The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and VOE is a Vanguard Mid-Cap Value fund. So, what’s the difference between LQD and VOE? And which fund is better?
The expense ratio of LQD is 0.07 percentage points higher than VOE’s (0.14% vs. 0.07%). LQD is mostly comprised of BBB bonds while VOE has a high exposure to the financial services sector. Overall, LQD has provided lower returns than VOE over the past ten years.
In this article, we’ll compare LQD vs. VOE. We’ll look at industry exposure and performance, as well as at their holdings and risk metrics. Moreover, I’ll also discuss LQD’s and VOE’s annual returns, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||iShares iBoxx $ Investment Grade Corporate Bond ETF||Vanguard Mid-Cap Value Index Fund ETF Shares|
|Category||Corporate Bond||Mid-Cap 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 Mid-Cap Value Index Fund ETF Shares (VOE) is a Mid-Cap Value fund that is issued by Vanguard. It currently has 26.78B total assets under management and has yielded an average annual return of 12.52% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.07%.
LQD’s dividend yield is 0.61% higher than that of VOE (2.48% vs. 1.87%). Also, LQD yielded on average 5.95% less per year over the past decade (6.58% vs. 12.52%). The expense ratio of LQD is 0.07 percentage points higher than VOE’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.
|Carrier Global Corp Ordinary Shares||1.28%|
|International Flavors & Fragrances Inc||1.13%|
|Motorola Solutions Inc||1.12%|
|Discover Financial Services||1.09%|
|Valero Energy Corp||0.97%|
|Willis Towers Watson PLC||0.9%|
|D.R. Horton Inc||0.89%|
VOE’s Top Holdings are Carrier Global Corp Ordinary Shares, International Flavors & Fragrances Inc, Motorola Solutions Inc, Discover Financial Services, and Welltower Inc at 1.28%, 1.13%, 1.12%, 1.09%, and 1.05%.
Corteva Inc (0.99%), Valero Energy Corp (0.97%), and Corning Inc (0.95%) have a slightly smaller but still significant weight. Willis Towers Watson PLC and D.R. Horton Inc are also represented in the VOE’s holdings at 0.9% and 0.89%.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a R-squared of 66.93 with a Standard Deviation of 5.94 and a Treynor Ratio of 3.08. Its Beta is 1.62 while LQD’s Alpha is 0.52. Furthermore, the fund has a Mean Return of 0.47 and a Sharpe Ratio of 0.85.
The Vanguard Mid-Cap Value Index Fund ETF Shares (VOE) has a Alpha of -3.77 with a Sharpe Ratio of 0.75 and a Mean Return of 1.05. Its Beta is 1.11 while VOE’s Standard Deviation is 15.98. Furthermore, the fund has a Treynor Ratio of 10.19 and a R-squared of 88.76.
LQD’s Mean Return is 0.58 points lower than that of VOE and its R-squared is 21.83 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than VOE. The Alpha and Beta of LQD are 4.29 points higher and 0.51 points higher than VOE’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 VOE, returning 37.65% on an annual basis. The poorest year for VOE in the last ten years was 2018, with a yield of -12.41%. Most years the Vanguard Mid-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 13.98%, 15.26%, and 16.04% 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 VOE, the end total would have been $33,655. This equates to a $23,655 profit over 11 years and a compound annual growth rate (CAGR) of 12.52%.
LQD’s CAGR is 5.95 percentage points lower than that of VOE and as a result, would have yielded $13,879 less on a $10,000 investment. Thus, LQD performed worse than VOE by 5.95% annually.
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