The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between VGT and LQD? And which fund is better?
The expense ratio of VGT is 0.04 percentage points lower than LQD’s (0.1% vs. 0.14%). VGT also has a high exposure to the technology sector while LQD is mostly comprised of BBB bonds. Overall, VGT has provided higher returns than LQD over the past ten years.
In this article, we’ll compare VGT vs. LQD. We’ll look at risk metrics and fund composition, as well as at their industry exposure and holdings. Moreover, I’ll also discuss VGT’s and LQD’s annual returns, performance, and portfolio growth and examine how these affect their overall returns.
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|Name||Vanguard Information Technology Index Fund ETF Shares||iShares iBoxx $ Investment Grade Corporate Bond ETF|
The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.
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%.
VGT’s dividend yield is 1.82% lower than that of LQD (0.66% vs. 2.48%). Also, VGT yielded on average 14.26% more per year over the past decade (20.84% vs. 6.58%). The expense ratio of VGT is 0.04 percentage points lower than LQD’s (0.1% vs. 0.14%).
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|Visa Inc Class A||3.16%|
|PayPal Holdings Inc||2.76%|
|Mastercard Inc Class A||2.76%|
|Cisco Systems Inc||1.9%|
VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.
Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.
|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.
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Standard Deviation of 16.61 with a Mean Return of 1.76 and a Sharpe Ratio of 1.23. Its R-squared is 74.84 while VGT’s Treynor Ratio is 20.55. Furthermore, the fund has a Alpha of 10.41 and a Beta of 1.02.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a R-squared of 66.93 with a Sharpe Ratio of 0.85 and a Treynor Ratio of 3.08. Its Standard Deviation is 5.94 while LQD’s Beta is 1.62. Furthermore, the fund has a Mean Return of 0.47 and a Alpha of 0.52.
VGT’s Mean Return is 1.29 points higher than that of LQD and its R-squared is 7.91 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than LQD. The Alpha and Beta of VGT are 9.89 points higher and 0.60 points lower than LQD’s Alpha and Beta.
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VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.
The year 2019 was the strongest year for LQD, returning 17.13% on an annual basis. The poorest year for LQD in the last ten years was 2018, with a yield of -3.76%. Most years the iShares iBoxx $ Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 7.16%, 8.57%, and 8.89% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.
With a $10,000 investment in LQD, the end total would have been $19,776. This equates to a $9,776 profit over 11 years and a compound annual growth rate (CAGR) of 6.58%.
VGT’s CAGR is 14.26 percentage points higher than that of LQD and as a result, would have yielded $52,942 more on a $10,000 investment. Thus, VGT outperformed LQD by 14.26% annually.
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