LQD vs. SCHF: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Schwab International Equity ETF (SCHF) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and SCHF is a Schwab ETFs Foreign Large Blend fund. So, what’s the difference between LQD and SCHF? And which fund is better?

The expense ratio of LQD is 0.08 percentage points higher than SCHF’s (0.14% vs. 0.06%). LQD is mostly comprised of BBB bonds while SCHF has a high exposure to the financial services sector. Overall, LQD has provided higher returns than SCHF over the past ten years.

In this article, we’ll compare LQD vs. SCHF. We’ll look at industry exposure and fund composition, as well as at their annual returns and holdings. Moreover, I’ll also discuss LQD’s and SCHF’s performance, risk metrics, and portfolio growth and examine how these affect their overall returns.

Summary

LQD SCHF
Name iShares iBoxx $ Investment Grade Corporate Bond ETF Schwab International Equity ETF
Category Corporate Bond Foreign Large Blend
Issuer iShares Schwab ETFs
AUM 40.23B 26.99B
Avg. Return 6.58% 6.43%
Div. Yield 2.48% 2.16%
Expense Ratio 0.14% 0.06%

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 International Equity ETF (SCHF) is a Foreign Large Blend fund that is issued by Schwab ETFs. It currently has 26.99B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 2.16% with an expense ratio of 0.06%.

LQD’s dividend yield is 0.32% higher than that of SCHF (2.48% vs. 2.16%). Also, LQD yielded on average 0.15% more per year over the past decade (6.58% vs. 6.43%). The expense ratio of LQD is 0.08 percentage points higher than SCHF’s (0.14% vs. 0.06%).

Fund Composition

Holdings

LQD - Holdings

LQD Bond Sectors Weight
BBB 50.92%
A 37.97%
AA 8.49%
AAA 2.7%
BB 0.05%
Below B 0.0%
B 0.0%
US Government 0.0%
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.

SCHF - Holdings

SCHF Holdings Weight
Nestle SA 1.66%
Samsung Electronics Co Ltd 1.6%
ASML Holding NV 1.29%
Roche Holding AG 1.24%
Toyota Motor Corp 1.02%
LVMH Moet Hennessy Louis Vuitton SE 0.93%
Novartis AG 0.92%
Shopify Inc A 0.78%
AstraZeneca PLC 0.75%
SAP SE 0.74%

SCHF’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.66%, 1.6%, 1.29%, 1.24%, and 1.02%.

LVMH Moet Hennessy Louis Vuitton SE (0.93%), Novartis AG (0.92%), and Shopify Inc A (0.78%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the SCHF’s holdings at 0.75% and 0.74%.

Risk Analysis

LQD SCHF
Mean Return 0.47 0.58
R-squared 66.93 98.16
Std. Deviation 5.94 15.08
Alpha 0.52 0.53
Beta 1.62 0.99
Sharpe Ratio 0.85 0.42
Treynor Ratio 3.08 5.39

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Beta of 1.62 with a Alpha of 0.52 and a Mean Return of 0.47. Its Sharpe Ratio is 0.85 while LQD’s Treynor Ratio is 3.08. Furthermore, the fund has a Standard Deviation of 5.94 and a R-squared of 66.93.

The Schwab International Equity ETF (SCHF) has a Mean Return of 0.58 with a R-squared of 98.16 and a Standard Deviation of 15.08. Its Sharpe Ratio is 0.42 while SCHF’s Treynor Ratio is 5.39. Furthermore, the fund has a Alpha of 0.53 and a Beta of 0.99.

LQD’s Mean Return is 0.11 points lower than that of SCHF and its R-squared is 31.23 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than SCHF. The Alpha and Beta of LQD are 0.01 points lower and 0.63 points higher than SCHF’s Alpha and Beta.

Performance

Annual Returns

LQD vs. SCHF - Annual Returns

Year LQD SCHF
2020 11.14% 9.86%
2019 17.13% 22.15%
2018 -3.76% -14.39%
2017 7.16% 25.83%
2016 5.97% 2.88%
2015 -1.08% -2.44%
2014 8.57% -4.44%
2013 -2.49% 20.03%
2012 11.68% 17.12%
2011 8.89% -12.32%
2010 9.15% 8.6%

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 2017 was the strongest year for SCHF, returning 25.83% on an annual basis. The poorest year for SCHF in the last ten years was 2018, with a yield of -14.39%. Most years the Schwab International Equity ETF has given investors modest returns, such as in 2016, 2010, and 2020, when gains were 2.88%, 8.6%, and 9.86% respectively.

Portfolio Growth

LQD vs. SCHF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $18,118 6.58%
SCHF $10,000 $17,089 6.43%

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 SCHF, the end total would have been $17,089. This equates to a $7,089 profit over 10 years and a compound annual growth rate (CAGR) of 6.43%.

LQD’s CAGR is 0.15 percentage points higher than that of SCHF and as a result, would have yielded $1,029 more on a $10,000 investment. Thus, LQD outperformed SCHF by 0.15% annually.


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