The iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. ITOT is a iShares Large Blend fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between ITOT and LQD? And which fund is better?
The expense ratio of ITOT is 0.11 percentage points lower than LQD’s (0.03% vs. 0.14%). ITOT also has a high exposure to the technology sector while LQD is mostly comprised of BBB bonds. Overall, ITOT has provided higher returns than LQD over the past ten years.
In this article, we’ll compare ITOT vs. LQD. We’ll look at performance and annual returns, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss ITOT’s and LQD’s holdings, portfolio growth, and risk metrics and examine how these affect their overall returns.
Summary
| ITOT | LQD | |
| Name | iShares Core S&P Total U.S. Stock Market ETF | iShares iBoxx $ Investment Grade Corporate Bond ETF |
| Category | Large Blend | Corporate Bond |
| Issuer | iShares | iShares |
| AUM | 41.97B | 40.23B |
| Avg. Return | 14.59% | 6.58% |
| Div. Yield | 1.2% | 2.48% |
| Expense Ratio | 0.03% | 0.14% |
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
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%.
ITOT’s dividend yield is 1.28% lower than that of LQD (1.2% vs. 2.48%). Also, ITOT yielded on average 8.01% more per year over the past decade (14.59% vs. 6.58%). The expense ratio of ITOT is 0.11 percentage points lower than LQD’s (0.03% vs. 0.14%).
Fund Composition
Holdings
| ITOT Holdings | Weight |
| Apple Inc | 5.07% |
| Microsoft Corp | 4.75% |
| Amazon.com Inc | 3.16% |
| Facebook Inc Class A | 1.89% |
| Alphabet Inc Class A | 1.79% |
| Alphabet Inc Class C | 1.71% |
| Tesla Inc | 1.17% |
| Berkshire Hathaway Inc Class B | 1.17% |
| NVIDIA Corp | 1.08% |
| JPMorgan Chase & Co | 1.02% |
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
| 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
| ITOT | LQD | |
| Mean Return | 1.27 | 0.47 |
| R-squared | 99.4 | 66.93 |
| Std. Deviation | 14.02 | 5.94 |
| Alpha | -0.54 | 0.52 |
| Beta | 1.03 | 1.62 |
| Sharpe Ratio | 1.04 | 0.85 |
| Treynor Ratio | 14.13 | 3.08 |
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Alpha of -0.54 with a Standard Deviation of 14.02 and a Mean Return of 1.27. Its Treynor Ratio is 14.13 while ITOT’s Sharpe Ratio is 1.04. Furthermore, the fund has a R-squared of 99.4 and a Beta of 1.03.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Standard Deviation of 5.94 with a Mean Return of 0.47 and a Alpha of 0.52. Its Treynor Ratio is 3.08 while LQD’s R-squared is 66.93. Furthermore, the fund has a Sharpe Ratio of 0.85 and a Beta of 1.62.
ITOT’s Mean Return is 0.80 points higher than that of LQD and its R-squared is 32.47 points higher. With a Standard Deviation of 14.02, ITOT is slightly more volatile than LQD. The Alpha and Beta of ITOT are 1.06 points lower and 0.59 points lower than LQD’s Alpha and Beta.
Performance
Annual Returns
| Year | ITOT | LQD |
| 2020 | 20.75% | 11.14% |
| 2019 | 30.87% | 17.13% |
| 2018 | -5.27% | -3.76% |
| 2017 | 21.23% | 7.16% |
| 2016 | 12.59% | 5.97% |
| 2015 | 0.96% | -1.08% |
| 2014 | 13.01% | 8.57% |
| 2013 | 32.67% | -2.49% |
| 2012 | 15.98% | 11.68% |
| 2011 | 1.55% | 8.89% |
| 2010 | 16.15% | 9.15% |
ITOT had its best year in 2013 with an annual return of 32.67%. ITOT’s worst year over the past decade yielded -5.27% and occurred in 2018. In most years the iShares Core S&P Total U.S. Stock Market ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.01%, 15.98%, and 16.15% 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
| Fund | Initial Balance | Final Balance | CAGR |
| ITOT | $10,000 | $42,310 | 14.59% |
| LQD | $10,000 | $19,776 | 6.58% |
A $10,000 investment in ITOT would have resulted in a final balance of $42,310. This is a profit of $32,310 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.59%.
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%.
ITOT’s CAGR is 8.01 percentage points higher than that of LQD and as a result, would have yielded $22,534 more on a $10,000 investment. Thus, ITOT outperformed LQD by 8.01% annually.
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