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LQD vs. MUB: What’s The Difference?

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.

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Summary

LQDMUB
NameiShares iBoxx $ Investment Grade Corporate Bond ETFiShares National Muni Bond ETF
CategoryCorporate BondMuni National Interm
IssueriSharesiShares
AUM40.23B22.71B
Avg. Return6.58%4.04%
Div. Yield2.48%1.96%
Expense Ratio0.14%0.07%

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%).

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Fund Composition

Holdings

LQD - Holdings

LQD Bond SectorsWeight
BBB50.92%
A37.97%
AA8.49%
AAA2.7%
BB0.05%
Below B0.0%
B0.0%
US Government0.0%
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.

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

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.

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Risk Analysis

LQDMUB
Mean Return0.470.32
R-squared66.9399
Std. Deviation5.943.68
Alpha0.52-0.46
Beta1.621.01
Sharpe Ratio0.850.88
Treynor Ratio3.083.2

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.

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Performance

Annual Returns

LQD vs. MUB - Annual Returns

YearLQDMUB
202011.14%4.87%
201917.13%7.28%
2018-3.76%0.86%
20177.16%4.61%
20165.97%0.06%
2015-1.08%2.99%
20148.57%8.61%
2013-2.49%-3.26%
201211.68%6.14%
20118.89%10.85%
20109.15%1.4%

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.

Portfolio Growth

LQD vs. MUB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$19,7766.58%
MUB$10,000$15,3334.04%

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.


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