IWB vs. QUAL: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between IWB and QUAL? And which fund is better?

IWB and QUAL have the same expense ratio: 0.15%. IWB also has a higher exposure to the technology sector and a higher standard deviation. Overall, IWB has provided higher returns than QUAL over the past ten years.

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

Summary

IWB QUAL
Name iShares Russell 1000 ETF iShares MSCI USA Quality Factor ETF
Category Large Blend Large Blend
Issuer iShares iShares
AUM 30.54B 23.93B
Avg. Return 14.64% 13.42%
Div. Yield 1.14% 1.29%
Expense Ratio 0.15% 0.15%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 0.15% lower than that of QUAL (1.14% vs. 1.29%). Also, IWB yielded on average 1.21% more per year over the past decade (14.64% vs. 13.42%). IWB and QUAL have the same expense ratio: 0.15%.

Fund Composition

Industry Exposure

IWB vs. QUAL - Industry Exposure

IWB QUAL
Technology 25.33% 22.52%
Industrials 8.88% 9.22%
Energy 2.44% 2.24%
Communication Services 10.83% 11.44%
Utilities 2.36% 2.41%
Healthcare 13.35% 13.22%
Consumer Defensive 5.97% 8.57%
Real Estate 3.34% 2.72%
Financial Services 13.64% 15.87%
Consumer Cyclical 11.85% 9.43%
Basic Materials 2.02% 2.35%

The iShares Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

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%.

IWB is 2.81% more exposed to the Technology sector than QUAL (25.33% vs 22.52%). IWB’s exposure to Financial Services and Healthcare stocks is 2.23% lower and 0.13% higher respectively (13.64% vs. 15.87% and 13.35% vs. 13.22%). In total, Utilities, Energy, and Real Estate also make up 0.77% more of the fund’s holdings compared to QUAL (8.14% vs. 7.37%).

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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%.

Risk Analysis

IWB QUAL
Mean Return 1.27 0
R-squared 99.73 0
Std. Deviation 13.87 0
Alpha -0.38 0
Beta 1.02 0
Sharpe Ratio 1.05 0
Treynor Ratio 14.31 0

The iShares Russell 1000 ETF (IWB) has a Sharpe Ratio of 1.05 with a R-squared of 99.73 and a Beta of 1.02. Its Standard Deviation is 13.87 while IWB’s Alpha is -0.38. Furthermore, the fund has a Mean Return of 1.27 and a Treynor Ratio of 14.31.

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

IWB’s Mean Return is 1.27 points higher than that of QUAL and its R-squared is 99.73 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than QUAL. The Alpha and Beta of IWB are 0.38 points lower and 1.02 points higher than QUAL’s Alpha and Beta.

Performance

Annual Returns

IWB vs. QUAL - Annual Returns

Year IWB QUAL
2020 20.8% 16.96%
2019 31.26% 34.14%
2018 -4.91% -5.77%
2017 21.53% 22.26%
2016 11.91% 9.18%
2015 0.82% 5.56%
2014 13.08% 11.62%
2013 32.93% 0.0%
2012 16.27% 0.0%
2011 1.36% 0.0%
2010 15.94% 0.0%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. QUAL - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $23,378 14.64%
QUAL $10,000 $23,251 13.42%

A $10,000 investment in IWB would have resulted in a final balance of $23,378. This is a profit of $13,378 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 1.21 percentage points higher than that of QUAL and as a result, would have yielded $127 more on a $10,000 investment. Thus, IWB outperformed QUAL by 1.21% annually.


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