09% 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

HYG vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
HYG $10,000 $17,335 6.42%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in HYG would have resulted in a final balance of $17,335. This is a profit of $7,335 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.42%.

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%.

HYG’s CAGR is 54.81 percentage points lower than that of TQQQ and as a result, would have yielded $575,677 less on a $10,000 investment. Thus, HYG performed worse than TQQQ by 54.81% annually.


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