SHY vs. TQQQ: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between SHY and TQQQ? And which fund is better?

The expense ratio of SHY is 0.80 percentage points lower than TQQQ’s (0.15% vs. 0.95%). SHY is mostly comprised of AAA bonds while TQQQ has a high exposure to the technology sector. Overall, SHY has provided lower returns than TQQQ over the past 10 years.

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

Summary

SHY TQQQ
Name iShares 1-3 Year Treasury Bond ETF ProShares UltraPro QQQ
Category Short Government Trading–Leveraged Equity
Issuer iShares ProShares
AUM 19.51B 12.41B
Avg. Return 1.27% 61.22%
Div. Yield 0.46% 0.0%
Expense Ratio 0.15% 0.95%

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

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%.

SHY’s dividend yield is 0.46% higher than that of TQQQ (0.46% vs. 0.0%). Also, SHY yielded on average 59.95% less per year over the past decade (1.27% vs. 61.22%). The expense ratio of SHY is 0.80 percentage points lower than TQQQ’s (0.15% vs. 0.95%).

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Fund Composition

Holdings

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (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

SHY TQQQ
Mean Return 0.09 4.65
R-squared 39.11 83.64
Std. Deviation 0.89 50.08
Alpha -0.03 7.29
Beta 0.18 3.37
Sharpe Ratio 0.54 1.1
Treynor Ratio 2.6 15.65

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Mean Return of 0.09 with a R-squared of 39.11 and a Beta of 0.18. Its Alpha is -0.03 while SHY’s Treynor Ratio is 2.6. Furthermore, the fund has a Standard Deviation of 0.89 and a Sharpe Ratio of 0.54.

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

SHY’s Mean Return is 4.56 points lower than that of TQQQ and its R-squared is 44.53 points lower. With a Standard Deviation of 0.89, SHY is slightly less volatile than TQQQ. The Alpha and Beta of SHY are 7.32 points lower and 3.19 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

SHY vs. TQQQ - Annual Returns

Year SHY TQQQ
2020 3.01% 109.85%
2019 3.42% 133.93%
2018 1.45% -19.65%
2017 0.27% 118.65%
2016 0.75% 11.04%
2015 0.43% 17.41%
2014 0.48% 56.82%
2013 0.23% 139.98%
2012 0.31% 51.95%
2011 1.43% -7.77%
2010 2.23% 0.0%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% 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

SHY vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SHY $10,000 $11,235 1.27%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in SHY would have resulted in a final balance of $11,235. This is a profit of $1,235 over 10 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

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%.

SHY’s CAGR is 59.95 percentage points lower than that of TQQQ and as a result, would have yielded $581,777 less on a $10,000 investment. Thus, SHY performed worse than TQQQ by 59.95% annually.


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