The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IWN is a iShares Small Value fund. So, what’s the difference between LQD and IWN? And which fund is better?
The expense ratio of LQD is 0.10 percentage points lower than IWN’s (0.14% vs. 0.24%). LQD is mostly comprised of BBB bonds while IWN has a high exposure to the financial services sector. Overall, LQD has provided lower returns than IWN over the past ten years.
In this article, we’ll compare LQD vs. IWN. We’ll look at risk metrics and annual returns, as well as at their performance and holdings. Moreover, I’ll also discuss LQD’s and IWN’s fund composition, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares Russell 2000 Value ETF|
|Category||Corporate Bond||Small Value|
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 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.
LQD’s dividend yield is 1.22% higher than that of IWN (2.48% vs. 1.26%). Also, LQD yielded on average 4.38% less per year over the past decade (6.58% vs. 10.96%). The expense ratio of LQD is 0.10 percentage points lower than IWN’s (0.14% vs. 0.24%).
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).
|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.
|AMC Entertainment Holdings Inc Class A||1.06%|
|Tenet Healthcare Corp||0.47%|
|Stag Industrial Inc||0.47%|
|EMCOR Group Inc||0.42%|
|Valley National Bancorp||0.37%|
|Chesapeake Energy Corp Ordinary Shares – New||0.37%|
|Agree Realty Corp||0.36%|
|Essent Group Ltd||0.35%|
IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.
Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.
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).
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Mean Return of 0.47 with a Alpha of 0.52 and a R-squared of 66.93. Its Sharpe Ratio is 0.85 while LQD’s Standard Deviation is 5.94. Furthermore, the fund has a Beta of 1.62 and a Treynor Ratio of 3.08.
The iShares Russell 2000 Value ETF (IWN) has a Alpha of -6.32 with a Sharpe Ratio of 0.59 and a Standard Deviation of 19.28. Its Beta is 1.21 while IWN’s Treynor Ratio is 8.3. Furthermore, the fund has a R-squared of 72.64 and a Mean Return of 1.01.
LQD’s Mean Return is 0.54 points lower than that of IWN and its R-squared is 5.71 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IWN. The Alpha and Beta of LQD are 6.84 points higher and 0.41 points higher than IWN’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!
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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% 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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.
LQD’s CAGR is 4.38 percentage points lower than that of IWN and as a result, would have yielded $8,413 less on a $10,000 investment. Thus, LQD performed worse than IWN by 4.38% annually.
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.