LQD vs VCLT: Stability or Income Opportunity

Vanguard Long-Term Corporate Bond ETF (VCLT) looks more affordable and offers a higher payout than iShares iBoxx Investment Grade Corporate Bond ETF (LQD), but comes with greater risk and a narrower portfolio. Both LQD and VCLT target investment-grade U.S. corporate bonds, but they differ in maturity profiles, sector tilts, and risk. LQD is the go-to for broad exposure and liquidity, while VCLT may appeal to those seeking higher income and can tolerate bigger price swings in long-term bonds. Snapshot (cost & size) Metric LQD VCLT Issuer IShares Vanguard Expense ratio 0.14% 0.03% 1-yr return (as of 2025-12-12) 5.38% 3.51% Dividend yield 4.34% 5.38% Beta 1.40 2.01 AUM $33.17 billion $9.0 billion Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months. VCLT is more affordable with a notably lower expense ratio, and it currently pays a higher dividend yield compared to LQD. Performance & risk comparison Metric LQD VCLT Max drawdown (5 y) -24.95% -34.32% Growth of $1,000 over 5 years $808 $690 What's inside VCLT holds 2400 bonds, with a focus on long-term investment-grade corporate debt-primarily maturing in 10 to 25 years. Its biggest sector exposures are healthcare (14%) and financial services (13%). Top holdings include CVS Health (NYSE:CVS), The Goldman Sachs Group (NYSE:GS), and Meta Platforms (NASDAQ:META). The fund has over 16 years of track record. LQD offers much broader diversification, holding over 3,000 bonds. Its sector allocation is 100% Cash & Others, with notable positions including Blk Csh Fnd Treasury Sl Agency, Anheuser-busch Companies Llc, and Usd Cash. LQD tracks a mainstream investment-grade index. For more guidance on ETF investing, check out the full guide at this link . What this means for investors At first glance, the iShares iBoxx Investment Grade Corporate Bond ETF and the Vanguard Long-Term Corporate Bond ETF appear to serve the same role where both ETFs provide exposure to investment-grade U.S. corporate debt. The meaningful difference is not credit quality, but interest rate risk. LQD is structured as a broad and liquid core holding, while VCLT concentrates exposure much further out on the yield curve, which materially changes how each fund responds when interest rates fluctuate. LQD holds thousands of bonds across a wide range of maturities, resulting in a shorter duration and more restrained price fluctuations. That design has made it a common benchmark for investment-grade corporate exposure and a frequent choice for investors prioritizing stability and liquidity. On the other hand, VCLT focuses on corporate bonds with longer maturities. This gives the ETF a significantly higher duration and greater sensitivity to long-term rate changes. Its higher yield reflects compensation for that added rate exposure rather than a meaningful shift in underlying credit risk. For investors, the real question is whether they want stability or are willing to accept bigger swings for higher income. LQD is typically used as a core corporate bond allocation intended to provide steady income and moderate volatility. VCLT, by...

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