Skip to content

LQD vs. EFV: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between LQD and EFV? And which fund is better?

The expense ratio of LQD is 0.25 percentage points lower than EFV’s (0.14% vs. 0.39%). LQD is mostly comprised of BBB bonds while EFV has a high exposure to the financial services sector. Overall, LQD has provided higher returns than EFV over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

LQDEFV
NameiShares iBoxx $ Investment Grade Corporate Bond ETFiShares MSCI EAFE Value ETF
CategoryCorporate BondForeign Large Value
IssueriSharesiShares
AUM40.23B14.37B
Avg. Return6.58%3.99%
Div. Yield2.48%2.94%
Expense Ratio0.14%0.39%

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 iShares MSCI EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.

LQD’s dividend yield is 0.46% lower than that of EFV (2.48% vs. 2.94%). Also, LQD yielded on average 2.58% more per year over the past decade (6.58% vs. 3.99%). The expense ratio of LQD is 0.25 percentage points lower than EFV’s (0.14% vs. 0.39%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

LQD - Holdings

LQD Bond SectorsWeight
BBB50.92%
A37.97%
AA8.49%
AAA2.7%
BB0.05%
Below B0.0%
B0.0%
US Government0.0%
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.

EFV - Holdings

EFV HoldingsWeight
Novartis AG2.41%
Toyota Motor Corp2.21%
Commonwealth Bank of Australia1.59%
Siemens AG1.45%
Sanofi SA1.42%
HSBC Holdings PLC1.4%
TotalEnergies SE1.35%
Allianz SE1.23%
GlaxoSmithKline PLC1.18%
Rio Tinto PLC1.1%

EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.

HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

LQDEFV
Mean Return0.470.42
R-squared66.9392.15
Std. Deviation5.9416.53
Alpha0.52-1.77
Beta1.621.05
Sharpe Ratio0.850.26
Treynor Ratio3.082.92

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

The iShares MSCI EAFE Value ETF (EFV) has a Sharpe Ratio of 0.26 with a Alpha of -1.77 and a Treynor Ratio of 2.92. Its R-squared is 92.15 while EFV’s Standard Deviation is 16.53. Furthermore, the fund has a Mean Return of 0.42 and a Beta of 1.05.

LQD’s Mean Return is 0.05 points higher than that of EFV and its R-squared is 25.22 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than EFV. The Alpha and Beta of LQD are 2.29 points higher and 0.57 points higher than EFV’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

LQD vs. EFV - Annual Returns

YearLQDEFV
202011.14%-2.78%
201917.13%15.97%
2018-3.76%-14.88%
20177.16%21.22%
20165.97%4.87%
2015-1.08%-5.89%
20148.57%-5.65%
2013-2.49%22.61%
201211.68%17.52%
20118.89%-12.24%
20109.15%3.18%

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 EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.

Portfolio Growth

LQD vs. EFV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$19,7766.58%
EFV$10,000$14,1343.99%

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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.

LQD’s CAGR is 2.58 percentage points higher than that of EFV and as a result, would have yielded $5,642 more on a $10,000 investment. Thus, LQD outperformed EFV by 2.58% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.