BSV vs. LQD: What’s The Difference?

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. BSV is a Vanguard Short-Term Bond fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between BSV and LQD? And which fund is better?

The expense ratio of BSV is 0.09 percentage points lower than LQD’s (0.05% vs. 0.14%). BSV is mostly comprised of AAA bonds and LQD has a high exposure to BBB bond. Overall, BSV has provided lower returns than LQD over the past ten years.

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

Summary

BSV LQD
Name Vanguard Short-Term Bond Index Fund ETF Shares iShares iBoxx $ Investment Grade Corporate Bond ETF
Category Short-Term Bond Corporate Bond
Issuer Vanguard iShares
AUM 67.71B 40.23B
Avg. Return 2.27% 6.58%
Div. Yield 1.48% 2.48%
Expense Ratio 0.05% 0.14%

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a Corporate Bond fund that is issued by iShares. It currently has 40.23B total assets under management and has yielded an average annual return of 6.58% over the past 10 years. The fund has a dividend yield of 2.48% with an expense ratio of 0.14%.

BSV’s dividend yield is 1.00% lower than that of LQD (1.48% vs. 2.48%). Also, BSV yielded on average 4.31% less per year over the past decade (2.27% vs. 6.58%). The expense ratio of BSV is 0.09 percentage points lower than LQD’s (0.05% vs. 0.14%).

Fund Composition

Holdings

BSV - Holdings

BSV Bond Sectors Weight
AAA 71.65%
BBB 13.08%
A 11.95%
AA 3.28%
Others 0.03%
Below B 0.01%
B 0.0%
BB 0.0%
US Government 0.0%

BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.

LQD - Holdings

LQD Bond Sectors Weight
BBB 50.92%
A 37.97%
AA 8.49%
AAA 2.7%
BB 0.05%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.13%

LQD’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.92%, 37.97%, 8.49%, 2.7%, and 0.05%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

BSV LQD
Mean Return 0.16 0.47
R-squared 78.38 66.93
Std. Deviation 1.33 5.94
Alpha 0.21 0.52
Beta 0.38 1.62
Sharpe Ratio 0.98 0.85
Treynor Ratio 3.33 3.08

The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Beta of 0.38 with a Sharpe Ratio of 0.98 and a Standard Deviation of 1.33. Its Mean Return is 0.16 while BSV’s R-squared is 78.38. Furthermore, the fund has a Treynor Ratio of 3.33 and a Alpha of 0.21.

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Sharpe Ratio of 0.85 with a Alpha of 0.52 and a Standard Deviation of 5.94. Its Beta is 1.62 while LQD’s R-squared is 66.93. Furthermore, the fund has a Treynor Ratio of 3.08 and a Mean Return of 0.47.

BSV’s Mean Return is 0.31 points lower than that of LQD and its R-squared is 11.45 points higher. With a Standard Deviation of 1.33, BSV is slightly less volatile than LQD. The Alpha and Beta of BSV are 0.31 points lower and 1.24 points lower than LQD’s Alpha and Beta.

Performance

Annual Returns

BSV vs. LQD - Annual Returns

Year BSV LQD
2020 4.67% 11.14%
2019 4.92% 17.13%
2018 1.34% -3.76%
2017 1.2% 7.16%
2016 1.42% 5.97%
2015 0.92% -1.08%
2014 1.32% 8.57%
2013 0.17% -2.49%
2012 1.98% 11.68%
2011 3.04% 8.89%
2010 4.0% 9.15%

BSV had its best year in 2019 with an annual return of 4.92%. BSV’s worst year over the past decade yielded 0.17% and occurred in 2013. In most years the Vanguard Short-Term Bond Index Fund ETF Shares provided moderate returns such as in 2018, 2016, and 2012 where annual returns amounted to 1.34%, 1.42%, and 1.98% respectively.

The year 2019 was the strongest year for LQD, returning 17.13% on an annual basis. The poorest year for LQD in the last ten years was 2018, with a yield of -3.76%. Most years the iShares iBoxx $ Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 7.16%, 8.57%, and 8.89% respectively.

Portfolio Growth

BSV vs. LQD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
BSV $10,000 $12,785 2.27%
LQD $10,000 $19,776 6.58%

A $10,000 investment in BSV would have resulted in a final balance of $12,785. This is a profit of $2,785 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.27%.

With a $10,000 investment in LQD, the end total would have been $19,776. This equates to a $9,776 profit over 11 years and a compound annual growth rate (CAGR) of 6.58%.

BSV’s CAGR is 4.31 percentage points lower than that of LQD and as a result, would have yielded $6,991 less on a $10,000 investment. Thus, BSV performed worse than LQD by 4.31% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply