The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and VBR is a Vanguard Small Value fund. So, what’s the difference between LQD and VBR? And which fund is better?
The expense ratio of LQD is 0.07 percentage points higher than VBR’s (0.14% vs. 0.07%). LQD is mostly comprised of BBB bonds while VBR has a high exposure to the financial services sector. Overall, LQD has provided lower returns than VBR over the past ten years.
In this article, we’ll compare LQD vs. VBR. We’ll look at performance and risk metrics, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss LQD’s and VBR’s fund composition, holdings, and industry exposure and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Vanguard Small-Cap Value Index Fund ETF Shares|
|Category||Corporate Bond||Small 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 Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.
LQD’s dividend yield is 0.88% higher than that of VBR (2.48% vs. 1.6%). Also, LQD yielded on average 5.70% less per year over the past decade (6.58% vs. 12.28%). The expense ratio of LQD is 0.07 percentage points higher than VBR’s (0.14% vs. 0.07%).
|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.
|Diamondback Energy Inc||0.55%|
|VICI Properties Inc Ordinary Shares||0.54%|
|Nuance Communications Inc||0.5%|
|Molina Healthcare Inc||0.48%|
|Howmet Aerospace Inc||0.44%|
|Apollo Global Management Inc Class A||0.42%|
|Brown & Brown Inc||0.41%|
VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.
Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Mean Return of 0.47 with a Beta of 1.62 and a Treynor Ratio of 3.08. Its Standard Deviation is 5.94 while LQD’s Sharpe Ratio is 0.85. Furthermore, the fund has a Alpha of 0.52 and a R-squared of 66.93.
The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Beta of 1.23 with a Sharpe Ratio of 0.67 and a R-squared of 82.2. Its Alpha is -5.09 while VBR’s Standard Deviation is 18.37. Furthermore, the fund has a Treynor Ratio of 9.15 and a Mean Return of 1.08.
LQD’s Mean Return is 0.61 points lower than that of VBR and its R-squared is 15.27 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than VBR. The Alpha and Beta of LQD are 5.61 points higher and 0.39 points higher than VBR’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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% 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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.
LQD’s CAGR is 5.70 percentage points lower than that of VBR and as a result, would have yielded $12,835 less on a $10,000 investment. Thus, LQD performed worse than VBR by 5.70% annually.
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