What LQD actually is

LQD is one of the largest corporate bond ETFs. It holds bonds issued by large US companies with investment-grade credit ratings, which means rating agencies see them as relatively safe borrowers.

What is inside

Bonds from banks, technology, consumer and industrial companies, with a mix of maturities that is longer than short-term funds. That makes its price more sensitive to interest-rate changes.

Distributions

LQD pays interest monthly. The amount changes as bonds are bought, sold or mature, and a portion is taxable as ordinary income. A bond fund yield is not guaranteed, and it is not like a company dividend that grows over time.

What to keep in mind

  • Interest-rate risk. Rising rates lower prices.
  • Credit spreads. Prices fall if investors worry about companies.
  • Inflation. Fixed interest buys less over time.

Quick take

LQD is a liquid core corporate bond fund for income and diversification, with sensitivity to rates.