The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Schwab U.S. Dividend Equity ETF (SCHD) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and SCHD is a Schwab ETFs Large Value fund. So, what’s the difference between LQD and SCHD? And which fund is better?
The expense ratio of LQD is 0.08 percentage points higher than SCHD’s (0.14% vs. 0.06%). LQD is mostly comprised of BBB bonds while SCHD has a high exposure to the financial services sector. Overall, LQD has provided lower returns than SCHD over the past ten years.
In this article, we’ll compare LQD vs. SCHD. We’ll look at risk metrics and fund composition, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss LQD’s and SCHD’s annual returns, performance, and holdings and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Schwab U.S. Dividend Equity ETF|
|Category||Corporate Bond||Large Value|
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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.
LQD’s dividend yield is 0.41% lower than that of SCHD (2.48% vs. 2.89%). Also, LQD yielded on average 8.22% less per year over the past decade (6.58% vs. 14.80%). The expense ratio of LQD is 0.08 percentage points higher than SCHD’s (0.14% vs. 0.06%).
|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.
|Merck & Co Inc||4.24%|
|The Home Depot Inc||4.19%|
|Texas Instruments Inc||4.16%|
|Verizon Communications Inc||3.96%|
|Cisco Systems Inc||3.96%|
SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.
PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Mean Return of 0.47 with a Sharpe Ratio of 0.85 and a Alpha of 0.52. Its Standard Deviation is 5.94 while LQD’s Treynor Ratio is 3.08. Furthermore, the fund has a R-squared of 66.93 and a Beta of 1.62.
The Schwab U.S. Dividend Equity ETF (SCHD) has a R-squared of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Standard Deviation is 0 while SCHD’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.
LQD’s Mean Return is 0.47 points higher than that of SCHD and its R-squared is 66.93 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than SCHD. The Alpha and Beta of LQD are 0.52 points higher and 1.62 points higher than SCHD’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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $14,898. This is a profit of $4,898 over 8 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.
LQD’s CAGR is 8.22 percentage points lower than that of SCHD and as a result, would have yielded $13,925 less on a $10,000 investment. Thus, LQD performed worse than SCHD by 8.22% 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.