🤝 BFF Take
For Most Bond Investors, LQD's Safety Is Worth the Lower Yield
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.
📋 Quick Takeaways
🏦LQD: 0.14% ER, ~4.2% yield, 2,500+ investment-grade bonds. HYG: 0.48% ER, ~6.2% yield, 1,200 junk bonds.
⚠️HYG dropped 30% in 2008 and 20% in March 2020. It behaves like equities in a crisis, not like a traditional bond allocation.
🎯LQD for bond stability with income. HYG only if you understand you are taking equity-like risk for higher yield.
📊 Data-Based Take: LQD has the lower fee
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.
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Reviewed by a CFA® Charterholder · Data updated Jun 2026 · Educational only, not financial advice
LQD
iShares iBoxx Investment Grade Corporate Bond ETF
HYG
iShares iBoxx High Yield Corporate Bond ETF
📋 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 |
$35B |
$18B |
| Holdings |
2,500 |
1,200 |
| Inception |
2002 |
2007 |
| 1-Year Return |
+5.50% |
+8.00% |
| 3-Year Return |
-2.00% |
+2.00% |
| 5-Year Return |
+1.00% |
+3.50% |
| Avg Bid-Ask Spread |
0.01% |
0.02% |
Data 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.
🎯 Should You Buy LQD or HYG?
Choose if...
LQD
- You want the lowest fees — saves ~$34/yr per $10K vs HYG
- You want broader diversification (2,500 holdings vs 1,200)
- You want income and stability with lower portfolio volatility
Choose if...
HYG
- You want income and stability with lower portfolio volatility
- You already use iShares and prefer staying within their fund family
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❓ LQD vs HYG — Frequently Asked Questions
What is the difference between LQD and HYG?
LQD holds investment-grade corporate bonds: debt from companies rated BBB- or above by S&P. HYG holds high-yield bonds, also called junk bonds, from companies rated BB+ or below, meaning they have a higher probability of default. The credit quality difference explains almost everything. LQD yields roughly 4.2% and is relatively stable. HYG yields roughly 6.2% and drops significantly during recessions when default fears spike.
Is HYG a good investment?
HYG can be appropriate for investors who understand what they are buying. High-yield bonds offer more income than investment-grade bonds, but they trade with significant equity-like volatility during market stress. HYG fell over 30% in 2008 and 20% in March 2020. If you are holding bonds to reduce portfolio volatility, HYG is unlikely to do the job. If you want higher income and can tolerate stock-like drawdowns, HYG has a place, but it should not be your core bond allocation.
Which is safer, LQD or HYG?
LQD is substantially safer. Investment-grade bonds have very low historical default rates. Even in severe recessions, most investment-grade issuers continue paying their debt. HYG's junk-bond holdings have meaningfully higher default rates, and during recessions investors rapidly price in higher default expectations, causing HYG to fall sharply even before actual defaults occur. LQD is the right choice if you want a bond fund that behaves like a bond.
What is the yield difference between LQD and HYG?
As of recent data, LQD yields approximately 4.2% and HYG yields approximately 6.2%, roughly a 2-percentage-point spread. This spread fluctuates: it widens during recessions (investors demand more compensation for default risk) and narrows during calm markets. A spread of 2 percentage points is historically tight, suggesting high-yield investors are not being adequately compensated for credit risk at current levels.
New to ETF investing? See answers to the most common ETF questions →
ℹ️ Data shown is for educational purposes and may not reflect the most current figures. Returns are trailing price-based and exclude dividend reinvestment. Past performance does not guarantee future results. ETF BFF is not a licensed financial advisor — this is not personalized financial advice.