No. of Recommendations: 14
A philosophical note.
Examining the historical relative performance of QQQ and QQQE (or SPY and RSP for that matter) is a lot like doing the following test:
You have two sets of two dice. The cubes in one set are covered with 3s and 4s. The other set is normal, 1 through 6. Same sum on each die.
You roll each set of dice 20 times, and sum the total. That represents the "CAGR" of that set of dice.
One of them will be a lot better than the other in terms of the total returns--it could be either. Does the result tell you whether you're better off with one or the other in future? No, it's just a finite bunch of random numbers that diverged one way, or the other, by chance.
Why does this remind me of QQQE and QQQ?
QQQ is totally dominated by a tiny number of stocks. (so is the S&P 500 these days). Those few stocks might do better than the rest, or might not. If a specific tiny number of stocks did better than average in the last month, does that tell you whether it will do better or worse than a much more diversified set in future? No. If they did better in the last 5 years or 10, does it tell you? Nope. It's just a random number dependent on the fates of a few specific businesses. We have absolutely no idea. (in the last decade the very largest have done very well, but in the prior 40 years the largest ~5 stocks by market cap were laggards by a mile on average. So which of those histories tells us much? Neither, perhaps).
In short, I don't think doing a deep complicated analysis into the relative returns of QQQ and QQQE is time well spent. The returns of QQQ are just the returns of QQQE, plus or minus a bunch of random numbers representing the fates of about five gigacaps. The random numbers in the past are not predictive of the random numbers in the future; the only thing you know for sure is that the returns will be a lot more random, and that your company-specific risk will be many times as high.
Jim
