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LQD vs. VXF: What’s The Difference?

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

The expense ratio of LQD is 0.08 percentage points higher than VXF’s (0.14% vs. 0.06%). LQD is mostly comprised of BBB bonds while VXF has a high exposure to the technology sector. Overall, LQD has provided lower returns than VXF over the past ten years.

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

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Summary

LQDVXF
NameiShares iBoxx $ Investment Grade Corporate Bond ETFVanguard Extended Market Index Fund ETF Shares
CategoryCorporate BondMid-Cap Growth
IssueriSharesVanguard
AUM40.23B114.53B
Avg. Return6.58%15.47%
Div. Yield2.48%1.19%
Expense Ratio0.14%0.06%

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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.

LQD’s dividend yield is 1.29% higher than that of VXF (2.48% vs. 1.19%). Also, LQD yielded on average 8.89% less per year over the past decade (6.58% vs. 15.47%). The expense ratio of LQD is 0.08 percentage points higher than VXF’s (0.14% vs. 0.06%).

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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.

VXF - Holdings

VXF HoldingsWeight
Square Inc A1.2%
Zoom Video Communications Inc1.04%
Uber Technologies Inc0.93%
Moderna Inc0.9%
Blackstone Group Inc0.83%
Snap Inc Class A0.8%
Twilio Inc A0.73%
DocuSign Inc0.68%
CrowdStrike Holdings Inc Class A0.63%
Marvell Technology Inc0.6%

VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.

Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.

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Risk Analysis

LQDVXF
Mean Return0.471.24
R-squared66.9385.73
Std. Deviation5.9418.04
Alpha0.52-3.26
Beta1.621.23
Sharpe Ratio0.850.79
Treynor Ratio3.0810.92

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

The Vanguard Extended Market Index Fund ETF Shares (VXF) has a Mean Return of 1.24 with a Standard Deviation of 18.04 and a Treynor Ratio of 10.92. Its Alpha is -3.26 while VXF’s R-squared is 85.73. Furthermore, the fund has a Sharpe Ratio of 0.79 and a Beta of 1.23.

LQD’s Mean Return is 0.77 points lower than that of VXF and its R-squared is 18.80 points lower. With a Standard Deviation of 5.94, LQD is slightly less volatile than VXF. The Alpha and Beta of LQD are 3.78 points higher and 0.39 points higher than VXF’s Alpha and Beta.

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Performance

Annual Returns

LQD vs. VXF - Annual Returns

YearLQDVXF
202011.14%32.19%
201917.13%28.04%
2018-3.76%-9.37%
20177.16%18.1%
20165.97%16.16%
2015-1.08%-3.26%
20148.57%7.55%
2013-2.49%38.37%
201211.68%18.48%
20118.89%-3.61%
20109.15%27.55%

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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.

Portfolio Growth

LQD vs. VXF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
LQD$10,000$19,7766.58%
VXF$10,000$44,13015.47%

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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.

LQD’s CAGR is 8.89 percentage points lower than that of VXF and as a result, would have yielded $24,354 less on a $10,000 investment. Thus, LQD performed worse than VXF by 8.89% annually.


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