LQD vs. VCLT: Choosing Between Stability and Long-Rate Exposure
Key Points
VCLT charges a lower expense ratio and offers a higher yield than LQD
LQD has outperformed VCLT over the past year and experienced a smaller five-year drawdown
VCLT holds far fewer bonds, with sector tilts and an ESG screen, while LQD is much broader
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Explore how differences in diversification, sector focus, and risk shape the appeal of these two leading corporate bond ETFs.
The iShares iBoxx Investment Grade Corporate Bond ETF (LQD) and the Vanguard Long-Term Corporate Bond ETF (VCLT) differ most in cost, yield, sector exposure, and risk profile, with LQD offering broader diversification and VCLT focusing on higher yield and an ESG screen.
LQD and VCLT both target U.S. investment-grade corporate bonds, but their approaches diverge. LQD is one of the largest, most diversified corporate bond ETFs, while VCLT narrows in on long-term maturities and applies an ESG filter. Here’s how the two stack up for cost, performance, risk, and portfolio makeup as of Dec. 16, 2025.
Snapshot (cost & size)
| Metric | LQD | VCLT |
|---|---|---|
| Issuer | IShares | Vanguard |
| Expense ratio | 0.14% | 0.03% |
| 1-yr return (as of 2025-12-16) | 5.38% | 3.51% |
| Dividend yield | 4.4% | 5.38% |
| Beta | 1.40 | 2.01 |
| AUM | $33 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 looks more affordable on fees, charging just 0.03% compared to LQD’s 0.14%, and it currently delivers a higher payout with a 5.5% yield versus LQD’s 4.4%.
Performance & risk comparison
| Metric | LQD | VCLT |
|---|---|---|
| Max drawdown (5 y) | (24.95%) | (34.31%) |
| Growth of $1,000 over 5 years | $805 | $690 |
What's inside
VCLT invests primarily in high-quality corporate bonds with maturities between 10 and 25 years, aiming for a high level of current income. The fund holds just 257 bonds, with its largest sector exposures in cash and others (15%), healthcare (14%), and financial services (13%). Top holdings include CVS Health (NYSE:CVS), The Goldman Sachs Group (NYSE:GS), and Meta Platforms (NASDAQ:META), and the fund applies an ESG screen. VCLT has a track record of 16.1 years.
LQD, in contrast, is far broader with over 3,000 holdings and a concentration in cash and equivalents. Its top positions are Blk Csh Fnd Treasury Sl Agency, Anheuser-busch Companies Llc, and CVS Health. LQD does not apply any ESG screening and provides a more comprehensive slice of the investment-grade corporate bond universe.
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What this means for investors
LQD and VCLT both offer exposure to investment-grade corporate bonds, but they respond very differently when rates move. LQD spreads risk across thousands of bonds and a wide maturity range. That structure keeps performance anchored to broad credit conditions rather than the long end of the yield curve alone.
VCLT narrows the bet. Its focus on long-dated corporate bonds lifts income but raises sensitivity to rate changes. Moves in long-term yields have a direct impact on price, and the ESG screen further concentrates the portfolio. Returns depend less on credit dispersion and more on where rates settle.
For investors, the decision comes down to intent. LQD is built for steady corporate bond exposure with liquidity and balance. VCLT is a higher-yielding position that embeds a clear view on long-term rates. Choosing between them is less about credit quality and more about how much rate risk you want working inside your bond allocation.
Glossary
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual income from dividends expressed as a percentage of the investment’s current price.
Beta: A measure of a fund’s volatility compared to the overall market, typically the S&P 500.
AUM (Assets Under Management): The total market value of all assets managed by a fund.
Max drawdown: The largest observed loss from a fund’s peak value to its lowest point over a specific period.
ESG screen: A filter that excludes companies not meeting certain environmental, social, or governance criteria.
Investment-grade: Bonds rated as relatively low risk of default, typically rated BBB/Baa or higher.
Corporate bond: A debt security issued by a corporation to raise capital, paying interest to investors.
Maturity: The length of time until a bond’s principal is repaid to investors.
Sector exposure: The proportion of a fund’s assets invested in specific industries or sectors.
Holdings: The individual securities or assets owned by a fund.
Total return: The investment’s price change plus all dividends and distributions, assuming those payouts are reinvested.
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Eric Trie has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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