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ETF Specialist

A Solid Choice for Exposure to the Investment-Grade Corporate-Bond Market

This Bronze-rated ETF cuts out some of its available opportunity set, but it is one of the cheapest funds in its category.

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IShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a solid choice for exposure to the investment-grade corporate-bond market. The fund's fee is low, and it harnesses the market's collective wisdom about the relative value of each security. But its portfolio is not fully representative of its opportunity set, as its index excludes bonds with less than three years remaining until maturity, and there are cheaper alternatives. It earns a Morningstar Analyst Rating of Bronze.

LQD tracks the Markit iBoxx USD Liquid Investment Grade Index, which includes investment-grade corporate bonds with more than three years remaining until maturity. The three-year cutoff excludes a sizable portion of the corporate-bond market and results in a portfolio focused on intermediate- and long-term bonds. The index is weighted by market value, tilting the portfolio toward the largest, most liquid issues.

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Neal Kosciulek does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.