The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between VIG and LQD? And which fund is better?
The expense ratio of VIG is 0.08 percentage points lower than LQD’s (0.06% vs. 0.14%). VIG also has a high exposure to the industrials sector while LQD is mostly comprised of BBB bonds. Overall, VIG has provided higher returns than LQD over the past ten years.
In this article, we’ll compare VIG vs. LQD. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and fund composition. Moreover, I’ll also discuss VIG’s and LQD’s industry exposure, performance, and holdings and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||iShares iBoxx $ Investment Grade Corporate Bond ETF|
|Category||Large Blend||Corporate Bond|
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 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%.
VIG’s dividend yield is 0.92% lower than that of LQD (1.56% vs. 2.48%). Also, VIG yielded on average 6.77% more per year over the past decade (13.35% vs. 6.58%). The expense ratio of VIG is 0.08 percentage points lower than LQD’s (0.06% vs. 0.14%).
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|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|Visa Inc Class A||3.22%|
|UnitedHealth Group Inc||3.22%|
|The Home Depot Inc||2.91%|
|Procter & Gamble Co||2.82%|
|Comcast Corp Class A||2.21%|
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
|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.
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Beta of 0.86 with a Standard Deviation of 12.25 and a Treynor Ratio of 14.33. Its Alpha is 0.12 while VIG’s R-squared is 92.2. Furthermore, the fund has a Mean Return of 1.09 and a Sharpe Ratio of 1.01.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Beta of 1.62 with a Treynor Ratio of 3.08 and a Mean Return of 0.47. Its Standard Deviation is 5.94 while LQD’s R-squared is 66.93. Furthermore, the fund has a Alpha of 0.52 and a Sharpe Ratio of 0.85.
VIG’s Mean Return is 0.62 points higher than that of LQD and its R-squared is 25.27 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than LQD. The Alpha and Beta of VIG are 0.40 points lower and 0.76 points lower than LQD’s Alpha and Beta.
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VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% 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 VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
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%.
VIG’s CAGR is 6.77 percentage points higher than that of LQD and as a result, would have yielded $18,175 more on a $10,000 investment. Thus, VIG outperformed LQD by 6.77% annually.
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