LQD vs HYG: Safe Corporate Bonds vs High-Yield Junk
LQD is the investment-grade bond fund for investors who want corporate bond income without taking on meaningful default risk. HYG chases 2+ extra percentage points of yield by lending to weaker companies. The question is whether that extra yield compensates for the risk.
LQD and HYG are the two ends of the corporate bond spectrum. LQD holds 2,500+ investment-grade bonds from companies like Apple, Microsoft, and JPMorgan at a 0.14% expense ratio, yielding around 4.2%. HYG holds roughly 1,200 high-yield (junk-rated) bonds at 0.48%, yielding around 6.2%. The 2-percentage-point yield gap is real, but it comes with a catch: HYG behaves like a stock during recessions. In 2008, HYG fell over 30%. In March 2020, it dropped 20% in weeks. LQD declined far less in both episodes. Investors who reach for HYG's yield often discover they own a volatile equity-like asset at the worst time. For most investors using bonds for stability and income, LQD's 4.2% yield with investment-grade credit quality is the more appropriate choice. HYG has a role in diversified fixed income portfolios for investors who understand they are taking on significant credit risk.
Whether the lower-cost fund suits your situation depends on your existing holdings, account type, tax situation, and how you use each fund. This is a cost comparison, not a personalized recommendation.
📋 LQD vs HYG — Key Facts Side by Side
| Metric | LQD | HYG |
|---|---|---|
| Fund Name | iShares iBoxx $ Investment Grade Corporate Bond ETF | iShares iBoxx $ High Yield Corporate Bond ETF |
| Issuer | iShares | iShares |
| Tracks Index | iBoxx USD Liquid Investment Grade | iBoxx USD Liquid High Yield |
| Expense Ratio | 0.14% ✓ | 0.48% |
| Cost per $10K/yr | $14.00 | $48.00 |
| AUM | $33.1B | $17.6B |
| Holdings | 2,500 | 1,200 |
| Inception | 2002 | 2007 |
| 1-Year Return | -0.55% | -0.47% |
| 3-Year Return | +5.25% | +8.84% |
| 5-Year Return | -0.59% | +3.64% |
| Dividend Yield | 4.55% | 5.90% |
| Holdings Overlap | See holdings overlap → | |
| Avg Bid-Ask Spread | 0.01% | 0.02% |
Expense ratio, AUM, and returns updated Jul 14, 2026 from ETF BFF database. Returns are annualised. Not investment advice.
📊 LQD vs HYG — Annualised Returns
Annualised returns (trailing, price-based). Past performance does not guarantee future results.
🎯 Which Fund Fits Which Investor?
- want the lowest fees: saves ~$34/yr per $10K vs HYG
- want broader diversification (2,500 holdings vs 1,200)
- want income and stability with lower portfolio volatility
- want income and stability with lower portfolio volatility
💰 What the Fee Difference Actually Costs
Adjust the numbers for your situation. This models each fund's expense ratio compounding against your balance over time.
Assumes a constant annual return reinvested, with each fund's expense ratio deducted yearly. Illustrative only; actual returns vary. Past performance does not guarantee future results.
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❓ LQD vs HYG — Frequently Asked Questions
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