The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between LQD and MUB? And which fund is better?
The expense ratio of LQD is 0.07 percentage points higher than MUB’s (0.14% vs. 0.07%). LQD is mostly comprised of BBB bonds and MUB has a high exposure to AA bond. Overall, LQD has provided higher returns than MUB over the past ten years.
In this article, we’ll compare LQD vs. MUB. We’ll look at holdings and performance, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss LQD’s and MUB’s risk metrics, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||iShares National Muni Bond ETF|
|Category||Corporate Bond||Muni National Interm|
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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.
LQD’s dividend yield is 0.52% higher than that of MUB (2.48% vs. 1.96%). Also, LQD yielded on average 2.54% more per year over the past decade (6.58% vs. 4.04%). The expense ratio of LQD is 0.07 percentage points higher than MUB’s (0.14% vs. 0.07%).
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.
|MUB Bond Sectors||Weight|
MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.
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 Alpha of 0.52 with a Beta of 1.62 and a Mean Return of 0.47. Its Standard Deviation is 5.94 while LQD’s R-squared is 66.93. Furthermore, the fund has a Treynor Ratio of 3.08 and a Sharpe Ratio of 0.85.
The iShares National Muni Bond ETF (MUB) has a Beta of 1.01 with a Standard Deviation of 3.68 and a Mean Return of 0.32. Its R-squared is 99 while MUB’s Treynor Ratio is 3.2. Furthermore, the fund has a Alpha of -0.46 and a Sharpe Ratio of 0.88.
LQD’s Mean Return is 0.15 points higher than that of MUB and its R-squared is 32.07 points lower. With a Standard Deviation of 5.94, LQD is slightly more volatile than MUB. The Alpha and Beta of LQD are 0.98 points higher and 0.61 points higher than MUB’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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% 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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.
LQD’s CAGR is 2.54 percentage points higher than that of MUB and as a result, would have yielded $4,443 more on a $10,000 investment. Thus, LQD outperformed MUB by 2.54% 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.