LQD vs VCLT: Stability or Income Opportunity

Core Insights - Vanguard Long-Term Corporate Bond ETF (VCLT) is more affordable and offers a higher payout than iShares iBoxx Investment Grade Corporate Bond ETF (LQD), but it comes with greater risk and a narrower portfolio [2][4] - LQD provides broad exposure and liquidity, while VCLT may appeal to those seeking higher income and can tolerate larger price swings in long-term bonds [2] Cost & Size Comparison - LQD has an expense ratio of 0.14% and a 1-year return of 5.38%, with a dividend yield of 4.34% and an AUM of $33.17 billion [3] - VCLT has a lower expense ratio of 0.03%, a 1-year return of 3.51%, a higher dividend yield of 5.38%, and an AUM of $9.0 billion [3] Performance & Risk Comparison - LQD has a max drawdown of -24.95% over 5 years, while VCLT has a max drawdown of -34.32% [5] - Growth of $1,000 over 5 years for LQD is $808, whereas for VCLT it is $690 [5] Portfolio Composition - VCLT holds 2,400 bonds, focusing on long-term investment-grade corporate debt, primarily maturing in 10 to 25 years, with significant sector exposures in healthcare (14%) and financial services (13%) [6] - LQD offers broader diversification with over 3,000 bonds and tracks a mainstream investment-grade index [7] Investment Implications - Both LQD and VCLT provide exposure to investment-grade U.S. corporate debt, but the key difference lies in interest rate risk [9] - LQD is structured as a broad and liquid core holding, while VCLT concentrates exposure further out on the yield curve, affecting how each fund responds to interest rate fluctuations [9]