TQQQ vs. DFAC: What’s The Difference?

The ProShares UltraPro QQQ (TQQQ) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. TQQQ is a ProShares Trading–Leveraged Equity fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between TQQQ and DFAC? And which fund is better?

The expense ratio of TQQQ is 0.76 percentage points higher than DFAC’s (0.95% vs. 0.19%). TQQQ also has a lower exposure to the technology sector and a higher standard deviation. Overall, TQQQ has provided higher returns than DFAC over the past 10 years.

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

Summary

TQQQ DFAC
Name ProShares UltraPro QQQ Dimensional U.S. Core Equity 2 ETF
Category Trading–Leveraged Equity Large Blend
Issuer ProShares Dimensional Fund Advisors
AUM 12.41B 13.53B
Avg. Return 61.22% 13.93%
Div. Yield 0.0% 1.0%
Expense Ratio 0.95% 0.19%

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%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

TQQQ’s dividend yield is 1.00% lower than that of DFAC (0.0% vs. 1.0%). Also, TQQQ yielded on average 47.29% more per year over the past decade (61.22% vs. 13.93%). The expense ratio of TQQQ is 0.76 percentage points higher than DFAC’s (0.95% vs. 0.19%).

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Fund Composition

Industry Exposure

TQQQ vs. DFAC - Industry Exposure

TQQQ DFAC
Technology 0.0% 22.81%
Industrials 0.0% 14.13%
Energy 0.0% 2.67%
Communication Services 0.0% 7.63%
Utilities 0.0% 1.54%
Healthcare 0.0% 12.09%
Consumer Defensive 0.0% 5.94%
Real Estate 0.0% 0.37%
Financial Services 0.0% 16.17%
Consumer Cyclical 0.0% 13.09%
Basic Materials 0.0% 3.56%

The ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

TQQQ is 22.81% less exposed to the Technology sector than DFAC (0.0% vs 22.81%). TQQQ’s exposure to Industrials and Energy stocks is 14.13% lower and 2.67% lower respectively (0.0% vs. 14.13% and 0.0% vs. 2.67%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 29.63% less of the fund’s holdings compared to DFAC (0.00% vs. 29.63%).

Holdings

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%.

DFAC - Holdings

DFAC Holdings Weight
Apple Inc 4.7%
Microsoft Corp 3.81%
Amazon.com Inc 2.39%
Johnson & Johnson 1.05%
Facebook Inc Class A 1.05%
JPMorgan Chase & Co 1.0%
Alphabet Inc Class C 0.85%
Alphabet Inc Class A 0.84%
Berkshire Hathaway Inc Class B 0.75%
Visa Inc Class A 0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

TQQQ DFAC
Mean Return 4.65 1.19
R-squared 83.64 95.1
Std. Deviation 50.08 15.55
Alpha 7.29 -2.75
Beta 3.37 1.12
Sharpe Ratio 1.1 0.88
Treynor Ratio 15.65 11.85

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

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Sharpe Ratio of 0.88 with a Mean Return of 1.19 and a Beta of 1.12. Its Alpha is -2.75 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Treynor Ratio of 11.85 and a Standard Deviation of 15.55.

TQQQ’s Mean Return is 3.46 points higher than that of DFAC and its R-squared is 11.46 points lower. With a Standard Deviation of 50.08, TQQQ is slightly more volatile than DFAC. The Alpha and Beta of TQQQ are 10.04 points higher and 2.25 points higher than DFAC’s Alpha and Beta.

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Performance

Annual Returns

TQQQ vs. DFAC - Annual Returns

Year TQQQ DFAC
2020 109.85% 15.8%
2019 133.93% 29.54%
2018 -19.65% -9.43%
2017 118.65% 18.82%
2016 11.04% 16.31%
2015 17.41% -2.53%
2014 56.82% 9.56%
2013 139.98% 37.55%
2012 51.95% 17.93%
2011 -7.77% -1.96%
2010 0.0% 21.67%

TQQQ had its best year in 2013 with an annual return of 139.98%. TQQQ’s worst year over the past decade yielded -19.65% and occurred in 2018. In most years the ProShares UltraPro QQQ provided moderate returns such as in 2015, 2012, and 2014 where annual returns amounted to 17.41%, 51.95%, and 56.82% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

TQQQ vs. DFAC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
TQQQ $10,000 $593,012 61.22%
DFAC $10,000 $31,887 13.93%

A $10,000 investment in TQQQ would have resulted in a final balance of $593,012. This is a profit of $583,012 over 10 years and amounts to a compound annual growth rate (CAGR) of 61.22%.

With a $10,000 investment in DFAC, the end total would have been $31,887. This equates to a $21,887 profit over 10 years and a compound annual growth rate (CAGR) of 13.93%.

TQQQ’s CAGR is 47.29 percentage points higher than that of DFAC and as a result, would have yielded $561,125 more on a $10,000 investment. Thus, TQQQ outperformed DFAC by 47.29% annually.


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