🤝 BFF Take
VCIT Wins on Cost — LQD Is the Liquidity Choice for Bond Traders
LQD (iShares iBoxx $ Investment Grade Corporate Bond ETF) and VCIT (Vanguard Intermediate-Term Corporate Bond ETF) both provide exposure to USD-denominated investment-grade corporate bonds from US issuers. LQD is the older, larger fund with $28B+ in AUM and a highly liquid options market — the go-to vehicle for institutional bond traders. VCIT charges 0.04% vs LQD's 0.14% — a 10 basis point annual fee advantage that is significant in a low-yield fixed income environment where every basis point of yield matters. Both focus on intermediate duration (5-10 years). The index construction differs slightly — LQD tracks the iBoxx IG index while VCIT tracks Bloomberg US 5-10 Year Corporate Bond — but the practical exposure is very similar. For buy-and-hold investors, VCIT is the clear cost winner.
📋 Quick Takeaways
🏦Both hold investment-grade US corporate bonds — Apple, Microsoft, JPMorgan, Verizon bonds are typical holdings
💰VCIT costs 0.04% vs LQD's 0.14% — 3.5x cheaper; on a $100K bond allocation saves $100/yr
📊LQD has $28B+ AUM vs VCIT's $45B — both highly liquid; LQD has deeper options market for institutions
📊 Data-Based Take: VCIT 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
VCIT
Vanguard Intermediate-Term Corporate Bond ETF
📋 LQD vs VCIT — Key Facts Side by Side
| Metric |
LQD |
VCIT |
| Fund Name |
iShares iBoxx $ Investment Grade Corporate Bond ETF |
Vanguard Intermediate-Term Corporate Bond ETF |
| Issuer |
iShares |
Vanguard |
| Tracks Index |
iBoxx $ Liquid Investment Grade |
Bloomberg US 5-10 Year Corporate Bond |
| Expense Ratio |
0.14% |
0.04% ✓ |
| Cost per $10K/yr |
$14.00 |
$4.00 |
| AUM |
$28B |
$45B |
| Holdings |
2,800 |
2,300 |
| Inception |
2002 |
2009 |
| 1-Year Return |
+5.20% |
+5.60% |
| 3-Year Return |
-1.20% |
-0.80% |
| 5-Year Return |
+0.40% |
+0.80% |
| Avg Bid-Ask Spread |
0.01% |
0.01% |
Data from ETF BFF database. Returns are annualised. Not investment advice.
📊 LQD vs VCIT — Annualised Returns
Annualised returns (trailing, price-based). Past performance does not guarantee future results.
🎯 Should You Buy LQD or VCIT?
Choose if...
LQD
- You want income and stability with lower portfolio volatility
- You already use iShares and prefer staying within their fund family
Choose if...
VCIT
- You want the lowest fees — saves ~$10/yr per $10K vs LQD
- You want income and stability with lower portfolio volatility
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❓ LQD vs VCIT — Frequently Asked Questions
What is the difference between LQD and VCIT?
LQD and VCIT both hold investment-grade US corporate bonds at intermediate duration, but with key differences: LQD tracks the iBoxx index (wider spread, some bonds under 5 years); VCIT specifically targets bonds with 5-10 year maturities. VCIT's tighter maturity range makes its duration profile more predictable. The biggest practical difference is cost — VCIT at 0.04% vs LQD at 0.14%. LQD has more trading volume and options market depth.
Are investment-grade corporate bonds safe?
Investment-grade corporate bonds (BBB- or higher by S&P) have low historical default rates — typically 0.1-0.3% annually. The primary risk is interest rate risk (duration), not credit risk. In 2022, LQD and VCIT fell 15-20% due to rising rates despite no increase in defaults. Corporate bonds also carry credit spread risk — in recessions, spreads widen and prices fall even if rates stay stable. They are safer than high-yield bonds (HYG/JNK) but more volatile than Treasuries.
What yield do LQD and VCIT pay?
Both typically yield 4.5-5.5% depending on the rate environment. VCIT's lower expense ratio means investors keep more of the gross yield. In a 5% yield environment, VCIT's 0.04% fee means 4.96% net vs LQD's 4.86% — a 10bp annual advantage that matters when fixed income returns are modest in absolute terms.
How does duration affect LQD and VCIT in different rate environments?
Both LQD and VCIT have intermediate duration of roughly 8-9 years. This means each 1% rise in rates causes approximately 8-9% decline in NAV. In a falling rate environment, both benefit similarly. Investors who want less rate sensitivity should look at short-duration alternatives (VCSH for corporate bonds, JPST or SHY for shorter duration). Investors who want more rate exposure can look at VCLT or LQD's longer-duration alternatives.
Is VCIT better than BND for corporate bond exposure?
BND (Vanguard Total Bond Market ETF, 0.03%) is a broader fund that includes Treasuries, agency bonds, and corporate bonds — roughly 30% of BND is corporate bonds. VCIT is purely corporate bonds. For investors specifically wanting corporate bond exposure (to tilt away from Treasuries and capture credit spread), VCIT gives a purer corporate bond allocation. For broad bond market exposure, BND is the cheaper, more diversified option.
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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.