The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between LQD and VBK? And which fund is better?
The expense ratio of LQD is 0.07 percentage points higher than VBK’s (0.14% vs. 0.07%). LQD is mostly comprised of BBB bonds while VBK has a high exposure to the technology sector. Overall, LQD has provided lower returns than VBK over the past ten years.
In this article, we’ll compare LQD vs. VBK. We’ll look at annual returns and portfolio growth, as well as at their holdings and industry exposure. Moreover, I’ll also discuss LQD’s and VBK’s performance, fund composition, and risk metrics and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Vanguard Small-Cap Growth Index Fund ETF Shares|
|Category||Corporate Bond||Small Growth|
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 Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.
LQD’s dividend yield is 2.03% higher than that of VBK (2.48% vs. 0.45%). Also, LQD yielded on average 9.95% less per year over the past decade (6.58% vs. 16.53%). The expense ratio of LQD is 0.07 percentage points higher than VBK’s (0.14% vs. 0.07%).
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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.
|Charles River Laboratories International Inc||0.78%|
|Fair Isaac Corp||0.57%|
|Bill.com Holdings Inc Ordinary Shares||0.56%|
VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.
Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.
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The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Standard Deviation of 5.94 with a Mean Return of 0.47 and a Sharpe Ratio of 0.85. Its Alpha is 0.52 while LQD’s Beta is 1.62. Furthermore, the fund has a Treynor Ratio of 3.08 and a R-squared of 66.93.
The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Alpha of -2.81 with a Standard Deviation of 17.95 and a Beta of 1.18. Its Mean Return is 1.22 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a Treynor Ratio of 11.18 and a R-squared of 80.56.
LQD’s Mean Return is 0.75 points lower than that of VBK and its R-squared is 13.63 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than VBK. The Alpha and Beta of LQD are 3.33 points higher and 0.44 points higher than VBK’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 2013 was the strongest year for VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in LQD would have resulted in a final balance of $19,776. This is a profit of $9,776 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.58%.
With a $10,000 investment in VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.
LQD’s CAGR is 9.95 percentage points lower than that of VBK and as a result, would have yielded $28,863 less on a $10,000 investment. Thus, LQD performed worse than VBK by 9.95% annually.
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