The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between LQD and MTUM? And which fund is better?
The expense ratio of LQD is 0.01 percentage points lower than MTUM’s (0.14% vs. 0.15%). LQD is mostly comprised of BBB bonds while MTUM has a high exposure to the financial services sector. Overall, LQD has provided lower returns than MTUM over the past ten years.
In this article, we’ll compare LQD vs. MTUM. We’ll look at risk metrics and portfolio growth, as well as at their annual returns and fund composition. Moreover, I’ll also discuss LQD’s and MTUM’s industry exposure, performance, and holdings and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares MSCI USA Momentum Factor ETF|
|Category||Corporate Bond||Large Growth|
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 USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.
LQD’s dividend yield is 2.04% higher than that of MTUM (2.48% vs. 0.44%). Also, LQD yielded on average 10.79% less per year over the past decade (6.58% vs. 17.37%). The expense ratio of LQD is 0.01 percentage points lower than MTUM’s (0.14% vs. 0.15%).
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|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.
|The Walt Disney Co||4.39%|
|JPMorgan Chase & Co||4.35%|
|Berkshire Hathaway Inc Class B||4.34%|
|Bank of America Corp||3.81%|
|PayPal Holdings Inc||3.76%|
|Wells Fargo & Co||3.05%|
|Applied Materials Inc||3.05%|
|Alphabet Inc Class C||2.84%|
MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.
PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.
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The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a R-squared of 66.93 with a Mean Return of 0.47 and a Alpha of 0.52. Its Beta is 1.62 while LQD’s Sharpe Ratio is 0.85. Furthermore, the fund has a Treynor Ratio of 3.08 and a Standard Deviation of 5.94.
The iShares MSCI USA Momentum Factor ETF (MTUM) has a Mean Return of 0 with a Beta of 0 and a Standard Deviation of 0. Its Sharpe Ratio is 0 while MTUM’s Alpha is 0. Furthermore, the fund has a Treynor Ratio of 0 and a R-squared of 0.
LQD’s Mean Return is 0.47 points higher than that of MTUM and its R-squared is 66.93 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than MTUM. The Alpha and Beta of LQD are 0.52 points higher and 1.62 points higher than MTUM’s Alpha and Beta.
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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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $15,279. This is a profit of $5,279 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.
LQD’s CAGR is 10.79 percentage points lower than that of MTUM and as a result, would have yielded $14,022 less on a $10,000 investment. Thus, LQD performed worse than MTUM by 10.79% annually.
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