LQD vs. DIA: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the SPDR Dow Jones Industrial Average ETF Trust (DIA) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and DIA is a SPDR State Street Global Advisors Large Value fund. So, what’s the difference between LQD and DIA? And which fund is better?

The expense ratio of LQD is 0.02 percentage points lower than DIA’s (0.14% vs. 0.16%). LQD is mostly comprised of BBB bonds while DIA has a high exposure to the financial services sector. Overall, LQD has provided lower returns than DIA over the past ten years.

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

Summary

LQD DIA
Name iShares iBoxx $ Investment Grade Corporate Bond ETF SPDR Dow Jones Industrial Average ETF Trust
Category Corporate Bond Large Value
Issuer iShares SPDR State Street Global Advisors
AUM 40.23B 30.46B
Avg. Return 6.58% 13.35%
Div. Yield 2.48% 1.61%
Expense Ratio 0.14% 0.16%

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 SPDR Dow Jones Industrial Average ETF Trust (DIA) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 30.46B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.61% with an expense ratio of 0.16%.

LQD’s dividend yield is 0.87% higher than that of DIA (2.48% vs. 1.61%). Also, LQD yielded on average 6.77% less per year over the past decade (6.58% vs. 13.35%). The expense ratio of LQD is 0.02 percentage points lower than DIA’s (0.14% vs. 0.16%).

Fund Composition

Holdings

LQD - Holdings

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.

DIA - Holdings

DIA Holdings Weight
UnitedHealth Group Inc 7.63%
Goldman Sachs Group Inc 7.23%
The Home Depot Inc 6.07%
Microsoft Corp 5.16%
Salesforce.com Inc 4.65%
Amgen Inc 4.64%
Boeing Co 4.56%
Visa Inc Class A 4.45%
McDonald’s Corp 4.4%
Honeywell International Inc 4.18%

DIA’s Top Holdings are UnitedHealth Group Inc, Goldman Sachs Group Inc, The Home Depot Inc, Microsoft Corp, and Salesforce.com Inc at 7.63%, 7.23%, 6.07%, 5.16%, and 4.65%.

Amgen Inc (4.64%), Boeing Co (4.56%), and Visa Inc Class A (4.45%) have a slightly smaller but still significant weight. McDonald’s Corp and Honeywell International Inc are also represented in the DIA’s holdings at 4.4% and 4.18%.

Risk Analysis

LQD DIA
Mean Return 0.47 1.13
R-squared 66.93 93.31
Std. Deviation 5.94 13.68
Alpha 0.52 -0.94
Beta 1.62 0.97
Sharpe Ratio 0.85 0.94
Treynor Ratio 3.08 13.07

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Standard Deviation of 5.94 with a Treynor Ratio of 3.08 and a Alpha of 0.52. Its Beta is 1.62 while LQD’s Mean Return is 0.47. Furthermore, the fund has a R-squared of 66.93 and a Sharpe Ratio of 0.85.

The SPDR Dow Jones Industrial Average ETF Trust (DIA) has a Mean Return of 1.13 with a Sharpe Ratio of 0.94 and a Alpha of -0.94. Its Beta is 0.97 while DIA’s Treynor Ratio is 13.07. Furthermore, the fund has a Standard Deviation of 13.68 and a R-squared of 93.31.

LQD’s Mean Return is 0.66 points lower than that of DIA and its R-squared is 26.38 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than DIA. The Alpha and Beta of LQD are 1.46 points higher and 0.65 points higher than DIA’s Alpha and Beta.

Performance

Annual Returns

LQD vs. DIA - Annual Returns

Year LQD DIA
2020 11.14% 9.63%
2019 17.13% 25.09%
2018 -3.76% -3.6%
2017 7.16% 27.97%
2016 5.97% 16.28%
2015 -1.08% 0.1%
2014 8.57% 9.88%
2013 -2.49% 29.41%
2012 11.68% 10.04%
2011 8.89% 8.21%
2010 9.15% 13.87%

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 2013 was the strongest year for DIA, returning 29.41% on an annual basis. The poorest year for DIA in the last ten years was 2018, with a yield of -3.6%. Most years the SPDR Dow Jones Industrial Average ETF Trust has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 9.88%, 10.04%, and 13.87% respectively.

Portfolio Growth

LQD vs. DIA - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
DIA $10,000 $37,965 13.35%

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 DIA, the end total would have been $37,965. This equates to a $27,965 profit over 11 years and a compound annual growth rate (CAGR) of 13.35%.

LQD’s CAGR is 6.77 percentage points lower than that of DIA and as a result, would have yielded $18,189 less on a $10,000 investment. Thus, LQD performed worse than DIA by 6.77% annually.


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