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IJR vs. QUAL: What’s The Difference?

The iShares Core S&P Small-Cap ETF (IJR) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IJR is a iShares Small Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IJR and QUAL? And which fund is better?

The expense ratio of IJR is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%). IJR also has a higher exposure to the industrials sector and a higher standard deviation. Overall, IJR has provided higher returns than QUAL over the past ten years.

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

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Summary

IJRQUAL
NameiShares Core S&P Small-Cap ETFiShares MSCI USA Quality Factor ETF
CategorySmall BlendLarge Blend
IssueriSharesiShares
AUM68.64B23.93B
Avg. Return13.97%13.42%
Div. Yield0.96%1.29%
Expense Ratio0.06%0.15%

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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

IJR’s dividend yield is 0.33% lower than that of QUAL (0.96% vs. 1.29%). Also, IJR yielded on average 0.55% more per year over the past decade (13.97% vs. 13.42%). The expense ratio of IJR is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%).

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Fund Composition

Industry Exposure

IJR vs. QUAL - Industry Exposure

IJRQUAL
Technology14.32%22.52%
Industrials17.31%9.22%
Energy4.0%2.24%
Communication Services2.59%11.44%
Utilities1.8%2.41%
Healthcare11.55%13.22%
Consumer Defensive4.01%8.57%
Real Estate9.55%2.72%
Financial Services15.91%15.87%
Consumer Cyclical13.61%9.43%
Basic Materials5.34%2.35%

The iShares Core S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.

IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

IJR is 8.09% more exposed to the Industrials sector than QUAL (17.31% vs 9.22%). IJR’s exposure to Financial Services and Technology stocks is 0.04% higher and 8.20% lower respectively (15.91% vs. 15.87% and 14.32% vs. 22.52%). In total, Communication Services, Energy, and Consumer Defensive also make up 11.65% less of the fund’s holdings compared to QUAL (10.60% vs. 22.25%).

Holdings

IJR - Holdings

IJR HoldingsWeight
BlackRock Cash Funds Treasury SL Agency1.08%
GameStop Corp Class A0.86%
Omnicell Inc0.61%
Stamps.com Inc0.58%
Saia Inc0.57%
Power Integrations Inc0.57%
Exponent Inc0.54%
NeoGenomics Inc0.53%
Chart Industries Inc0.53%
Macy’s Inc0.51%

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%.

QUAL - Holdings

QUAL HoldingsWeight
Facebook Inc Class A4.77%
Nike Inc Class B4.05%
Microsoft Corp3.54%
Apple Inc3.52%
Johnson & Johnson2.99%
BlackRock Inc2.87%
Target Corp2.8%
Mastercard Inc Class A2.72%
NVIDIA Corp2.71%
Alphabet Inc Class A2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

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Risk Analysis

IJRQUAL
Mean Return1.210
R-squared76.030
Std. Deviation18.680
Alpha-3.70
Beta1.20
Sharpe Ratio0.740
Treynor Ratio10.770

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

The iShares MSCI USA Quality Factor ETF (QUAL) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Alpha of 0. Its R-squared is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a Beta of 0 and a Standard Deviation of 0.

IJR’s Mean Return is 1.21 points higher than that of QUAL and its R-squared is 76.03 points higher. With a Standard Deviation of 18.68, IJR is slightly more volatile than QUAL. The Alpha and Beta of IJR are 3.70 points lower and 1.20 points higher than QUAL’s Alpha and Beta.

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Performance

Annual Returns

IJR vs. QUAL - Annual Returns

YearIJRQUAL
202011.24%16.96%
201922.79%34.14%
2018-8.43%-5.77%
201713.2%22.26%
201626.49%9.18%
2015-2.0%5.56%
20145.67%11.62%
201341.36%0.0%
201216.28%0.0%
20110.9%0.0%
201026.14%0.0%

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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.

Portfolio Growth

IJR vs. QUAL - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IJR$10,000$18,54613.97%
QUAL$10,000$23,25113.42%

A $10,000 investment in IJR would have resulted in a final balance of $18,546. This is a profit of $8,546 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.97%.

With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.

IJR’s CAGR is 0.55 percentage points higher than that of QUAL and as a result, would have yielded $4,705 less on a $10,000 investment. Thus, IJR outperformed QUAL by 0.55% annually.


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