LQD vs. IVW: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares S&P 500 Growth ETF (IVW) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IVW is a iShares Large Growth fund. So, what’s the difference between LQD and IVW? And which fund is better?

The expense ratio of LQD is 0.04 percentage points lower than IVW’s (0.14% vs. 0.18%). LQD is mostly comprised of BBB bonds while IVW has a high exposure to the technology sector. Overall, LQD has provided lower returns than IVW over the past ten years.

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

Summary

LQD IVW
Name iShares iBoxx $ Investment Grade Corporate Bond ETF iShares S&P 500 Growth ETF
Category Corporate Bond Large Growth
Issuer iShares iShares
AUM 40.23B 35.72B
Avg. Return 6.58% 16.74%
Div. Yield 2.48% 0.61%
Expense Ratio 0.14% 0.18%

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 S&P 500 Growth ETF (IVW) is a Large Growth fund that is issued by iShares. It currently has 35.72B total assets under management and has yielded an average annual return of 16.74% over the past 10 years. The fund has a dividend yield of 0.61% with an expense ratio of 0.18%.

LQD’s dividend yield is 1.87% higher than that of IVW (2.48% vs. 0.61%). Also, LQD yielded on average 10.16% less per year over the past decade (6.58% vs. 16.74%). The expense ratio of LQD is 0.04 percentage points lower than IVW’s (0.14% vs. 0.18%).

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.

IVW - Holdings

IVW Holdings Weight
Apple Inc 11.46%
Microsoft Corp 10.75%
Amazon.com Inc 7.14%
Facebook Inc Class A 4.28%
Alphabet Inc Class A 4.06%
Alphabet Inc Class C 3.86%
Tesla Inc 2.65%
NVIDIA Corp 2.43%
PayPal Holdings Inc 1.62%
Adobe Inc 1.49%

IVW’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 11.46%, 10.75%, 7.14%, 4.28%, and 4.06%.

Alphabet Inc Class C (3.86%), Tesla Inc (2.65%), and NVIDIA Corp (2.43%) have a slightly smaller but still significant weight. PayPal Holdings Inc and Adobe Inc are also represented in the IVW’s holdings at 1.62% and 1.49%.

Risk Analysis

LQD IVW
Mean Return 0.47 1.44
R-squared 66.93 93.82
Std. Deviation 5.94 13.77
Alpha 0.52 2.19
Beta 1.62 0.98
Sharpe Ratio 0.85 1.21
Treynor Ratio 3.08 17.24

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

The iShares S&P 500 Growth ETF (IVW) has a Beta of 0.98 with a Treynor Ratio of 17.24 and a R-squared of 93.82. Its Standard Deviation is 13.77 while IVW’s Sharpe Ratio is 1.21. Furthermore, the fund has a Alpha of 2.19 and a Mean Return of 1.44.

LQD’s Mean Return is 0.97 points lower than that of IVW and its R-squared is 26.89 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IVW. The Alpha and Beta of LQD are 1.67 points lower and 0.64 points higher than IVW’s Alpha and Beta.

Performance

Annual Returns

LQD vs. IVW - Annual Returns

Year LQD IVW
2020 11.14% 33.21%
2019 17.13% 30.91%
2018 -3.76% -0.17%
2017 7.16% 27.2%
2016 5.97% 6.74%
2015 -1.08% 5.33%
2014 8.57% 14.67%
2013 -2.49% 32.48%
2012 11.68% 14.39%
2011 8.89% 4.49%
2010 9.15% 14.84%

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 2020 was the strongest year for IVW, returning 33.21% on an annual basis. The poorest year for IVW in the last ten years was 2018, with a yield of -0.17%. Most years the iShares S&P 500 Growth ETF has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 14.39%, 14.67%, and 14.84% respectively.

Portfolio Growth

LQD vs. IVW - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
IVW $10,000 $51,915 16.74%

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 IVW, the end total would have been $51,915. This equates to a $41,915 profit over 11 years and a compound annual growth rate (CAGR) of 16.74%.

LQD’s CAGR is 10.16 percentage points lower than that of IVW and as a result, would have yielded $32,139 less on a $10,000 investment. Thus, LQD performed worse than IVW by 10.16% annually.


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