The Vanguard Total International Stock Index Fund ETF Shares (VXUS) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) are both among the Top 100 ETFs. VXUS is a Vanguard Foreign Large Blend fund and LQD is a iShares Corporate Bond fund. So, what’s the difference between VXUS and LQD? And which fund is better?
The expense ratio of VXUS is 0.06 percentage points lower than LQD’s (0.08% vs. 0.14%). VXUS also has a high exposure to the financial services sector while LQD is mostly comprised of BBB bonds. Overall, VXUS has provided higher returns than LQD over the past ten years.
In this article, we’ll compare VXUS vs. LQD. We’ll look at holdings and fund composition, as well as at their performance and annual returns. Moreover, I’ll also discuss VXUS’s and LQD’s risk metrics, portfolio growth, and industry exposure and examine how these affect their overall returns.
|NameVanguard Total International Stock Index Fund ETF SharesiShares iBoxx $ Investment Grade Corporate Bond ETF|
|Category||Foreign Large Blend||Corporate Bond|
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.
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%.
VXUS’s dividend yield is 0.04% lower than that of LQD (2.44% vs. 2.48%). Also, VXUS yielded on average 1.83% more per year over the past decade (8.41% vs. 6.58%). The expense ratio of VXUS is 0.06 percentage points lower than LQD’s (0.08% vs. 0.14%).
|Taiwan Semiconductor Manufacturing Co Ltd||1.62%|
|Tencent Holdings Ltd||1.41%|
|Alibaba Group Holding Ltd Ordinary Shares||1.26%|
|Samsung Electronics Co Ltd||1.05%|
|ASML Holding NV||0.86%|
|Roche Holding AG||0.81%|
|Toyota Motor Corp||0.67%|
|LVMH Moet Hennessy Louis Vuitton SE||0.61%|
VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.
ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.
|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 Total International Stock Index Fund ETF Shares (VXUS) has a R-squared of 98.39 with a Mean Return of 0.56 and a Beta of 0.99. Its Alpha is 0.31 while VXUS’s Sharpe Ratio is 0.4. Furthermore, the fund has a Treynor Ratio of 5.14 and a Standard Deviation of 15.12.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) has a Beta of 1.62 with a Alpha of 0.52 and a Standard Deviation of 5.94. Its R-squared is 66.93 while LQD’s Treynor Ratio is 3.08. Furthermore, the fund has a Sharpe Ratio of 0.85 and a Mean Return of 0.47.
VXUS’s Mean Return is 0.09 points higher than that of LQD and its R-squared is 31.46 points higher. With a Standard Deviation of 15.12, VXUS is slightly more volatile than LQD. The Alpha and Beta of VXUS are 0.21 points lower and 0.63 points lower than LQD’s Alpha and Beta.
VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% 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 VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.
With a $10,000 investment in LQD, the end total would have been $16,639. This equates to a $6,639 profit over 9 years and a compound annual growth rate (CAGR) of 6.58%.
VXUS’s CAGR is 1.83 percentage points higher than that of LQD and as a result, would have yielded $2,676 more on a $10,000 investment. Thus, VXUS outperformed LQD by 1.83% annually.
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