IJR vs. LQD: What’s The Difference?

The iShares Core S&P Small-Cap ETF (IJR) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. IJR is a iShares Small Blend fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between IJR and LQD? And which fund is better?

The expense ratio of IJR is 0.08 percentage points lower than LQD’s (0.06% vs. 0.14%). IJR also has a high exposure to the industrials sector while LQD is mostly comprised of BBB bonds. Overall, IJR has provided higher returns than LQD over the past ten years.

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

Summary

IJR LQD
Name iShares Core S&P Small-Cap ETF iShares iBoxx $ Investment Grade Corporate Bond ETF
Category Small Blend Corporate Bond
Issuer iShares iShares
AUM 68.64B 40.23B
Avg. Return 13.97% 6.58%
Div. Yield 0.96% 2.48%
Expense Ratio 0.06% 0.14%

The iShares Core S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.

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%.

IJR’s dividend yield is 1.52% lower than that of LQD (0.96% vs. 2.48%). Also, IJR yielded on average 7.39% more per year over the past decade (13.97% vs. 6.58%). The expense ratio of IJR is 0.08 percentage points lower than LQD’s (0.06% vs. 0.14%).

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Fund Composition

Holdings

IJR - Holdings

IJR Holdings Weight
BlackRock Cash Funds Treasury SL Agency 1.08%
GameStop Corp Class A 0.86%
Omnicell Inc 0.61%
Stamps.com Inc 0.58%
Saia Inc 0.57%
Power Integrations Inc 0.57%
Exponent Inc 0.54%
NeoGenomics Inc 0.53%
Chart Industries Inc 0.53%
Macy’s Inc 0.51%

IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.

Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.

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.

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Risk Analysis

IJR LQD
Mean Return 1.21 0.47
R-squared 76.03 66.93
Std. Deviation 18.68 5.94
Alpha -3.7 0.52
Beta 1.2 1.62
Sharpe Ratio 0.74 0.85
Treynor Ratio 10.77 3.08

The iShares Core S&P Small-Cap ETF (IJR) has a Beta of 1.2 with a Sharpe Ratio of 0.74 and a Standard Deviation of 18.68. Its R-squared is 76.03 while IJR’s Treynor Ratio is 10.77. Furthermore, the fund has a Alpha of -3.7 and a Mean Return of 1.21.

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

IJR’s Mean Return is 0.74 points higher than that of LQD and its R-squared is 9.10 points higher. With a Standard Deviation of 18.68, IJR is slightly more volatile than LQD. The Alpha and Beta of IJR are 4.22 points lower and 0.42 points lower than LQD’s Alpha and Beta.

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Performance

Annual Returns

IJR vs. LQD - Annual Returns

Year IJR LQD
2020 11.24% 11.14%
2019 22.79% 17.13%
2018 -8.43% -3.76%
2017 13.2% 7.16%
2016 26.49% 5.97%
2015 -2.0% -1.08%
2014 5.67% 8.57%
2013 41.36% -2.49%
2012 16.28% 11.68%
2011 0.9% 8.89%
2010 26.14% 9.15%

IJR had its best year in 2013 with an annual return of 41.36%. IJR’s worst year over the past decade yielded -8.43% and occurred in 2018. In most years the iShares Core S&P Small-Cap ETF provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 11.24%, 13.2%, and 16.28% 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

IJR vs. LQD - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IJR $10,000 $38,800 13.97%
LQD $10,000 $19,776 6.58%

A $10,000 investment in IJR would have resulted in a final balance of $38,800. This is a profit of $28,800 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.97%.

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%.

IJR’s CAGR is 7.39 percentage points higher than that of LQD and as a result, would have yielded $19,024 more on a $10,000 investment. Thus, IJR outperformed LQD by 7.39% annually.


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