The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and RSP is a Invesco Large Blend fund. So, what’s the difference between LQD and RSP? And which fund is better?
The expense ratio of LQD is 0.06 percentage points lower than RSP’s (0.14% vs. 0.2%). LQD is mostly comprised of BBB bonds while RSP has a high exposure to the technology sector. Overall, LQD has provided lower returns than RSP over the past ten years.
In this article, we’ll compare LQD vs. RSP. We’ll look at industry exposure and fund composition, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss LQD’s and RSP’s performance, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Invesco S&P 500 Equal Weight ETF|
|Category||Corporate Bond||Large Blend|
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 Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
LQD’s dividend yield is 1.17% higher than that of RSP (2.48% vs. 1.31%). Also, LQD yielded on average 7.21% less per year over the past decade (6.58% vs. 13.79%). The expense ratio of LQD is 0.06 percentage points lower than RSP’s (0.14% vs. 0.2%).
|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.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Mean Return of 0.47 with a Treynor Ratio of 3.08 and a R-squared of 66.93. 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 Alpha of 0.52.
The Invesco S&P 500 Equal Weight ETF (RSP) has a Sharpe Ratio of 0.89 with a R-squared of 94.47 and a Beta of 1.1. Its Treynor Ratio is 12.12 while RSP’s Standard Deviation is 15.36. Furthermore, the fund has a Mean Return of 1.19 and a Alpha of -2.45.
LQD’s Mean Return is 0.72 points lower than that of RSP and its R-squared is 27.54 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than RSP. The Alpha and Beta of LQD are 2.97 points higher and 0.52 points higher than RSP’s Alpha and Beta.
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 RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% 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 RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
LQD’s CAGR is 7.21 percentage points lower than that of RSP and as a result, would have yielded $18,888 less on a $10,000 investment. Thus, LQD performed worse than RSP by 7.21% annually.
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