19 important things you should know about LQD ETF before you buy it

Milan Kovacevic April 25, 2019

Are you evaluating LQD ETF as a potential investment? Are you looking to get the full scoop on this fund, as well as learn about alternatives to investing in it? If so, you came to the right place.

In this LQD ETF review, we’ll address key questions our readers have been asking us about this fund, above and beyond what you can find in its prospectus, and on Morningstar or Yahoo Finance.

Here is what you’ll be able to find in this review:

  • The Basics: LQD performance, returns, expense ratio, holdings and dividend yield;
  • The Analysis: the pros and cons of investing in LQD ETF;
  • The Alternatives: other ETFs and mutual funds you should consider as alternatives to LQD.

And here is the list of questions we’ll answer:

  1. Describe iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).
  2. What is LQD underlying index?
  3. What are LQD holdings?
  4. How did LQD perform historically? What were the historical returns?
  5. How many up and down years did LQD have historically?
  6. What is LQD dividend yield?
  7. What is LQD expense ratio?
  8. What is LQD tax efficiency (tax-cost ratio)?
  9. What is LQD beta? How would you assess LQD risk?
  10. What is LQD Sharpe ratio?
  11. What are the pros of investing in LQD? What are LQD positives?
  12. What are the cons of investing in LQD? What are LQD negatives?
  13. Compare and contrast: LQD vs VCIT.
  14. Compare and contrast: LQD vs HYG.
  15. Compare and contrast: LQD vs AGG.
  16. Compare and contrast: LQD vs BND.
  17. Compare and contrast: LQD vs IEF.
  18. Compare and contrast: LQD vs VCSH.
  19. Compare and contrast: LQD vs LQDH.

So let’s start. Scroll down to the question that interests you the most.

The Basics

1. Describe iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD).

The Fund seeks investment results that correspond generally to the price and yield performance of a segment of the U.S. investment grade corporate bond market as defined by the GS $ InvesTop Index.

2. What is LQD underlying index?

Markit iBoxx $ Liquid Investment Grade Index.

3. What are LQD top holdings?

LQD has 0 stock holdings and 1,936 bond holdings.

The top 10 holdings represent 2.81% of total assets. Here are the top holdings:

NameSymbol% Assets
Verizon Communications Inc. 4.33%N/A0.42
GE Capital International Funding Company Unlimited Company 4.42%N/A0.37
Anheuser-Busch Companies LLC / Anheuser-Busch InBev Worldwide Inc 4.9%N/A0.35
CVS Health Corp 4.3%N/A0.32
CVS Health Corp 5.05%N/A0.25
Goldman Sachs Group, Inc. 6.75%N/A0.25
CVS Health Corp 3.7%N/A0.23
Anheuser-Busch InBev Finance Inc. 3.3%N/A0.21
Verizon Communications Inc. 4.86%N/A0.21
CVS Health Corp 4.1%N/A0.20

4. How did LQD perform historically? What were the historical returns?

LQD has generated the following returns:

  • 1-month return is 2.93%;
  • 3-month return is 6.18%;
  • 1-year return is 5.21%;
  • 3-year return is 3.48%;
  • 5-year return is 3.80%;
  • 10-year return is 6.47%;
  • 15-year return is 4.72%.

5. How many up and down years did LQD have historically?

In the last 10 years, LQD had 7 up years and 3 down years.

6. What is LQD dividend yield?

LQD yield is 3.53%.

7. What is LQD expense ratio?

LQD expense ratio is 0.15%. The expense ratio of a fund is the total percentage of fund assets used for administrative, management, and all other expenses.

8. What is LQD tax efficiency (tax-cost ratio)?

  • 1-year ax cost ratio is 1.46%;
  • 3-year ax cost ratio is 1.4%.

9. What is LQD beta? How would you assess LQD risk?

  • 3-year beta is 1.43;
  • 5-year beta is 1.46;
  • 10-year beta is 1.50;
  • 15-year beta is 1.69.

LQD risk is greater than the underlying index fund risk.  

10. What is LQD Sharpe ratio?

  • 3-year Sharpe ratio is 0.49;
  • 5-year Sharpe ratio is 0.64;
  • 10-year Sharpe ratio is 1.20;
  • 15-year Sharpe ratio is 0.54.

LQD has generated higher risk-adjusted returns than the underlying index fund.

The Analysis

11. What are the pros of investing in LQD? What are LQD positives?

The following are LQD strengths from our perspective:

  • LQD 3-year return is 3.48%, which is higher than the 3-year return of the benchmark index (Bloomberg Barclays US Aggregate Bond TR USD), 2.03%.
  • LQD 5-year return is 3.8%, which is higher than the 5-year return of the benchmark index (Bloomberg Barclays US Aggregate Bond TR USD), 2.74%.
  • LQD 10-year return is 6.47%, which is higher than the 10-year return of the benchmark index (Bloomberg Barclays US Aggregate Bond TR USD), 3.77%.
  • LQD 15-year return is 4.72%, which is higher than the 15-year return of the benchmark index (Bloomberg Barclays US Aggregate Bond TR USD), 3.89%.
  • LQD expense ratio is 0.15%, which is considered low. Nice job picking a low-cost fund.

12. What are the cons of investing in LQD? What are LQD negatives?

The following are LQD weaknesses from our perspective:

  • LQD 3-year Beta is 1.43, which is higher than the index (BBgBarc US Agg Bond TR USD) 3-year beta, 1.00. The fund is perceived to be riskier than the comparable index based on the previous 3 years.
  • LQD 5-year Beta is 1.46, which is higher than the index (BBgBarc US Agg Bond TR USD) 5-year beta, 1.00. The fund is perceived to be riskier than the comparable index based on the previous 5 years.
  • LQD 10-year Beta is 1.5, which is higher than the index (BBgBarc US Agg Bond TR USD) 10-year beta, 1.00. The fund is perceived to be riskier than the comparable index based on the previous 10 years.
  • LQD 15-year Beta is 1.69, which is higher than the index (BBgBarc US Agg Bond TR USD) 15-year beta, 1.00. The fund is perceived to be riskier than the comparable index based on the previous 15 years.

The Alternatives

13. Compare and contrast: LQD vs VCIT.

Both LQD and VCIT are ETFs. LQD has a lower 5-year return than VCIT (3.8% vs 3.85%). LQD has a higher expense ratio than VCIT (0.15% vs 0.07%). Below is the comparison between LQD and VCIT.


LQDVCIT
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Corporate Investment Grade Intermediate
Net Assets$33.76B$22.95B
Expense Ratio0.15%0.07%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexBloomberg Barclays U.S. 5-10 Year Corporate Bond Index
YTD Return6.18%5.42%
1-Year Return5.21%6.16%
3-Year Return3.48%3.38%
5-Year Return3.8%3.85%
10-Year Return6.47%N/A

VCIT profile: The Fund seeks to track the performance of a market-weighted corporate bond index with an intermediate-term dollar-weighted average maturity. The Fund employs a "passive management - or indexing - investment approach designed to track the performance of the Barclays Capital U.S. 5-10 Year Corporate Bond Index.

14. Compare and contrast: LQD vs HYG.

Both LQD and HYG are ETFs. LQD has a higher 5-year return than HYG (3.8% vs 3.64%). LQD has a lower expense ratio than HYG (0.15% vs 0.49%). Below is the comparison between LQD and HYG.


LQDHYG
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Corporate High Yield
Net Assets$33.76B$17.19B
Expense Ratio0.15%0.49%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexMarkit iBoxx $ Liquid High Yield Index
YTD Return6.18%7.59%
1-Year Return5.21%6.53%
3-Year Return3.48%7.38%
5-Year Return3.8%3.64%
10-Year Return6.47%9.34%

HYG profile: The Fund seeks investment results that correspond generally to the price and yield performance of the U.S. dollar high yield corporate bond market as defined by the iBoxx $ Liquid High Yield Index. The Fund will invest at least 90% of its assets in component securities of its Underlying Index.

15. Compare and contrast: LQD vs AGG.

Both LQD and AGG are ETFs. LQD has a higher 5-year return than AGG (3.8% vs 2.72%). LQD has a higher expense ratio than AGG (0.15% vs 0.04%). Below is the comparison between LQD and AGG.


LQDAGG
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Broad Market Investment Grade
Net Assets$33.76B$59.44B
Expense Ratio0.15%0.04%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexBloomberg Barclays U.S. Aggregate Bond Index
YTD Return6.18%2.94%
1-Year Return5.21%4.57%
3-Year Return3.48%1.98%
5-Year Return3.8%2.72%
10-Year Return6.47%3.6%

AGG profile: The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the United States investment grade securities markets as defined by the Barclays Capital U.S. Aggregate Index.

16. Compare and contrast: LQD vs BND.

Both LQD and BND are ETFs. LQD has a higher 5-year return than BND (3.8% vs 2.68%). LQD has a higher expense ratio than BND (0.15% vs 0.04%). Below is the comparison between LQD and BND.


LQDBND
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Broad Market Investment Grade
Net Assets$33.76B$38.00B
Expense Ratio0.15%0.04%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexBloomberg Barclays U.S. Aggregate Float Adjusted Index
YTD Return6.18%2.98%
1-Year Return5.21%4.52%
3-Year Return3.48%1.99%
5-Year Return3.8%2.68%
10-Year Return6.47%3.62%

BND profile: The Fund seeks to track the performance of a broad, market-weighted bond index.

17. Compare and contrast: LQD vs IEF.

Both LQD and IEF are ETFs. LQD has a higher 5-year return than IEF (3.8% vs 2.97%). LQD and IEF have the same expense ratio (0.15%). Below is the comparison between LQD and IEF.


LQDIEF
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. Government Treasury Intermediate
Net Assets$33.76B$13.01B
Expense Ratio0.15%0.15%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexICE U.S. Treasury 7-10 Year Bond Index
YTD Return6.18%2.78%
1-Year Return5.21%5.86%
3-Year Return3.48%0.86%
5-Year Return3.8%2.97%
10-Year Return6.47%3.34%

IEF profile: The Fund seeks investment results that correspond generally to the price and yield performance of the intermediate-term sector of the U.S. Treasury market as defined by the Barclays Capital 7-10 Year Treasury Index.

18. Compare and contrast: LQD vs VCSH.

Both LQD and VCSH are ETFs. LQD has a higher 5-year return than VCSH (3.8% vs 2.2%). LQD has a higher expense ratio than VCSH (0.15% vs 0.07%). Below is the comparison between LQD and VCSH.


LQDVCSH
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Corporate Investment Grade Short-Term
Net Assets$33.76B$23.87B
Expense Ratio0.15%0.07%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade IndexBloomberg Barclays U.S. 1-5 Year Corporate Bond Index
YTD Return6.18%2.78%
1-Year Return5.21%4.5%
3-Year Return3.48%2.28%
5-Year Return3.8%2.2%
10-Year Return6.47%N/A

VCSH profile: The Fund seeks to track the performance of a market-weighted corporate bond index with a short-term dollar-weighted average maturity. The Fund employs a "passive management" - or indexing - investment approach designed to track the performance of the Barclays Capital U.S. 1-5 Year Corporate Bond Index.

19. Compare and contrast: LQD vs LQDH.

Both LQD and LQDH are ETFs. LQD has a higher expense ratio than LQDH (0.15% vs 0.1%). Below is the comparison between LQD and LQDH.


LQDLQDH
SegmentFixed Income: U.S. - Corporate Investment GradeFixed Income: U.S. - Corporate Investment Grade
Net Assets$33.76B$216.65M
Expense Ratio0.15%0.1%
Management Stylepassive (index-based)passive (index-based)
Underlying IndexMarkit iBoxx $ Liquid Investment Grade Index--
YTD Return6.18%3.65%
1-Year Return5.21%1.6%
3-Year Return3.48%4.37%
5-Year Return3.8%N/A
10-Year Return6.47%N/A

LQDH profile: The Fund seeks to mitigate the interest rate risk of a portfolio composed of US dollar-denominated, investment-grade corporate bonds. The Fund invests its net assets in US dollar-denominated investment-grade bonds, in US Treasury securities and in one or more underlying funds that invest in investment-grade bonds.

We hope this review was helpful to you and taught you the basics of investing in LQD (return, performance, yield, expense ratio, and holdings), the pros and cons of, and the alternatives to investing in LQD.

If you’d like to leave any comments, feel free to do so below.

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