The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between LQD and SCHP? And which fund is better?
The expense ratio of LQD is 0.09 percentage points higher than SCHP’s (0.14% vs. 0.05%). LQD is mostly comprised of BBB bonds and SCHP has a high exposure to AAA bond. Overall, LQD has provided higher returns than SCHP over the past ten years.
In this article, we’ll compare LQD vs. SCHP. We’ll look at annual returns and portfolio growth, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss LQD’s and SCHP’s performance, risk metrics, and holdings and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Schwab U.S. TIPS ETF|
|Category||Corporate Bond||Inflation-Protected Bond|
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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.
LQD’s dividend yield is 0.51% higher than that of SCHP (2.48% vs. 1.97%). Also, LQD yielded on average 2.66% more per year over the past decade (6.58% vs. 3.92%). The expense ratio of LQD is 0.09 percentage points higher than SCHP’s (0.14% vs. 0.05%).
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|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.
|SCHP Bond Sectors||Weight|
SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Beta of 1.62 with a Treynor Ratio of 3.08 and a R-squared of 66.93. Its Sharpe Ratio is 0.85 while LQD’s Standard Deviation is 5.94. Furthermore, the fund has a Mean Return of 0.47 and a Alpha of 0.52.
The Schwab U.S. TIPS ETF (SCHP) has a Alpha of -0.5 with a Sharpe Ratio of 0.64 and a Treynor Ratio of 2.31. Its Mean Return is 0.28 while SCHP’s Standard Deviation is 4.32. Furthermore, the fund has a R-squared of 66.16 and a Beta of 1.17.
LQD’s Mean Return is 0.19 points higher than that of SCHP and its R-squared is 0.77 points higher. With a Standard Deviation of 5.94, LQD is slightly more volatile than SCHP. The Alpha and Beta of LQD are 1.02 points higher and 0.45 points higher than SCHP’s Alpha and Beta.
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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 SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% 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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.
LQD’s CAGR is 2.66 percentage points higher than that of SCHP and as a result, would have yielded $3,700 more on a $10,000 investment. Thus, LQD outperformed SCHP by 2.66% annually.
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