The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between LQD and SCHA? And which fund is better?
The expense ratio of LQD is 0.10 percentage points higher than SCHA’s (0.14% vs. 0.04%). LQD is mostly comprised of BBB bonds while SCHA has a high exposure to the healthcare sector. Overall, LQD has provided lower returns than SCHA over the past ten years.
In this article, we’ll compare LQD vs. SCHA. We’ll look at industry exposure and portfolio growth, as well as at their performance and fund composition. Moreover, I’ll also discuss LQD’s and SCHA’s annual returns, holdings, and risk metrics and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Schwab U.S. Small-Cap ETF|
|Category||Corporate Bond||Small 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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
LQD’s dividend yield is 1.50% higher than that of SCHA (2.48% vs. 0.98%). Also, LQD yielded on average 6.04% less per year over the past decade (6.58% vs. 12.62%). The expense ratio of LQD is 0.10 percentage points higher than SCHA’s (0.14% vs. 0.04%).
|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.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|Penn National Gaming Inc||0.27%|
|Axon Enterprise Inc||0.27%|
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Mean Return of 0.47 with a R-squared of 66.93 and a Beta of 1.62. Its Sharpe Ratio is 0.85 while LQD’s Standard Deviation is 5.94. Furthermore, the fund has a Treynor Ratio of 3.08 and a Alpha of 0.52.
The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a Sharpe Ratio of 0.7 and a R-squared of 82.26. Its Beta is 1.25 while SCHA’s Mean Return is 1.14. Furthermore, the fund has a Alpha of -4.65 and a Treynor Ratio of 9.62.
LQD’s Mean Return is 0.67 points lower than that of SCHA and its R-squared is 15.33 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than SCHA. The Alpha and Beta of LQD are 5.17 points higher and 0.37 points higher than SCHA’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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $18,118. This is a profit of $8,118 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
LQD’s CAGR is 6.04 percentage points lower than that of SCHA and as a result, would have yielded $11,917 less on a $10,000 investment. Thus, LQD performed worse than SCHA by 6.04% 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) 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!
2) 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!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.