The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between LQD and BIV? And which fund is better?
The expense ratio of LQD is 0.09 percentage points higher than BIV’s (0.14% vs. 0.05%). LQD is mostly comprised of BBB bonds and BIV has a high exposure to AAA bond. Overall, LQD has provided higher returns than BIV over the past ten years.
In this article, we’ll compare LQD vs. BIV. We’ll look at risk metrics and portfolio growth, as well as at their holdings and industry exposure. Moreover, I’ll also discuss LQD’s and BIV’s fund composition, annual returns, and performance and examine how these affect their overall returns.
|NameiShares iBoxx $ Investment Grade Corporate Bond ETFVanguard Intermediate-Term Bond Index Fund ETF Shares|
|Category||Corporate Bond||Intermediate-Term Bond|
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%.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.
LQD’s dividend yield is 0.42% higher than that of BIV (2.48% vs. 2.06%). Also, LQD yielded on average 1.26% more per year over the past decade (6.58% vs. 5.31%). The expense ratio of LQD is 0.09 percentage points higher than BIV’s (0.14% vs. 0.05%).
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|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.
|BIV Bond Sectors||Weight|
BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.
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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 Sharpe Ratio of 0.85. Its Beta is 1.62 while LQD’s Alpha is 0.52. Furthermore, the fund has a Treynor Ratio of 3.08 and a R-squared of 66.93.
The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Sharpe Ratio of 0.89 with a Beta of 1.33 and a Mean Return of 0.35. Its R-squared is 95.12 while BIV’s Treynor Ratio is 2.72. Furthermore, the fund has a Alpha of -0.07 and a Standard Deviation of 4.09.
LQD’s Mean Return is 0.12 points higher than that of BIV and its R-squared is 28.19 points lower. With a Standard Deviation of 5.94, LQD is slightly more volatile than BIV. The Alpha and Beta of LQD are 0.59 points higher and 0.29 points higher than BIV’s Alpha and Beta.
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LQD had its best year in 2019 with an annual return of 17.13%. LQD’s worst year over the past decade yielded -3.76% and occurred in 2018. In most years the iShares iBoxx $ Investment Grade Corporate Bond ETF provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 7.16%, 8.57%, and 8.89% respectively.
The year 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $19,776. This is a profit of $9,776 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.
LQD’s CAGR is 1.26 percentage points higher than that of BIV and as a result, would have yielded $2,284 more on a $10,000 investment. Thus, LQD outperformed BIV by 1.26% annually.
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