The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IWB is a iShares Large Blend fund. So, what’s the difference between LQD and IWB? And which fund is better?
The expense ratio of LQD is 0.01 percentage points lower than IWB’s (0.14% vs. 0.15%). LQD is mostly comprised of BBB bonds while IWB has a high exposure to the technology sector. Overall, LQD has provided lower returns than IWB over the past ten years.
In this article, we’ll compare LQD vs. IWB. We’ll look at holdings and fund composition, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss LQD’s and IWB’s risk metrics, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares Russell 1000 ETF|
|Category||Corporate Bond||Large Blend|
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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.
LQD’s dividend yield is 1.34% higher than that of IWB (2.48% vs. 1.14%). Also, LQD yielded on average 8.06% less per year over the past decade (6.58% vs. 14.64%). The expense ratio of LQD is 0.01 percentage points lower than IWB’s (0.14% vs. 0.15%).
|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.
|Facebook Inc Class A||2.03%|
|Alphabet Inc Class A||1.93%|
|Alphabet Inc Class C||1.82%|
|Berkshire Hathaway Inc Class B||1.24%|
|JPMorgan Chase & Co||1.09%|
IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.
Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Alpha of 0.52 with a Sharpe Ratio of 0.85 and a Treynor Ratio of 3.08. Its Standard Deviation is 5.94 while LQD’s R-squared is 66.93. Furthermore, the fund has a Mean Return of 0.47 and a Beta of 1.62.
The iShares Russell 1000 ETF (IWB) has a Standard Deviation of 13.87 with a Mean Return of 1.27 and a R-squared of 99.73. Its Beta is 1.02 while IWB’s Treynor Ratio is 14.31. Furthermore, the fund has a Sharpe Ratio of 1.05 and a Alpha of -0.38.
LQD’s Mean Return is 0.80 points lower than that of IWB and its R-squared is 32.80 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IWB. The Alpha and Beta of LQD are 0.90 points higher and 0.60 points higher than IWB’s Alpha and Beta.
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 IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% 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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.
LQD’s CAGR is 8.06 percentage points lower than that of IWB and as a result, would have yielded $22,686 less on a $10,000 investment. Thus, LQD performed worse than IWB by 8.06% annually.
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