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LQD vs. VV: What’s The Difference?

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Large-Cap Index Fund ETF Shares (VV) are both among the Top 100 ETFs. LQD is a iShares Corporate Bond fund and VV is a Vanguard Large Blend fund. So, what’s the difference between LQD and VV? And which fund is better?

The expense ratio of LQD is 0.10 percentage points higher than VV’s (0.14% vs. 0.04%). LQD is mostly comprised of BBB bonds while VV has a high exposure to the technology sector. Overall, LQD has provided lower returns than VV over the past ten years.

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

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Summary

LQDVV
NameiShares iBoxx $ Investment Grade Corporate Bond ETFVanguard Large-Cap Index Fund ETF Shares
CategoryCorporate BondLarge Blend
IssueriSharesVanguard
AUM40.23B37.65B
Avg. Return6.58%14.75%
Div. Yield2.48%1.26%
Expense Ratio0.14%0.04%

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 Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.

LQD’s dividend yield is 1.22% higher than that of VV (2.48% vs. 1.26%). Also, LQD yielded on average 8.17% less per year over the past decade (6.58% vs. 14.75%). The expense ratio of LQD is 0.10 percentage points higher than VV’s (0.14% vs. 0.04%).

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Fund Composition

Holdings

LQD - Holdings

LQD Bond SectorsWeight
BBB50.92%
A37.97%
AA8.49%
AAA2.7%
BB0.05%
Below B0.0%
B0.0%
US Government0.0%
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.

VV - Holdings

VV HoldingsWeight
Apple Inc5.7%
Microsoft Corp5.35%
Amazon.com Inc3.87%
Facebook Inc Class A2.19%
Alphabet Inc Class A1.93%
Alphabet Inc Class C1.81%
Tesla Inc1.37%
Berkshire Hathaway Inc Class B1.3%
NVIDIA Corp1.24%
JPMorgan Chase & Co1.24%

VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.

Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.

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Risk Analysis

LQDVV
Mean Return0.471.24
R-squared66.9399.86
Std. Deviation5.9413.75
Alpha0.52-0.08
Beta1.621.01
Sharpe Ratio0.851.04
Treynor Ratio3.0814.14

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

The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Mean Return of 1.24 with a Beta of 1.01 and a R-squared of 99.86. Its Standard Deviation is 13.75 while VV’s Alpha is -0.08. Furthermore, the fund has a Sharpe Ratio of 1.04 and a Treynor Ratio of 14.14.

LQD’s Mean Return is 0.77 points lower than that of VV and its R-squared is 32.93 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than VV. The Alpha and Beta of LQD are 0.60 points higher and 0.61 points higher than VV’s Alpha and Beta.

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Performance

Annual Returns

LQD vs. VV - Annual Returns

YearLQDVV
202011.14%20.99%
201917.13%31.39%
2018-3.76%-4.44%
20177.16%22.03%
20165.97%11.65%
2015-1.08%1.07%
20148.57%13.39%
2013-2.49%32.65%
201211.68%16.09%
20118.89%1.58%
20109.15%15.81%

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 VV, returning 32.65% on an annual basis. The poorest year for VV in the last ten years was 2018, with a yield of -4.44%. Most years the Vanguard Large-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.39%, 15.81%, and 16.09% respectively.

Portfolio Growth

LQD vs. VV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$19,7766.58%
VV$10,000$42,97014.75%

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 VV, the end total would have been $42,970. This equates to a $32,970 profit over 11 years and a compound annual growth rate (CAGR) of 14.75%.

LQD’s CAGR is 8.17 percentage points lower than that of VV and as a result, would have yielded $23,194 less on a $10,000 investment. Thus, LQD performed worse than VV by 8.17% annually.


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