The iShares Russell 1000 Value ETF (IWD) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between IWD and LQD? And which fund is better?
The expense ratio of IWD is 0.05 percentage points higher than LQD’s (0.19% vs. 0.14%). IWD also has a high exposure to the financial services sector while LQD is mostly comprised of BBB bonds. Overall, IWD has provided higher returns than LQD over the past ten years.
In this article, we’ll compare IWD vs. LQD. We’ll look at performance and fund composition, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss IWD’s and LQD’s holdings, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||iShares Russell 1000 Value ETF||iShares iBoxx $ Investment Grade Corporate Bond ETF|
|Category||Large Value||Corporate Bond|
The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.
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%.
IWD’s dividend yield is 0.91% lower than that of LQD (1.57% vs. 2.48%). Also, IWD yielded on average 4.82% more per year over the past decade (11.40% vs. 6.58%). The expense ratio of IWD is 0.05 percentage points higher than LQD’s (0.19% vs. 0.14%).
|Berkshire Hathaway Inc Class B||2.58%|
|JPMorgan Chase & Co||2.25%|
|Johnson & Johnson||2.24%|
|UnitedHealth Group Inc||1.78%|
|Procter & Gamble Co||1.71%|
|The Walt Disney Co||1.5%|
|Bank of America Corp||1.43%|
|Comcast Corp Class A||1.33%|
|Exxon Mobil Corp||1.2%|
IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.
The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.
|LQD Bond Sectors||Weight|
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.
The iShares Russell 1000 Value ETF (IWD) has a Sharpe Ratio of 0.81 with a Treynor Ratio of 11.06 and a Standard Deviation of 14.35. Its Beta is 1.02 while IWD’s R-squared is 92.38. Furthermore, the fund has a Alpha of -3.23 and a Mean Return of 1.03.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Alpha of 0.52 with a Mean Return of 0.47 and a Beta of 1.62. Its R-squared is 66.93 while LQD’s Treynor Ratio is 3.08. Furthermore, the fund has a Standard Deviation of 5.94 and a Sharpe Ratio of 0.85.
IWD’s Mean Return is 0.56 points higher than that of LQD and its R-squared is 25.45 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than LQD. The Alpha and Beta of IWD are 3.75 points lower and 0.60 points lower than LQD’s Alpha and Beta.
IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.
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%.
IWD’s CAGR is 4.82 percentage points higher than that of LQD and as a result, would have yielded $10,970 more on a $10,000 investment. Thus, IWD outperformed LQD by 4.82% annually.
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