LQD vs. IWR: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares Russell Mid-Cap ETF (IWR) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and IWR is a iShares Mid-Cap Blend fund. So, what’s the difference between LQD and IWR? And which fund is better?

The expense ratio of LQD is 0.05 percentage points lower than IWR’s (0.14% vs. 0.19%). LQD is mostly comprised of BBB bonds while IWR has a high exposure to the technology sector. Overall, LQD has provided lower returns than IWR over the past ten years.

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

Summary

LQD IWR
Name iShares iBoxx $ Investment Grade Corporate Bond ETF iShares Russell Mid-Cap ETF
Category Corporate Bond Mid-Cap Blend
Issuer iShares iShares
AUM 40.23B 29.84B
Avg. Return 6.58% 14.15%
Div. Yield 2.48% 0.99%
Expense Ratio 0.14% 0.19%

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 Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

LQD’s dividend yield is 1.49% higher than that of IWR (2.48% vs. 0.99%). Also, LQD yielded on average 7.57% less per year over the past decade (6.58% vs. 14.15%). The expense ratio of LQD is 0.05 percentage points lower than IWR’s (0.14% vs. 0.19%).

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.

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

Risk Analysis

LQD IWR
Mean Return 0.47 1.17
R-squared 66.93 91.52
Std. Deviation 5.94 15.66
Alpha 0.52 -2.8
Beta 1.62 1.11
Sharpe Ratio 0.85 0.86
Treynor Ratio 3.08 11.72

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

The iShares Russell Mid-Cap ETF (IWR) has a Treynor Ratio of 11.72 with a Mean Return of 1.17 and a Standard Deviation of 15.66. Its Alpha is -2.8 while IWR’s Beta is 1.11. Furthermore, the fund has a R-squared of 91.52 and a Sharpe Ratio of 0.86.

LQD’s Mean Return is 0.70 points lower than that of IWR and its R-squared is 24.59 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than IWR. The Alpha and Beta of LQD are 3.32 points higher and 0.51 points higher than IWR’s Alpha and Beta.

Performance

Annual Returns

LQD vs. IWR - Annual Returns

Year LQD IWR
2020 11.14% 16.91%
2019 17.13% 30.31%
2018 -3.76% -9.13%
2017 7.16% 18.32%
2016 5.97% 13.58%
2015 -1.08% -2.57%
2014 8.57% 13.03%
2013 -2.49% 34.5%
2012 11.68% 17.13%
2011 8.89% -1.67%
2010 9.15% 25.25%

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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

LQD vs. IWR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $19,776 6.58%
IWR $10,000 $39,751 14.15%

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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.

LQD’s CAGR is 7.57 percentage points lower than that of IWR and as a result, would have yielded $19,975 less on a $10,000 investment. Thus, LQD performed worse than IWR by 7.57% annually.


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