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.

Summary

IJR QUAL
Name iShares Core S&P Small-Cap ETF iShares MSCI USA Quality Factor ETF
Category Small Blend Large Blend
Issuer iShares iShares
AUM 68.64B 23.93B
Avg. Return 13.97% 13.42%
Div. Yield 0.96% 1.29%
Expense Ratio 0.06% 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%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

IJR vs. QUAL - Industry Exposure

IJR QUAL
Technology 14.32% 22.52%
Industrials 17.31% 9.22%
Energy 4.0% 2.24%
Communication Services 2.59% 11.44%
Utilities 1.8% 2.41%
Healthcare 11.55% 13.22%
Consumer Defensive 4.01% 8.57%
Real Estate 9.55% 2.72%
Financial Services 15.91% 15.87%
Consumer Cyclical 13.61% 9.43%
Basic Materials 5.34% 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 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%.

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

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%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

IJR QUAL
Mean Return 1.21 0
R-squared 76.03 0
Std. Deviation 18.68 0
Alpha -3.7 0
Beta 1.2 0
Sharpe Ratio 0.74 0
Treynor Ratio 10.77 0

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.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

IJR vs. QUAL - Annual Returns

Year IJR QUAL
2020 11.24% 16.96%
2019 22.79% 34.14%
2018 -8.43% -5.77%
2017 13.2% 22.26%
2016 26.49% 9.18%
2015 -2.0% 5.56%
2014 5.67% 11.62%
2013 41.36% 0.0%
2012 16.28% 0.0%
2011 0.9% 0.0%
2010 26.14% 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

Fund Initial Balance Final Balance CAGR
IJR $10,000 $18,546 13.97%
QUAL $10,000 $23,251 13.42%

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.


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 Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

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

Leave a Reply