LQD vs. TQQQ: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between LQD and TQQQ? And which fund is better?

The expense ratio of LQD is 0.81 percentage points lower than TQQQ’s (0.14% vs. 0.95%). LQD is mostly comprised of BBB bonds while TQQQ has a high exposure to the technology sector. Overall, LQD has provided lower returns than TQQQ over the past ten years.

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

Summary

LQD TQQQ
Name iShares iBoxx $ Investment Grade Corporate Bond ETF ProShares UltraPro QQQ
Category Corporate Bond Trading–Leveraged Equity
Issuer iShares ProShares
AUM 40.23B 12.41B
Avg. Return 6.58% 61.22%
Div. Yield 2.48% 0.0%
Expense Ratio 0.14% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

LQD’s dividend yield is 2.48% higher than that of TQQQ (2.48% vs. 0.0%). Also, LQD yielded on average 54.64% less per year over the past decade (6.58% vs. 61.22%). The expense ratio of LQD is 0.81 percentage points lower than TQQQ’s (0.14% vs. 0.95%).

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.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

LQD TQQQ
Mean Return 0.47 4.65
R-squared 66.93 83.64
Std. Deviation 5.94 50.08
Alpha 0.52 7.29
Beta 1.62 3.37
Sharpe Ratio 0.85 1.1
Treynor Ratio 3.08 15.65

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

The ProShares UltraPro QQQ (TQQQ) has a Treynor Ratio of 15.65 with a Mean Return of 4.65 and a Sharpe Ratio of 1.1. Its R-squared is 83.64 while TQQQ’s Standard Deviation is 50.08. Furthermore, the fund has a Beta of 3.37 and a Alpha of 7.29.

LQD’s Mean Return is 4.18 points lower than that of TQQQ and its R-squared is 16.71 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than TQQQ. The Alpha and Beta of LQD are 6.77 points lower and 1.75 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

LQD vs. TQQQ - Annual Returns

Year LQD TQQQ
2020 11.14% 109.85%
2019 17.13% 133.93%
2018 -3.76% -19.65%
2017 7.16% 118.65%
2016 5.97% 11.04%
2015 -1.08% 17.41%
2014 8.57% 56.82%
2013 -2.49% 139.98%
2012 11.68% 51.95%
2011 8.89% -7.77%
2010 9.15% 0.0%

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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

LQD vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
LQD $10,000 $18,118 6.58%
TQQQ $10,000 $593,012 61.22%

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 TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

LQD’s CAGR is 54.64 percentage points lower than that of TQQQ and as a result, would have yielded $574,894 less on a $10,000 investment. Thus, LQD performed worse than TQQQ by 54.64% annually.


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